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Penny Leclair stands next to two pay phones in Ottawa.Dave Chan/The Globe and Mail

Two of Canada's largest telecom companies say they will start yanking payphones out of service if the industry regulator does not accept their call for sharply higher rates.

Bell Canada and Bell Aliant Inc. sparked a controversy earlier this year by applying for payphone rate hikes of up to 100 per cent, which would mean local calls using coins could cost as much as $1, up from 50 cents.

Now they have issued an ultimatum to the federal telecom regulator: reject our request for higher prices and we will start pulling our most unprofitable payphones from service.

Underscoring the gravity of their warning, the companies say the number of payphones slated for "proactive removal" could amount to about 25 per cent of their combined payphone base in Ontario and Quebec – unless the Canadian Radio-television and Telecommunications Commission (CRTC) gives them some pricing flexibility.

The intensifying battle over payphone rates comes at a time when the explosive popularity of smartphones and other wireless devices has put payphone usage in steady decline.

Although many Canadians consider public telephones to be relics of a bygone era, consumer advocates argue they remain a necessity for anyone without a mobile phone and can even be emergency lifelines for those that do have them – especially if a battery dies or if there is an interruption in mobile service.

Phone companies, eager to add more customers to lucrative mobile-phone service plans, are challenging the CRTC's commitment to protecting an inexpensive and convenient communication service. As a result, the regulator's decision in this case could mark the final tipping point that sends the payphone on a course to extinction. Usage is already tumbling: a CRTC report shows average revenue per payphone has fallen from more than $1,000 in 2008 to around $700 or so in 2011 for major industry players.

The companies say in new CRTC filings that "if they do not get approval for the opportunity to experiment with alternative rate levels that could be as high as the maximum levels requested in their application, then they plan to change their practice and will proactively start removing their most unprofitable pay telephones."

Specifically, Bell and Bell Aliant, partly owned by Bell, have asked the CRTC to raise the maximum price of a local call made with coins from 50 cents to $1. The highest rate for a non-cash local call, such as one made with a payment card, could rise from $1 to $2, if the change is approved.

Depending upon the outcome of the CRTC decision, the companies will decide how many payphones they plan to keep in service. Although they have stated that a quarter of their payphones could be at risk, it is unclear how many that represents because they refuse to publicly disclose the total number in operation. They stress, however, the more wiggle room they have to raise rates, the slower their decommissioning process is likely to be.

Consumer advocates find that tactic troubling. "If you make or let these things become unavailable, you are just disenfranchising people," said John Lawford, executive director of the Public Interest Advocacy Centre, adding any price hikes will disproportionately hurt low-income Canadians, many of whom cannot afford cellphones or home phones.

"Pricing flexibility would make our overall payphone business more sustainable and having the flexibility to adjust prices supports the investment needed to upgrade our payphones to accept the new dollar coin," said Jacqueline Michelis, a spokeswoman for Bell Canada's parent BCE Inc., in an e-mailed statement.

"Without this pricing flexibility, it does not make good business sense to invest in retrofitting older payphones which means at some point, we would have to start removing those older payphones (we can remove payphones without CRTC approval)."

The one exception is if a company is targeting the removal of the last payphone in a community. In that case, the companies have to provide 60 days notice of their plans.

More than three-quarters of Canadians own mobile phones, with 27.4 million subscribers at the end of 2011. Nonetheless, the CRTC has numerous complaints from consumers about the proposed payphone price increase, arguing it would hurt the poor or consumers with hearing or visual disabilities who struggle to find accessible wireless phones.

Penny Leclair was one of them. The 61-year-old Ottawa resident, who is blind and has a hearing disability, told the CRTC that people who are visually impaired make it a point to know where to find payphones in the areas in which they live, work or travel.

Although she has a voice-operated iPhone to call 911 in the case of an emergency, she never uses it because she cannot hear enough to have a conversation on it. A payphone, meanwhile, allows her to use what is known as a T-coil receiver to amplify the sound.

"There have to be options for people. Just because people carry cellphones doesn't mean they are always working cellphones," she said in an interview. "Everybody who makes these decisions obviously has access to a phone and they don't always realize what their decisions are going to mean for people who struggle."