Talk's cheap, and it's about to get cheaper. Sometime this summer, CNCP and Ted Rogers will apply for regulatory approval of their plan to provide long- distance telephone service, breaking the monopoly now held by Telecom Canada, the consortium of nine phone companies led by Bell Canada.

The government clearly favors opening the market to competition, following the lead of the U.S., Japan and Britain. The Supreme Court is likely soon to settle the jurisdictional squabble over telecommunications between the Dominion and the provinces in Ottawa's favor, clearing the way for the Canadian Radio-television & Telecommunications Commission, which these days is rated as pro-competition, to crack open the monopoly. But that doesn't mean it's a done deal. First we're all going to have to talk about it for months on end.

The case for competition might seem open and shut at first. Long-distance rates in Canada are on average at least 50% higher than in the U.S., where competition has ruled since 1978, but they can range up to four times as high - even after the 24% cut in Bell's rates of the last 18 months.

It is to be expected that Bell would not take a fancy to the idea of dismantling the monopoly that has made it one of the biggest profit-makers in Canada, though it will dress this self interest in the usual public interest drag. But it's surprising to see the Consumers' Association of Canada doing the running for it. Competition in long distance, the organization argues, will prevent Bell from cross-subsidizing local service, leading to higher long-distance charges.

ODD STANCE

This is an odd stance for the association to take. The CAC attacks the analogous case for monopoly in mail delivery, that town should subsidize country through a uniform rate of postage. Its economists know cross-subsidization wastes society's resources, encouraging the use of services that cost more to produce than they return in revenue, at the expense of services that cost less.

Why the switch? Simple, really. The biggest beneficiaries of competition in long-distance are a small minority: business, which accounts for 80% of the market, and the rich, who use long distance more than others. But lower long- distance rates for the few come at the cost of higher local rates for the many. A study conducted for a federal-provincial task force on telecommunications estimated little more than one in 10 residential and small business customers would save on their overall monthly charges. The CAC counted heads and declared a majority for monopoly.

This is a seductive argument. Competition is not a god to be worshipped for its own sake. The case for competitive markets over monopoly is a straight comparison of gains and losses: Ordinarily, as prices are driven down to competitive levels, consumers win more in buying power than producers lose in profits.

No one is questioning whether consumers would win more than producers lose here. The efficiency gains from eliminating cross-subsidization would almost certainly mean that the total cost of phone service would be substantially less. In the U.S., the overall bill has fallen since 1984, even with the huge costs of the AT & T breakup.

This is rather a matter between different consumers, and here the criteria get murkier. Suppose the majority vote to confiscate the property of a minority group. Everybody gains, except a wretched few. Is this fair? On the other hand, should a small group be allowed to grow rich by exploiting the masses? Clearly, raw numbers are no guide.

One elementary principle is to see whether coercion is involved. This would clearly favor competition in long distance, since the many who gain from cheap local calls do so only by exploiting long-distance callers.

Then again, progressive taxation operates on the same principles, and most of us would call that fair. So the income levels of those involved in any transfer is also important. Here the moral waters grow muddier still. Rich people make local calls; some poor people make long-distance calls. Moreover, it's not clear who ultimately pays the cost of higher long-distance charges for business, except that it isn't business: like any other corporate tax, it hits either consumers, or workers, or shareholders.

Why should the rich get a free ride on local service? Why should long distance be priced beyond the poor? If justice is our concern, why not take from the rich and give to the poor directly, through the tax-and-transfer system, rather than by the scattershot means of rigged phone rates? Redistributing income is the job of the state, not the phone company.