Bell Canada v. Bell Aliant Region Communications: Regulation of the Telecommunications Industry
On September 18, the Supreme Court of Canada released its decision in Bell Canada v. Bell Aliant Region Communications, 2009 SCC 40. Touching on areas such as administrative and communications law, the case concerned the extent and proper exercise of the authority of the Canadian Radio-Television and Telecommunications Commission (“CRTC”).
In May 2002, the CRTC exercised its statute-derived rate-setting authority to establish a formula regulating the maximum prices to be charged for certain services offered by incumbent local exchange carriers. The CRTC ordered the carriers to establish deferral accounts as separate accounting entries in their ledgers to record funds representing the difference between the rates actually charged and those as otherwise determined by the formula. After inviting submissions and conducting a public process to determine the appropriate disposition of the deferral accounts, in February 2006 the CRTC decided that these accounts should be used by companies to expand high-speed broadband internet services in remote and rural communities and to improve accessibility for individuals with disabilities. The remainder would be distributed to certain residential subscribers through a one-time credit or prospective rate reductions.
Two appeals were launched against this decision: one on the part of Bell Canada against the order for one-time credits, another on the part of the Consumers’ Association of Canada and the National Anti-Poverty Organization against the order for broadband expansion.
The CRTC and the Telecommunications Act
Prior to engaging the specific grounds of appeal, Justice Rosalie Abella, writing for the unanimous seven-member court (McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Charron, Rothstein and Cromwell JJ. concurring), wrote at length about the rate-setting power that the Telecommunications Act, S.C. 1993, c. 38, confers upon the CRTC. Specifically, Justice Abella noted: the expansive list under s. 7 of telecommunications policy objectives, the requirement under s. 27(1) that “[e]very rate… for a telecommunications service shall be just and reasonable”, the power under s. 27(5) that “[i]n determining whether a rate is just and reasonable, the Commission may adopt any method or technique that it considers appropriate”, and the directive under section 47 that “[t]he Commission shall exercise its powers and perform its duties… (a) with a view to implementing the … telecommunications policy objectives and ensuring that … carriers provide telecommunications services and charge rates in accordance with section 27”. Justice Abella concluded that the CRTC’s rate-setting power and discretion was considerably broad, especially in light of the fact that the Railway Act, R.S.C. 1985, c. R-3 (the predecessor statute for telecommunications rate-setting) contained nothing analogous to ss. 7 and 47. Also noted was s. 37(1), under which “the Commission may require a … carrier (a) to adopt any method of identifying the costs of providing telecommunications services and to adopt any accounting method or system of accounts”, as this case concerned the creation and disposition of deferral accounts. In Justice Abella’s own words:
In my view, it follows from the CRTC’s broad discretion to determine just and reasonable rates under s. 27, its power to order a carrier to adopt any accounting method under s. 37, and its statutory mandate under s. 47 to implement the wide-ranging Canadian telecommunications policy objectives set out in s. 7, that the Telecommunications Act provides the CRTC with considerable scope in establishing and approving the use to be made of deferral accounts. They were created in accordance both with the CRTC’s rate-setting authority and with the goal that all rates charged by carriers were and would remain just and reasonable.
In reaching this conclusion, Justice Abella distinguished a number of decisions limiting of the CRTC’s discretion, on the grounds that those decisions concerned exercises of power other than that at issue here, the power of rate-setting, which Justice Abella found was “at the very core of [the CRTC’]s competence.”
Justice Abella then turned to Bell Canada’s appeal. Bell Canada argued that the CRTC had no statutory authority to order what it claimed amounted to retrospective “rebates” to customers. In its view, the distributions ordered by the CRTC were in substance a variation of rates that had been declared final. In this, Bell Canada relied on Bell Canada v. Canada (Canadian Radio-Television and Telecommunications Commission),  1 S.C.R. 1722. Justice Abella quashed this argument by pointing out the obvious and intentional functional difference between deferral accounts and that which Bell construed them as:
[T]he credits ordered out of the deferral accounts in the case before us are neither retroactive nor retrospective. They do not vary the original rate as approved, which included the deferral accounts, nor do they seek to remedy a deficiency in the rate order through later measures, since these credits or reductions were contemplated as a possible disposition of the deferral account balances from the beginning.
TELUS, which joined Bell, argued additionally that the CRTC’s action constituted an unjust confiscation of property. Justice Abella disposed of this argument too:
The funds in the accounts never belonged unequivocally to the carriers, and always consisted of encumbered revenues. Had the CRTC intended that these revenues be used for any purposes the affected carriers wanted, it could simply have approved the rates as just and reasonable and ordered the balance of the deferral accounts turned over to them. It chose not to do so.
Consumers’ Association of Canada
The Consumers’ Association of Canada’s appeal, diametrically opposed to that of Bell Canada’s, argued that the disposition of some deferral account funds for broadband expansion highlighted that the rates charged by carriers were neither just nor reasonable. The core of that argument was that the CRTC’s decision “effectively forced users of a certain service (residential subscribers in certain areas) to subsidize users of another service (the future users of broadband services) … [which] was an indication that the rates charged to residential users were not in fact just and reasonable”. Justice Abella disposed of this appeal by pointing both to the long history of cross-subsidization and to the policy objectives under section 7, finding that they
demonstrate that the CRTC need not limit itself to considering solely the service at issue in determining whether rates are just and reasonable. The statute contemplates a comprehensive national telecommunications framework. It does not require the CRTC to atomize individual services. It is for the CRTC to determine a tolerable level of cross-subsidization.
Thus, in dismissing the appeal, Justice Abella concluded:
[T]he CRTC did exactly what it was mandated to do under the Telecommunications Act. It had the statutory authority to set just and reasonable rates, to establish the deferral accounts, and to direct the disposition of the funds in those accounts. It was obliged to do so in accordance with the telecommunications policy objectives set out in the legislation and, as a result, to balance and consider a wide variety of objectives and interests. It did so in these appeals in a reasonable way, both in ordering subscriber credits and in approving the use of the funds for broadband expansion.
From my reading of these reasons, I found there to be an occasional difficulty in distinguishing exactly whether the Court’s affirmation of the reasonableness of the CRTC’s exercise of its rate-setting authority flowed simply from a strong statutory and administratively deferential presumption, or whether it subsisted by definition. If the latter, then that is strange, and dare I say circular. The portions to which I am referring are: “[i]t was precisely because the rate-setting mechanism approved by the CRTC included accumulation in and disposition from the deferral accounts pursuant to further CRTC orders, that the rates were and continued to be just and reasonable”; and, “[f]ar from rendering these rates inappropriate, the deferral accounts ensured that the rates were just and reasonable.” To this I must say that just because one is given a general means to ensure a “just and reasonable” end does not necessarily mean that the end resulting from a particularized exercise of the means will in fact be “just and reasonable”.
But the aforesaid is of no real consequence, being but two possibly errant sentences that really have more to do with the general discussion of the CRTC’s broad rate-setting power than with the specific grounds of appeal. They do not detract materially from the result. As for the result itself, it is, considering the relevant statutory provisions and the arguments fenced by the appealing parties, obvious, natural, and unsurprising, as shown by its unanimity.