Telus appeals to federal court over changes to CRTC’s new contribution scheme

The Federal Court of Appeal is expected to rule by mid-March on an application by Telus Corp to change how contribution is collected in 2002. Telus has joined the list of people seeking modifications in the CRTC’s contribution ruling – Telecom Decision 2000-745 – which abandoned the old per-minute contribution assessment in favour of a levy on revenues (NL, Dec. 4/00). But the western telco’s VP of government and regulatory affairs still believes the basic ruling was correct. Bell Canada, supported by two wireless competitors, filed a review & vary application with the CRTC questioning the method used to assess payments for 2001 (NL, Dec. 20/00). Telus is more concerned about recovering embedded costs in 2002. Rather than taking the R&V route, it filed a leave to appeal to the Federal Court of Appeal. The western telco argues that the regulator must set just and reasonable rates. At the time of the original hearings on contribution, the firm maintained that it should have the right to allow for embedded costs. The CRTC did not include this in its ruling, so Telus is proceeding to the courts. "Obviously they didn’t agree with us, so what’s the sense in going back to them with something we think is a pretty fundamental legal question?" asks Willie Grieve, Telus’ regulatory VP. Telus had proposed that the total subsidy requirement be set using the Phase II incremental cost approach, with a 25 per cent markup tacked on. The CRTC dis-agreed and fixed the markup at 15 per cent. "The financial impact of reducing the mark-up from 25 per cent to 15 per cent cannot be estimated at this time because of decisions the CRTC must reach in a related proceeding," Telus writes in its court application. "However, the impact on the amount of the total subsidy requirement is expected to be significant. The financial impact of moving to a 15 per cent markup will be felt by TCI and TCBC beginning January 1st, 2002, as the subsidy requirement will be based on calculating Phase II costs plus a 15 per cent markup commencing on that date." Grieve describes these complaints as "corrections", saying no one wants a return to the previous system. "The fundamentals, the main pillars of the decision, going to revenue from per-minute and going to incremental costs plus a markup for the calculation of the subsidy, those will stand," he insists. "So it looks like the commission is being attacked from all quarters, but these are really details that people are attacking." The telco is also concerned about setting a precedent. If it let its concerns about embedded costs pass in the contribution decision, Grieve worries the company wouldn’t be able to defend itself if the CRTC decides to apply similar regulations on other services. The major focus of the Telus appeal is the definition of just and reasonable rates. "The standard applied when setting rates was the ‘just and reasonable’ standard common to many regulated industries," the firm writes in its leave to appeal. "Under rate base/rate of return regulation, if a company earned more or less than an allowed rate of return, the regulator could review its rates with a view to lowering or raising them." The courts have defined just and reasonable in the past. "It’s fluid in a sense but there are things the commission or a regulator has to permit," Grieve explains to Network Letter. "And the regulator has to permit you to recover the costs, or has to permit you a reasonable opportunity to recover the costs you incur and have incurred in the performance of your obligations." Previously, the telco monopolies would price residential services below costs, knowing they could make up the difference elsewhere. The CRTC has told ILECs that they can’t take the money from residential service. The ILECs reply they have no where else from which to draw. Grieve couldn’t speculate on how soon an appeal would take, but says he hopes the court would hear the case quickly in light of the regulations taking effect next year.

Telus appeals to federal court over changes to CRTC’s new contribution scheme

News | January 15, 2001

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