Toronto launches suit against AT&T Canada in continuing war over right of ways

The battle over municipal rights of way has reached new heights in Canada, telecom companies and municipalities mired in a lawsuit and legal appeals. The City of Toronto is being particularly aggressive in fighting for what it believes is the right of local governments to determine the price and conditions of allowing access to public rights of way. Canada’s largest city says it stands to lose up to $20 million as a result of a CRTC decision earlier this year (Decision 2001-23) that effectively capped what the City of Vancouver could charge Ledcor Industries Ltd for right of way access (NL, Jan. 29/01). Other municipalities worry the precedent-setting decision will unfairly limit what they can charge telecom companies that need access to city sewers, streets and other rights of way. The Federation of Canadian Municipalities (FCM) is appealing the CRTC ruling to the Federal Court of Appeal, and Toronto is urging other local governments to contribute funds on a per-capita basis to the legal battle. Meanwhile, on its home turf, the City of Toronto has launched its own lawsuit against AT&T Canada for failing to live up to its contractual obligations. The two parties had an agreement in place, but AT&T Canada wants to renegotiate the deal in light of the CRTC’s Ledcor decision. AT&T Canada’s response to the lawsuit was to file a grievance with the regulator asking it to intervene in the dispute. "The licence agreement has imposed obligations on AT&T Canada that are onerous and one-sided and completely inconsistent with the terms enunciated in Decision 2001-23," the telco writes in its Part VII application to the CRTC. "These obligations will continue to impede AT&T Canada’s ability to compete with other carriers that benefit from more favourable terms of access to City controlled property. The City nevertheless refuses to negotiate access rights based on Decision 2001-23 with AT&T Canada." Bucking for a new contract AT&T Canada inherited the Toronto contract from Metronet Communications Inc, which it acquired in 1999 (NL, March 8/99). The deal outlines the terms and conditions for running fibre optic cables through the city’s decommissioned pipes. AT&T Canada’s VP of regulatory and government affairs maintains that all the company is seeking is consistency between the old pact and the new ground rules set out by the commission. "If you read through the Ledcor decision, those things that the CRTC commented on as not being appropriate for Vancouver to recover," Chris Peirce explains. "Like percentage of revenue, like some of the liability provisions, like the ability to order extra capacity; those types of things are pretty much all found in the agreement that we had signed with Toronto." One Toronto city councillor is not so generous in his assessment. Howard Moscoe points out that the company has a history of altering the deal. "We have already adjusted voluntarily the AT&T contract once before. This was prior to the decision coming out," he tells Network Letter. "It was a very generous contract from the city’s point of view because we were the first and we wanted some speed. It was basically a contract for our abandoned water mains. And they came to us and said, ‘these contracts that we signed are too rich, we gave you too much.’ We said ‘we’re prepared to make those adjustments voluntarily.’ And we adjusted those contracts on the basis of our level playing field policy, which is basically everybody comes in at the same price."The telco has a number of complaints about the terms of the contract. The original deal called for AT&T Canada to pay either $1.15 million or two per cent of its annual gross revenue from Toronto (whichever was greater) as a licence access fee. Next March the percentage is to increase to three per cent. Another article of the agreement says the rate may be renegotiated after a decade, but it can never fall below three per cent. But the Ledcor-Vancouver decision precludes a market-based rate for the use of municipal property or the assessment of revenue fees. Cities are restricted to the recovery of causal costs. Since revenue fees were deleted from the package, the reporting obligations initially required by Vancouver from Ledcor were also eliminated. AT&T Canada wants a similar move in its Toronto contract.Another provision in the pact forces the CLEC to offer a dark fibre licence and lit fibre services to Toronto. The city will pay only $20 for the licence and AT&T Canada cannot end the deal. The company wants the CRTC to strike that clause in its entirety. "In Ledcor, basically said that that type of arrangement, where there’s extraction of facilities isn’t legitimate, so you shouldn’t be forced to leave some of your infrastructure there for the municipality," AT&T Canada regulatory affairs VP Teresa Muir tells Network Letter. The Toronto-AT&T Canada contract says disputes must be settled either by arbitration or through an Ontario court. But the telco wants that removed, since another section of 2001-23 found such wording inappropriate. Other provisions being challenged by AT&T Canada involve relocation and expiry, termination, default or cancellation of the access agreement. Moscoe maintains a deal is a deal. "We’re proceeding on the basis of the contracts we’ve already signed with them and we will continue to do that." He wonders why the telcos are so adamant that agreements must be renegotiated. The appeal of 2001-23 by the FCM to the Federal Court means the matter isn’t over. "Many of the companies have basically taken the attitude ‘now that the CRTC has made its decision, you have to let us in for their price’," he asserts. "Our general response has been it hasn’t followed through to the final conclusion. There’s no final decision on that. We simply have a CRTC ruling, so I don’t know where they’re going with this." He speculates there may be market considerations influencing the Part VII filing. "I think it says a lot more about the business state of AT&T in Canada than it does about any contractual arrangements between the city of Toronto and AT&T," the councillor offers. The city and the company have been sending lawyer’s letters back and forth since the spring. On March 29 AT&T Canada gave Toronto a cheque for one half of the municipal access fees along with a note requesting new terms for the contract. The city rejected this and sued at the beginning of April. At the end of the month it said it would only talk if the telco paid the outstanding balance of the access fees and could not guarantee any amending of the deal. On May 11 AT&T Canada said it would pay if good faith negotiations took place. Toronto rejected the offer four days later. To the Supreme Court, if necessary Toronto city council is also helping to underwrite the FCM appeal, and Moscoe, who chairs the federation’s telecom committee, is twisting arms to get more funds. "We’re asking cities for another voluntary contribution but this time we’ve calculated the cost of an appeal right to the very nth degree, to the end of the final Supreme Court appeal," he explains. "We’re asking cities to pledge support amounting to about $1.2 million towards the appeal case. Toronto has already made its pledge of support of $450,000 over a three-year period. When we have cities representing 6.5 million people then we’ll go forward with the appeal, but we want to be sure to have the pledged funding to carry it through." He wants large and small cities to participate, but is concentrating on bigger communities. He has spoken with the mayors of Vancouver and Calgary and the chief administrative officer in Edmonton."The vibes are very positive. The truth of the matter is that Toronto can’t afford not to appeal," Moscoe reports. "Failing to proceed with the appeal will cost Toronto immediately $4.4 million. That’s immediately, and potentially some $20 million."

Toronto launches suit against AT&T Canada in continuing war over right of ways

News | June 18, 2001

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