Court has jurisdiction to overturn wholesale rates, big telecoms argue

The CRTC's wholesale rates ruling from last August ignored the intentions of a 2006 Maxime Bernier-era policy directive, and the decision to slash wholesale rates for third-party internet service providers must be set aside, lawyers representing the incumbent cable carriers and telecom companies sought to convince the Federal Court of Appeal's three judge panel Thursday. Much of the first day of testimony on the hearing's first day centered around whether or not the court had the jurisdiction to review the CRTC's wholesale rates decision, which the regulator issued in August of 2019 and slashed the rates incumbents are allowed to charge resellers for wholesale internet access. According to Kent Thomson -- a lawyer representing Rogers Communications Inc., Quebecor Inc., Shaw Communications Inc. and Bragg Communications Inc. -- the CRTC's decision to ignore specific costing data amounted to a violation of its "duty of fairness" to his clients. "The CRTC had no discretion to determine rates in a manner that breached the duty of fairness. It had no discretion to engage in arbitrary decision making," Thomson said. Thomson also said that the 2006 policy directive -- which directed the CRTC to “rely on market forces to the maximum extent feasible as the means of achieving the telecommunications policy objectives" -- requires the CRTC to demonstrate why its new wholesale rates satisfy the intent of the directive, and not doing so itself constitutes an error of law. As precedent, Thomson cited a June 10 decision in the Ontario divisional court concerning natural gas rates, in which Enbridge successfully argued that "the scope of the board's rate-setting discretion was a question of law, and therefore properly subject to appeal," Thomson told the court. According to Thomson, Section 64 of the Telecommunications Act confers the same right of appeal as in the Ontario natural gas rates case. In an April filing, TekSavvy Solutions Inc. argued that the 2006 policy directive does not require the CRTC to explain how a given decision conforms to the directive. Elsewhere, Thomson encouraged the court to consider the impact of the decision on the parties, and then proceeded to detail recent cuts to investment and infrastructure by his clients. The CRTC's decision, "if it is permitted to be implemented, will have a profound and devastating impact on the Internet-related businesses of the cable carriers from almost every perspective," Thomson told the court. "Among other things, it will upend entirely their business models, and place them at a severe competitive disadvantage. It will have a dramatic and adverse impact on their willingness and ability to make extraordinary investments required to maintain, expand, and upgrade their wireless networks," Thomson said, adding that Canadians who will "suffer most" are those in rural parts of the country. Incumbent telecom companies have been cutting their investments and warning of future cuts in investments if the wholesale rates decision -- or mandated access for mobile virtual network operators -- is allowed to go ahead. At several moments, the court's judges appeared to push back against the argument -- offered by telecom lawyers -- that the CRTC ignoring certain data constituted an appealable error in law. "The body with the expertise is the CRTC. I really have difficulty -- and I'm explaining my difficulty so you can help me with it -- how is this not a quibble with weighing evidence?" justice Eleanor Dawson asked. "It's not a quibble about weighing evidence. It's a matter of taking a dramatically inconsistent position on the very same issue ," Thomson replied. Steve Mason, arguing on behalf of BCE Inc., told the court that the CRTC exceeded its authority under the Telecommunications Act. Specifically, the statutory constraint under section 47 of the act holds that the regulator must follow policy directives and the Government's cabinet directions. Justice David Stratas offered that section 47 of the act doesn't entitle a court to "second guess" the regulator's assessment of a policy objective, to which Mason replied that the act does require the regulator to "consider and balance" the objectives of Canadian policy objectives. "If they fail to do that, that is a reviewable error," Mason said. "Just because your client balances the policies differently, or because there are arguments you can make that the did not weigh the policies adequately -- you're saying that constitutes jurisdictional error. I must say, speaking for myself, I don't think it goes that far," Stratas said. "The manner in which they balance them is not subject to review. The question of whether they did at all is," Mason replied. Later in the proceeding Stratas returned to the question of balancing the policy objective, and said that in his reading, he saw the CRTC's attempt to balance the 2006 policy objective in the decision. "I kind of can see where this board is coming from and I kind of know what they're saying. It's not favourable to your objectives, but they are allowed to balance," Stratas said. "I have been unable to find where the CRTC gives short shrift to the importance, to the fact that lowering wholesale access rates are going to have a detrimental impact on the carrier's ability to expand to rural Canada; on the carrier's ability to make investments in next generation networks like 5G," Mason said, again referencing threats of network cuts. The Competitive Network Operators of Canada and TekSavvy, the two parties arguing in favor of the new wholesale access rates, are scheduled to make their arguments tomorrow. Correction: The article originally stated incorrectly that Telus was a party to the proceedings. They are not. -- With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Court has jurisdiction to overturn wholesale rates, big telecoms argue

News | June 25, 2020

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Court has jurisdiction to overturn wholesale rates, big telecoms argue

News | June 25, 2020

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