Big 3 fight back against ISED’s efforts to protect wholesale regime

Submissions to the Department of Innovation, Science, and Economic Development’s (ISED) consultation on a new draft policy direction for the CRTC reveal some of the legal arguments that could be used to fight the direction should the government give it the force of law. In the package of responses released last Friday by the department, submissions from the big three telecom companies (BCE Inc., Rogers Communications Inc., and Telus Corp.) make the case that several paragraphs from the proposed policy direction fall outside the legal authority granted to the Governor in Council under the Telecommunications Act. One submission from McCarthy Tétrault, a Bay Street law firm which often represents incumbent telecom companies in court battles, argued that the portions of the draft policy direction that respond directly to specific market phenomena are ultra vires, lacking the necessary authority granted by the act governing orders in council. Section 8 of the act stipulates that the “Governor in Council may, by order, issue to the commission directions of general application on broad policy matters with respect to the Canadian telecommunications policy objectives.” The provisions of the draft policy direction which would direct the CRTC to “foster fixed internet competition” -- by maintaining a regulatory framework for mandating access to wholesale services, and to proactively monitor and adjust this framework -- neither concern “broad policy matters nor are of “general application,” according to the law firm. “While framed in general terms, in practice they apply only to a particular group (incumbent carriers) and a particular dispute (mandatory wholesale access),” the law firm wrote in its submission, before going on to quote the 2006 Telecommunications Policy Review Panel’s analysis of Section 8. That panel, the firm points out, held that the “power of policy direction is not unfettered.” “Policy directions must be limited in their subject matter and their specificity,” the panel wrote. Bell, in its own submission, explicitly pointed to McCarthy Tétrault’s ultra vires arguments, saying that it had read the firm's submission before submitting its own. “We agree that the Proposed Direction, as presently drafted, currently provides directions that are so specific and prescriptive that they lie beyond the powers of the Governor in Council under section 8 of the Act,” Bell wrote, adding that the language of the proposed direction is too prescriptive to conform to the section of the act in question. For its part, Bell also argued that the sections of the act concerning the wholesale regime -- sections 9, 10, and 11 -- conflict with language in Section 34(2) of the Telecommunications Act, which directs the regulator to refrain from regulating a service that “is or will be subject to competition sufficient to protect the interests of users.” Yet, according to Bell, “should the commission determine as a matter of fact that competition in a given market is sufficient, certain Clauses of the Proposed Direction forbid it from forbearing certain services.” Indeed, ISED’s draft policy direction was partly borne out of a trio of petitions asking cabinet to overturn or send back a May 2021 CRTC decision to reverse course on dramatically lowering access rates for wholesale third-party internet providers. The sections of the proposed policy direction targeted by Bell and McCarthy Tétrault -- 9, 10, and 11 -- require the commission to continue to mandate the provision of aggregated wholesale high-speed internet access “until it determines that broad, sustainable and meaningful competition will persist if the service is no longer mandated,” and at the same time set the interim and final tariffs “more expediently” by “reforming the tariff-setting process and considering external expertise or international best practices.” The CRTC had been phasing out the aggregated wholesale regime in favour of a disaggregated model which has been slow to roll out and plagued by a lack of uptake. But the draft policy direction’s language about the wholesale regime crafted as a response to competitor concerns about the wholesale regime, Bell said, is too specific and may produce dissonance with “market facts.” “The new policy direction needs to be able to stand the test of time,” the incumbent wrote. “Remedies that seem appropriate today might not tomorrow - it is preferable to use broad language that has the flexibility to adapt with the evolving marketplace, as reflected by the evidence that the Commission will gather in the future.” Bell also pointed to the recent Rogers outage -- and its knock-on effects for wholesale-based providers like TekSavvy Solutions Inc. -- in calling for reinforced language supporting facilities-based competition. “The recent service outage that afflicted our competitor Rogers provides a clear illustration of the benefits of having multiple networks,” Bell argued. “While millions of Canadians were affected by Rogers' service issues, the whole country was not paralyzed as competing networks, such as ours, continued to function,” the company wrote, adding that “service-based competitors do not provide a failsafe as was made clear by TekSavvy: when the Rogers network went down, so did their resellers' services.” In its own arguments that the wholesale access-focused provisions of the proposed policy direction violate section 8 of the Telecommunications Act, Telus enlisted the services of Professor Richard Schultz, James McGill Professor of Political Science, Emeritus at McGill University. “In professor Schultz’s assessment,” Telus wrote, “the Policy Direction represents an ‘unprecedented degree of meddling’ in technical matters that are exclusively in the CRTC’s jurisdiction. He concludes that if enacted in its current form, the Policy Direction will ‘encourage further pressures on the Cabinet to direct the Commission on such matters, thus further eroding the independent role for the CRTC to implement public policy.’” If the government does want to “exert this level of control over the work of an independent tribunal” and preserve the existence of the wholesale regime, Telus added, it should do so through Parliament rather than through cabinet. “The final report was issued nearly two years ago, yet the government has done nothing with it. By ignoring the output of its own expert panel and proceeding with this Policy Direction rather than legislative amendments, Cabinet is short-circuiting what should be a legislative process,” the western incumbent wrote. What’s more, Telus argued, the CRTC had already decided to abandon the aggregated wholesale high-speed access regime in favor of a disaggregated regime. “If Cabinet thought that the CRTC made the wrong decision by determining to phase out aggregated access services in 2015, it could have used its power” to send the decision back to the commission or rejected it altogether. “Instead, it is using Section 8 improperly now to do what it declined to do under Section 12 properly seven years ago,” Telus wrote. Rogers, on the other hand, proposed only what it called “limited amendments” to the proposal’s language on the wholesale access regime, amendments that would pave the way for the end of the CRTC’s wholesale service mandate. Specifically, Rogers wanted a test in the proposed policy direction’s Section 10 -- that mandated access for aggregated will continue until the CRTC decides that “broad, sustainable and meaningful competition will persist if the service is no longer mandated -- be also included in section 9 of the policy direction (mandating wholesale access generally) and Section 11 (mandating wholesale access at a variety of speeds). Extending such a test for the entirety of the wholesale regime, Rogers argued, would bring the Government’s proposed policy direction into line with the forbearance provisions under section 34 of the Telecommunications Act. – Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca .

Big 3 fight back against ISED’s efforts to protect wholesale regime

News | August 11, 2022

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Big 3 fight back against ISED’s efforts to protect wholesale regime

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