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OTTAWA)—The Supreme Court of Canada (SCC) today dismissed the appeal launched by consumer and anti-poverty groups of the CRTC decision allocating money, intended for rate discounts on telephone bills, to fund telephone company broadband operations in uneconomic areas. Michael Janigan, executive director and general counsel of the Public Interest Advocacy Centre, which backed the appeal of the Consumers Association of Canada and the National Anti-Poverty Organization noted: “The Supreme Court decision confirms the power of the CRTC to act like a mini-government, taxing the customers of one service, in this case local telephone service, to fund projects in a completely unrelated and unregulated service – broadband internet.”
Janigan noted the Court’s interpretation of the broad objectives of the Telecommunications Act giving sweeping powers to the Commission to set rates and apply rate revenues outside of the revenue requirement of the service provider was certainly not foreseen by the drafters of the Act in the 1990s.
In 2002, the CRTC decided that any rate discounts that were to be paid to customers under the price cap formula were to put in a separate account. Rates were to be kept high to encourage local competition. About $1.6 billion dollars were put into the account. Over the four year price cap period, the CRTC used the money for a variety of purposes, mostly to provide discounted access to digital networks to competitors. When competition did arise, it was primarily due to cable technology advancement not to the CRTC
schemes that required contribution only from residential telephone subscribers. In 2004, with 650 million dollars left to spend, the Commission held a proceeding to determine how to spend the money.
Its 2006 decision decided that it should be used to help the telephone companies that had been charging the excess rates with their broadband Internet operations in the areas where it was difficult to operate a financially successful service. The Commission later decided that all the money wasn’t needed for that purpose and ordered about $300 million rebated to customers. The telephone companies wanted it all.
“This is not the right way to fund broadband,” Janigan said . “The money came from residential telephone customers only. They are basically subsidizing Bell and Telus’ broadband ambitions. And, in the end, there is no particular fairness associated with the broadband funding.”