CANADIAN BAR ASSOCIATION CONFERENCE ON
CURRENT DEVELOPMENTS IN ADMINISTRATIVE AND EMPLOYMENT LAW
November 13 & 14, 1998
PROCEDURAL FAIRNESS AND DEREGULATION: A CONSUMER ADVOCATE’S VIEW OF THE EXPERIENCE WITH TELECOMMUNICATIONS
The Canadian telecommunications industry has undergone dramatic changes during the last decade – changes in technology, market structure and regulatory regime. The CRTC has opened virtually all markets (local and long distance) to competition, has forborne from regulating companies where sufficient competition exists (e.g., long distance, terminal sets), and has completely revamped the regulatory regime applicable to those companies now facing the prospect of local competition.
No longer do the traditional methods of regulating a public utility apply. Rate base, rate of return regulation has been replaced in all but exceptional cases with a combination of forbearance (reliance on market forces), regulatory back-stops, and price cap regulation. Oral public hearings, which used to be a standard element of public utility regulation, have become rare – indeed, almost non-existent. Formal proceedings are now conducted in writing, with increasing reliance on the Internet to exchange and publish information. Many more issues are handled through informal proceedings and working groups, as the Commission attempts a more cooperative approach to decision-making.
Yet, basic telephone service remains an essential service for Canadians. Indeed, together with newer telecommunications services such as Internet, phone service is becoming increasingly essential. Consumer and public interest groups are more interested than ever in telecommunications policy and regulation.
The following comments address the recent evolution of procedures used by the CRTC in its regulation of telecommunications where the ratepayer interest is involved.(1)
PROCEDURAL FAIRNESS IN THE CONTEXT OF DEREGULATION
It is now well-established that the principles of natural justice and fairness apply to public bodies making non-legislative decisions which affect the rights, privileges or interests of an individual.(2) While the content of these principles will vary depending on the nature of the decision, the type of administrative body, and the effect of the decision on the individual’s rights,(3) they can be summarized as:
1. The requirement to provide affected individuals with an adequate opportunity to be heard before a decision is made affecting their interests; and
2. The requirement for independence and impartiality on the part of the decision maker.
Included in the requirement for an adequate opportunity to be heard is adequate notice, as well as an adequate hearing (whether oral or in writing). “Adequacy” of the notice and the procedure will depend on the legitimate expectations of the affected individuals,(4) as well as the three factors listed above.
Public utility regulators such as the CRTC have long respected these principles in the exercise of their powers, even when engaging in what could be argued to be legislative decision making (e.g., establishing rules of conduct binding on the industry at large). Quite properly, regulatory decisions which affect a large and indeterminate number of individuals or companies are not treated as exempt from the requirements of procedural fairness simply because there is no significant individual interest at stake. Indeed, while the effect of such decisions on any one individual ratepayer may be minor, the effect on ratepayers as a whole (vs. company shareholders, for example) may be enormous. In any case, the CRTC’s Telecommunications Rules of Procedure,(5) which apply to all proceedings before the Commission,(6) clearly reflect the Commission’s desire to ensure that all parties to a proceeding are given an adequate opportunity to be heard.
A simplistic view of deregulation might lead one to believe that, once the monopoly is cracked, the regulator has no more business being involved, and any necessary protections should be left to market forces, subject only to the intervention of competition authorities under the Competition Act. However, even a cursory examination of telecommunications will reveal a much messier reality, requiring ongoing regulatory oversight for the foreseeable future. While increased reliance has been placed on the Competition Act, even the Director of Investigation and Research (Competition Bureau) acknowledges that there are some important statutory policy goals (e.g., providing universal service) that neither market forces nor competition law can address, and that some competitive issues (e.g., interconnection and access) require the technical expertise of an industry regulator, such that specific regulatory functions will remain indefinitely with the CRTC.(7)
This points to an important procedural consequence of deregulation that has potential impacts beyond the confines of natural justice: as the CRTC forbears from regulation, determining where its jurisdiction ends and that of the Competition Bureau begins can be problematic. While courts have held that business conduct undertaken pursuant to a valid scheme of regulation is deemed to be in the public interest and, therefore, beyond the application of the Competition Act,(8) it remains unclear exactly how this principle is to be implemented.(9) To whom should consumers (or competitors) complain? From whom can they obtain redress? The uncertainty and confusion over which authority has jurisdiction in a semi-competitive, semi-regulated environment is a problem for business and consumers alike, and needs to be addressed in a coordinated fashion by both agencies.(10)
NEW APPROACHES TO REGULATION
Coincident with the transition from monopoly regulation to management of an increasingly competitive industry, the CRTC has adopted a number of new procedural approaches in an effort to accomplish its regulatory tasks in the most effective and efficient manner.(11) Recognizing that its traditional quasi-judicial processes were no longer appropriate for the resolution of complex, often highly technical issues in a tremendously dynamic industry, the CRTC has all but abandoned the use of oral hearings, and is relying increasingly on “streamlined regulation”, ADR-type procedures, and industry self-regulation. Each of these three developments is discussed below.
In an attempt to achieve greater efficiency, and to comply with new statutory requirements for timely decision making,(12) the Commission approves numerous tariff applications on an interim basis, sometimes ex parte. While interested parties are provided with an opportunity to comment on the application before it is finally approved, the practical consequences of denying an application once it has been approved on an interim basis cannot be ignored, and undoubtedly contribute to an unwritten presumption in favour of final approval. It would appear that efficiency in this case may be taking precedence over fairness.
As noted above, oral hearings in telecommunications matters have become rare; virtually all Commission proceedings are dealt with in writing. At the same time, and presumably to mitigate any perceived lack of openness as a result of this trend, the CRTC has been conducting open consultations with the public on an ad hoc basis, as well as sessions with regular interveners to obtain feedback on the Commission’s practices and procedures (see below). While there is no legal requirement, per se, for oral hearings, the trend toward paper proceedings has not happened without protest: on a number of occasions, parties have expressed their concern about the lack of opportunity to cross-examine adverse witnesses on controversial evidence and to make their case orally..
Such protests have been acted upon in only one instance to this author’s knowledge: when the Commission attempted to extend the application of a rate rebalancing decision to the Manitoba Telephone System (“MTS”) and its customers, without any public hearing. A lengthy public hearing had been held with respect to other companies, but MTS was not subject to CRTC jurisdiction at the time. Once MTS came under its jurisdiction, the Commission proposed to apply the decision to MTS without any additional public proceeding. MTS customers took their complaint to the Federal Court, arguing that the CRTC’s failure to hold a public proceeding with respect to MTS, inter alia breached their legitimate expectations and was otherwise contrary to the requirement of natural justice. Unfortunately, the court never had an opportunity to rule on this case.(13) However, the episode does point to a perceived need for full and proper proceedings where ratepayers stand to be directly affected.
A number of different types of proceedings have been used in recent years by the CRTC to obtain public input, to build consensus among competing interests, and to achieve more effective decision making through the active involvement of industry and consumers. Consumer groups have been involved in three distinct types of procedure: consultations, workshops, and a novel form of negotiated rule making.
The aim of consultation by an administrative body is usually modest: to provide a forum for input to the decision maker. Consultations may be open or closed, bilateral or multilateral, held within a proceeding or on issues that are not the subject of an existing proceeding. There is no attempt to reach consensus on issues; rather, the objective is simply to provide the decision maker with informed input and/or to permit interested parties an opportunity to be heard.
The CRTC uses bilateral consultations, but generally only with respect to issues that are not already before it in a proceeding. It is felt that, for reasons of fairness and due process, any discussion of matters before the Commission should occur on the record of the relevant proceeding. These consultations take two forms: open, public forums in which anyone is invited to speak their mind, and closed, invitation-only sessions between the invited party and the Commission. In this way, the Commission is attempting to improve its understanding of public concerns and of industry it governs, and thereby to improve the effectiveness of its decisions.
Consultations are a valuable tool for the CRTC, and can be conducted at minimal cost (for example, in the case of open, public consultations, by piggybacking on existing Commission hearings so as to avoid the cost of a separate trip). As long as the Commission does not compromise the integrity of existing proceedings by allowing the consultations to venture into matters already the subject of an established proceeding, and as long as the consultations are open and preceded by adequate notice, the requirements of natural justice will likely be met.
However, the practice of closed, one-on-one consultations on matters of both public and private interest raises concerns about both elements of natural justice. The Commission must be especially careful to provide an equal opportunity to all stakeholders to be heard in this manner. It must also ensure that such consultations do not degenerate into lobbying sessions. The pursuit of effectiveness through greater dialogue with stakeholders must not compromise the need for procedural fairness, impartiality and the appearance of impartiality on the part of the regulator.
One step beyond consultations, workshops have been used by the CRTC to bring together various interested parties in order to build consensus, clarify issues, and resolve potential problems before they arise. Workshops are different from consultations in that they allow for the exchange of ideas and views between stakeholders with a view to achieving greater understanding, cooperation, and ultimately, consensus among the parties. Workshops may be open or closed, held within or outside a proceeding, and presided over by either a Board member or staff person.
The CRTC has used workshops (also referred to as “roundtables”) in at least two instances: (a) to identify and define issues in a particular matter, before commencing a proceeding through a public notice,(14) and (b) “to provide an opportunity for individual participants, interest groups, associations and the industry to consult and discuss issues of concern relating to public participation in Commission proceedings”.(15)
In the first case, the Commission invited a limited number of industry participants (those directly affected by the issue in question) to a “Round Table Consultation” chaired by the Commission Vice-Chair. As stated in the subsequent Public Notice,
An important aspect of this consultative process was to seek clarification and industry input on the extent of the problems associated with the current contribution mechanism, and to identify alternative solutions, if required, that would foster competition and, at the same time, maintain both affordable basic local service and the reasonable financial health of the independents. The Commission noted that it intended the round table to be a consultative rather than a decisional process and that it intended to initiate this proceeding subsequently, wherein all interested parties would be invited to participate and make submissions.(16)
A number of uninvited parties, upon learning of the intended closed consultation, requested that they be permitted to participate, and were so allowed. However, questions were raised as to the fairness and propriety of such closed door sessions, even for the limited purpose of facilitating a subsequent public proceeding. In this case, efforts to achieve greater effectiveness seemed to run up against the demands for procedural fairness.
The second example of CRTC experimentation with workshops was a one day, staff-conducted workshop on public participation in Commission proceedings. Two months in advance, invitations were sent to those consumer groups and other public interest organizations who had previously participated in Commission proceedings, as well as to the associations representing the Commission’s regulated industries. Participants were asked to provide brief written submissions in advance, outlining their concerns and proposed solutions. These submissions were then used by Commission staff to develop an agenda for the meeting. After the meeting, staff reviewed and evaluated the various oral and written submissions, and made recommendations to the Commission, many of which were subsequently implemented.(17)
The use of workshops (or indeed consultations) for the purpose of evaluating and revising general procedure and practice is sensible and involves minimal risk. Everyone “wins”: the Commission obtains helpful input, while parties have an opportunity to assist the Commission in the development of its general operational practices. Because decisions on practice and procedure are quasi-legislative, they do not require the same degree of due process as those involving substantive policy.
(c) Negotiated Rule Making
Of all the various ADR-type procedures, this is one of the most useful for regulators such as the CRTC, whose mandate involves detailed oversight of a complex and constantly changing industry. It is also finding favour among regulators of monopoly utilities, as a means of reducing the number of issues to be addressed in traditional, adversarial rate hearings.
The term “negotiated rule making” is used here to mean a multilateral bargaining process designed to achieve consensus among interested parties on regulatory policy and related matters. Where, as in the case of the CRTC, the tribunal has exclusive jurisdiction to make these kinds of decisions, the parties to the negotiation have no decision-making powers – they can only make recommendations to the decision-maker.
For negotiated rule making to operate effectively, a number of criteria must be met: the regulator must not delegate its exclusive decision-making powers, all stakeholders must have a full and fair opportunity to participate, there must be clear rules of engagement and a clear agenda, and each party must participate in good faith.
The CRTC has blazed new trails in negotiated rule making over the last few years, with its use of industry working groups to develop the detailed (often highly technical) rules for local competition in telecommunications. Under the oversight of the CRTC Interconnection Steering Committee (“CISC”), and a Coordinating Committee with one representative from each interested party, over 20 working groups have been established to address specific tasks required for local interconnection.(18) Participation in any working group is open to any and all interested parties, and can be active or passive.
One or more CRTC staff members is assigned to each working group, but staff does not participate in the group’s work unless requested. Each working group identifies and defines tasks within its mandate, then works toward a consensus resolution of each task. Once the group has achieved consensus on a given outcome, it files a consensus report with the CISC Coordinating Committee and the Commission. The consensus report is reviewed at the next Coordinating Committee meeting, at which time parties who were not involved in the working group may raise objections. If no objection is raised, the consensus report is filed with the Commission for approval. Where objections are raised, the matter is sent back to the working group. Approval of consensus reports is not automatic; the Commission reviews each matter on its merits and issues a ruling either approving the consensus as submitted, modifying it, or dismissing it.
Where consensus cannot be achieved, a formal dispute is initiated. Each party to the dispute submits its position, in writing, to the Coordinating Committee and CRTC staff, as well as to the working group members. A final effort is made to achieve consensual resolution of the issue, with CRTC staff participation. If this effort is unsuccessful, the dispute is filed with the Commission, and discussed at the next Coordinating Committee meeting. Another effort at resolution is made at this level. Staff may issue a non-binding opinion at this stage, to assist in a negotiated resolution. If this fails, the matter is left in the Commission’s hands. The type of process then invoked by the Commission will depend upon the nature and history of the dispute, and may involve anything from rendering a decision based on the record before it, to issuing a public notice on the disputed matter and inviting public comment.
While there is little doubt that this process has been effective in terms of minimizing disputes, achieving industry “buy-in”, and reducing the Commission’s workload, a number of procedural concerns arise. First is the issue of adequate notice. Aside from the original public notice which was issued in 1996, notice of the subsequent establishment of working groups, together with the minutes, reports and other recorded output of each working group, is published on the CRTC’s website. It is therefore up to interested parties to monitor the website in order to be aware of CISC developments. Even diligent monitoring, however, can fail to uncover the existence of an important issue if it has not been made the subject of a specific task, or if the working group did not post the information in a timely manner.
Thus, aside from the active involvement of one consumer representative in the working group in which end-user issues were most concentrated,(19) consumer advocates have relied upon other parties and Commission staff to bring to their attention issues arising in other groups which raise end-user concerns. This provides an interesting contrast to the manner in which the Commission provides notice on other, non-CISC issues: tariff applications, for example, are more reliably posted to the CRTC website for public review, and, where considered sufficiently important or controversial, are made the subject of a public notice by the Commission. In other words, consumers can rely on the Commission to actively notify them of important issues arising out of ordinary tariff applications. This is not the case with important issues arising out of CISC deliberations, unless and until the issue is filed with the CRTC as a formal dispute.
A second procedural concern with the CISC process has to do with the ability of interested parties to participate. The CISC process is an enormous undertaking, requiring enormous effort on the part of its participants.(20) Its theoretical openness is of limited value to resource-strapped stakeholders, who quickly find that effective participation in negotiated rule making requires far more than explaining and defending one’s position. In order to be part of the negotiation, and to have their views reflected in the group’s output, parties must be prepared to negotiate – to engage in discussion with other stakeholders, to listen and attempt to understand opposing interests, to consider alternative approaches, to be creative, and ultimately, to compromise where doing so is in the public interest. They must be prepared to attend lengthy meetings, travel where necessary, and stay involved until the issue has been resolved.
This is a far greater burden on participants than is the traditional, adversarial-style proceeding in which parties make their case, ask and answer questions, make their case once again, then leave it to the Commission to decide the issue based on the record before it. Indeed, the opportunity to participate in negotiated rule making processes such as CISC may be no more that – an unrealized opportunity – for those groups who simply don’t have the requisite resources.
A third development that commonly accompanies deregulation is increased reliance on industry self-regulation. Despite obvious concerns about putting the fox in charge of the chicken coop, enthusiasm remains high for this approach to dealing with government cutbacks and minimizing heavy-handed regulation. The CRTC has been forthright about its desire to foster industry self-regulation,(21) and currently does so in at least two areas: customer complaints regarding cable TV service, and customer complaints in respect of certain long distance telephone companies. In each case, the Commission’s practice is to refer complaints to the relevant body, as appropriate.
With competition in long distance telephone service came a flurry of new consumer complaints about confusing and deceptive marketing, aggressive sales practices, and unauthorized transfers (“slamming”) by a number of the new providers. Neither the Commission nor the Bureau of Competition were able to respond effectively to these complaints. By1996, the problem had become serious enough that some industry players(22) established the “Telecommunications Customer Service Foundation” (TCSF), developed a Code of Ethics binding on members of the Foundation, and hired an Ombudsman to oversee administration of the Code and to provide a fair and timely process for the resolution of their customers’ complaints. The Ombudsman, who has been active now for two years, reports to the TCSF, which is an exclusively industry body with no consumer or other participation.
The cable TV experience with self-regulation provides an interesting contrast to the industry-initiated TCSF. First, unlike the industry-initiated TCSF, the CRTC initiated and supervised the development of cable TV standards, through a series of public proceedings.(23) Early on in this process, the cable industry, with the encouragement of the CRTC, established a body known as the Cable Television Standards Foundation (CTSF) to implement the expected standards and codes. By 1991, a set of standards was approved by the Commission, and in 1992, the CRTC began referring customer complaints to the CTSF.
Second, the cable TV industry recognized the importance of public accountability: it set up an independent body known as the Cable Television Standards Council to administer the various standards, codes and guidelines. Although appointed by the industry, the three Council members are selected specifically to ensure a broad representation of interests. The Council chairperson has judicial experience, one member represents the consumer interest, and the other is from the cable television industry.
Third, while the Commission appears to follow the same practice of complaint referral in each case, it has publicly explained its approach only in respect of the CTSF. Presumably responding to concerns about improper delegation, the Commission emphasized in a public notice that while it intended to refer complaints to the CTSF, “any interested party may, at any time, choose to approach the Commission directly”, that it would “carefully monitor the activities of the Council in carrying out its new responsibilities”, and that it would continue to deal with breaches of the Cable Television Regulations as well as with complaints about matters not covered by the Standards.(24) No such clarification has been made in respect of the TCSF.
Both experiments in industry self-regulation appear to have been successful in terms of improving customer satisfaction with the complaints process: the industry bodies tend to provide faster and more effective resolution of customer complaints than does the CRTC. Moreover, the standards themselves are considered reasonable, likely because they were in each case developed through consultations with consumer representatives. However, concerns remain about ultimate accountability residing with the industry itself, and in particular about the lack of any consumer representatives on the TCSF Board.
CONCLUSION AND RECOMMENDATIONS
The process of deregulating a public utility industry inevitably involves changes that raise a number of fairness and other administrative law concerns. These concerns include: uncertainty and confusion as a result of overlapping jurisdiction between the industry regulator and the Competition Bureau, regulatory gaps, improper delegation of decision-making and complaints handling to industry bodies, inadequate distance between the regulator and its subjects, and the predominance of efficiency concerns over fairness considerations. Even where the regulator is not breaching the rules of natural justice, its legitimacy will be enhanced the more open and fair its procedures are perceived to be.
In light of these concerns, the following recommendations are provided:
- The CRTC and the Competition Bureau should work together to develop clearer guidelines as to which agency will take control in the case of overlapping jurisdiction.
- The CRTC should treat as legitimate (i.e., refer complaints to) only those self-regulatory bodies whose codes were developed with adequate public input, and that are themselves structured in a manner that assures public accountability.
- Where the only form of public notice is via the CRTC’s webpage, greater efforts should be made to ensure timely posting and easy monitoring by interested parties.
- Consensus recommendations by industry working groups, as well as disputes arising from those groups, should be made the subject of Public Notices, or at a minimum set out on the CRTC webpage in a timely and effective (i.e., easily accessed) manner.
- When engaging in closed consultations, the Commission must be especially careful to provide an equal opportunity to all stakeholders to be heard in this manner, and must ensure that such consultations do not degenerate into lobbying sessions.
- The Commission should continue its practice of not discussing ongoing proceedings with interested parties outside the (open) proceeding.
- ADR-type procedures used in the context of substantive decision-making must be designed with appropriate safeguards against the exclusion of any interested party. This should include provisions for the funding of resource-poor interveners where necessary to ensure adequate public participation.
1. As telecommunications becomes more competitive, the CRTC is increasingly acting as a “referee” between disputing service providers. Staff assisted resolution and staff mediation (see Telecom Public Notice CRTC 95-51 for an explanation of these terms) have been used on a number of occasions to date, with some success. While there are important private interests at stake in these proceedings, ratepayers are not usually affected.
2. Nicholson v. Haldimand-Norfolk (Regional Municipality) Commrs. of Police  1 S.C.R. 311, 88 D.L.R. (3d) 671, 23 N.R. 410; Martineau v. Matsqui Institution,  1 S.C.R. 602.
3. Knight v. Indian Head School Division No. 19,  1 S.C.R. 653, 69 D.L.R. (4th) 489, 43 Admin.L.R. 157, 83 Sask.R. 81.
4. Where the decision maker promised that a specific procedure would be followed, or acted in such a way as to reasonably create such an expectation, affected individuals have a right to that procedure on the basis of their “legitimate expectation”: Old St. Boniface Residents Assn. Inc. v. Winnipeg (City),  3 S.C.R. 1170, 46 Admin. L.R. 161, [1991 2 W.W.R. 145, 75 D.L.R. (4th) 385, 116 N.R. 46, 69 Man.R. (2d) 134.
6. Ibid., s.3.
7. See Remarks by Konrad von Finckenstein, Director of Investigation and Research, Competition Bureau, to the International Bar Association Conference, Vancouver B.C., September 15, 1998.
8. Reference re: Farm Products Marketing Act,  S.C.R. 198, 7 D.L.R. (2d) 257; R. v. Canadian Breweries Ltd.,  O.R. 601, 126 C.C.C. 133 (H.C.); A.G. Canada v. Law Society of British Columbia,  2 S.C.R. 307,  5 W.W.R. 289.
9. For example, does conditional forbearance constitute a regulatory scheme, under which conduct is subject to CRTC regulation?
10. Some problems arising from the introduction of competition have eluded the regulatory powers of both authorities: neither considered itself empowered to deal effectively with consumer complaints of “slamming” by unregulated telephone service providers (the practice of switching a customer between carriers without the customer’s consent). While affected individuals may have had their concerns “heard”, the lack of any effective recourse is of concern.
11. The Telecommunications Act, subs.7(f), requires that regulation by the CRTC, “where required, is efficient and effective”.
12. Section 26 of the Act requires that the Commission decide on tariff applications (or provide reasons why such a decision is not being made) within 45 days of filing.
13. Manitoba Society of Seniors Inc. and the Consumers Association of Canada (Manitoba) Inc. v. the CRTC and MTS,, Notice of Motion filed Dec.5, 1994, Federal Court File A-657-94. On the eve of the court hearing, Cabinet issued Order-In-Council P.C. 1994-2036 staying the rate rebalancing ordered by the Commission in Telecom Decision CRTC 94-19 and referring the rate rebalancing decision back to the Commission for reconsideration. Hence, the Manitoba case become moot.
14. The Public Notice in question was Telecom Public Notice CRTC 97-41: Review of the Contribution Regime of Independent Telephone Companies in Ontario and Quebec.
15. Staff-conducted workshop on issues related to public participation in the Commission’s broadcasting and telecommunications proceedings, 16 June 1997.
16. Para.8, Telecom Public Notice CRTC 97-41.
17. Indeed, implementation of the recommendations is being tracked through a “Report Card”, published on the CRTC’s web site. A further meeting of interested parties is being held via teleconference to assess progress on the workshop suggestions.
18. These groups cover such areas as customer transfer processes, ordering and billing, emergency services, network operations, building access and inside wiring, and master agreements.
19. The Customer Transfer sub-working group developed rules and processes for customer transfers between local service providers, along with processes for the resolution of disputes over the authorization of such transfers.
20. Indeed, some participants have questioned whether the CISC process is any more efficient than a more traditional proceeding. If anything, it appears to have substantially shifted the resource burden of decision-making from the Commission to the industry.
21. See, for example, the Commission’s Vision statement “From Vision to Results at the CRTC”, (revised, May 1998).
22. Members of the Competitive Telecommunications Association, led by AT&T Canada, Sprint Canada, and ACC Long Distance.
23. See Public Notice CRTC 1988-13: Guidelines for Developing Industry-Administered Standards; Public Notice CRTC 1991-60: Cable Television Customer Service Standards; and Public Notice CRTC 1992-22: Cable Television Standards Council.
24. Public Notice CRTC 1992-22.