Court File No. A-517-06 FEDERAL COURT OF APPEAL BETWEEN CONSUMERS' ASSOCIATION OF CANADA and NATIONAL ANTI-POVERTY ORGANIZATION Appellants - and - CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION Respondent - and - BELL ALIANT REGIONAL COMMUNICATIONS, LIMITED PARTNERSHIP, BELL CANADA, ARCH DISABILITY LAW CENTRE, CANADIAN ASSOCIATION OF THE DEAF, MTS ALLSTREAM INC., SASKATCHEWAN TELECOMMUNICATIONS, TÉLÉBEC, SOCIÉTÉ EN COMMANDITE, TELUS COMMUNICATIONS INC. AND TELUS COMMUNICATIONS (QUÉBEC) INC. Respondents NOTICE OF APPEAL TO THE RESPONDENTS: A LEGAL PROCEEDING HAS BEEN COMMENCED AGAINST YOU by the appellant. The relief claimed by the appellant appears on the following page. THIS APPEAL will be heard by the Court at a time and place to be fixed by the Judicial Administrator. Unless the Court directs otherwise, the place of hearing will be as requested by the appellant. The appellant requests that this appeal be heard at Ottawa. IF YOU WISH TO OPPOSE THIS APPEAL, to receive notice of any step in the appeal or to be served with any documents in the appeal, you or a solicitor acting for you must prepare a notice of appearance in Form 341 prescribed by the Federal Courts Rules and serve it on the appellant's solicitor, or where the appellant is self-represented, on the appellant, WITHIN 10 DAYS of being served with this notice of appeal. IF YOU INTEND TO SEEK A DIFFERENT DISPOSITION of the order appealed from, you must serve and file a notice of cross-appeal in Form 341 prescribed by the Federal Courts Rules instead of serving and filing a notice of appearance. Copies of the Federal Courts Rules, information concerning the local offices of the Court and other necessary information may be obtained on request to the Administrator of this Court at Ottawa (telephone 613-992-4238) or at any local office. IF YOU FAIL TO OPPOSE THIS APPEAL, JUDGMENT MAY BE GIVEN IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. November 21, 2006 Issued by: _"Elise A. Benoit"__ Registry Officer, OTTAWA TO: Torys LLP John Laskin Afshan Ali Suite 3000, 79 Wellington St. W., TD Centre PO Box 270, Stn. Toronto Dom. Toronto, ON M5K 1N2 Tel: (416) 865-0040 Fax: (416) 865-7380 Solicitors for the Respondent Canadian Radio-Television and Telecommunications Commission (CRTC) AND TO: Daniel M. Campbell, Q.C. Cox Hanson O'Reilly Matheson 1100-1959 Upper Water Street P.O. Box 2380 Central Halifax, NS B3J 3E5 Tel: 902-491-4105 Fax: 902-421-3130 Solicitors for the Respondent, Bell Aliant Regional Communications, Limited Partnership (Aliant) ARCH DISABILITY LAW CENTRE (ARCH) 425 Bloor Street East Suite 110 Toronto, ON M4W 3R5 Phyllis Gordon Executive Director Tel. 416-482-8255 Fax. 416-482-2981 gordonp@lao.on.ca Blake Cassels & Graydon LLP Barristers and Solicitors Box 25, Commerce Court West Toronto, ON M5L 1A9 Neil Finkelstein Tel: (416) 863-2266 Fax: (416) 863-2653 David Kidd Tel: (613) 788-2203 Fax: (613) 788-2247 Catherine Beagan Flood Tel: (416) 863-2269 Fax: (416) 863-2653 Solicitors for the Respondents, Bell Canada Canadian Association of the Deaf (CAD) 203-251 Bank Street Ottawa, ON K2P 1X3 James Roots Executive Director TTY. 613-565-2882 Fax. 613-565-1207 jroots@cad.ca MTS Allstream Inc. 333 Main Street - MP19C PO Box 6666 Winnipeg, MB R3C 3V6 Mr. Roy Buckshaw, Director, Regulatory Affairs Tel: 204-941-8566 Fax: 204-775-2560 Saskatchewan Telecommunications (Sasktel) 2121 Saskatchewan Drive 12th Floor Regina, SK S4P 3Y2 Mr. Brian Armstrong Director of Regulatory Affairs - ROW & Access SaskTel - Corporate Counsel Tel: (306) 777-2115 Fax: (306) 565-6216 brian.armstrong@sasktel.sk.ca Télébec, Société en commandite 7151, rue Jean-Talon est 7e étage Anjou, QC H1M 3N8 Mr. Allen Mercier, Directeur, Recherche réglementaire Tel: 514-493-5340 Fax: 514-493-5379 Burnet, Duckworth & Palmer LLP Suite 1400, 350 7th Ave SW Calgary, AB T2P 3N9 John Lowe Tel: 403-260-0273 Fax: 403-260-0332 rbl@bdplaw.com Solicitor for the Respondents, TELUS Communications Inc.(TCI) AND TO: AdNET R.R. 1 PO Box 688. 1 Collver Road Thessalon, ON P0R 1L0 Wilf Lefresne Executive Director Tel: 705-649-1252 Fax: 705-842-3747 wlefresne@adnetalgoma.ca AGBriggs Consulting Inc. 208 Chebucto Drive Oakville, ON L6J 5P9 Andrew Briggs Tel. 905-844-3716 Fax. 905-844-3712 abriggs@cogeco.ca Angus Oliver 4 Blair Street Toronto, ON M4B 3N6 Tel. 416-757-3916 Fax. N/A angusoliver@netscape.net Angus TeleManagement Group Inc. PO Box 1269 Kemptville, ON K0G 1J0 Elisabeth Angus Executive Vice President Tel. 613-258-2519 Fax. 613-822-8006 lisangus@angustel.ca Association Québecoise de l'industrie du disque, du spectacle et de la video 6420 rue St-Denis Montréal, QC H2S 2R7 Annie Provencher Tel : 514-842-5147 ext. 226 Fax : 514-842-7762 provencher@adisq.com Barrett Xplore Inc. 100 Corporation Drive Brampton, ON L6S 6B5 Stuart Kinney Corporate Counsel Tel. 506-328-0610 Fax. 905-792-6060 stuartk@barrettcorp.com BCOAPO et al. C/O BC PIAC Suite 208 1090 W Pender St. Vancouver, BC V6E 2N7 Mr. Jim Quail Counsel Tel : 604-687-3034 Fax : 604-682-7896 jimquail@bcpiac.com Rogers Communications Inc. (which has acquired Call-Net Enterprises Inc.) 360 Albert Street Suite 300 Ottawa, ON K1R 7X7 Don Bowles Vice President, Regulatory Affairs Tel. 613-688-5658 Fax. 613-940-2003 regulate@sprint-canada.com Canadian Cable Television Association (CCTA) 360 Albert Street Suite 1010 Ottawa, ON K1R 7X7 Lori Assheton-Smith, Counsel Tel. 613-232-2631 Fax. 613-232-2137 assheton-smith@ccta.com City of Calgary 6C13 800 MacLeod Tr SE Calgary, AB T2G 2M3 Clyde Pawluk Regulatory Analyst Tel. 403-268-6474 Fax. 403-268-4777 calgaryregulatory@calgary.ca Consumers Association of Canada (Manitoba) & Manitoba Society of Seniors (CAC/MSOS) c/o Public Interest Law Centre 402-294 Portage Avenue Winnipeg, MB R3C 0B9 Byron Williams Counsel for CAC/MSOS Tel. 204-985-8545 Fax. 204-985-8544 bywil@pilc.mb.ca David Stinson Consulting Inc. 207 Melrose Avenue Ottawa, ON K1Y 1V3 David Stinson Tel. 613-728-0708 Fax. 613-728-6187 stinsond@comnet.ca Desjardins Securities 145 King Street West Suite 2750 Toronto, ON M5H 1J8 Brian Curry Tel: 416-867-6000 Fax: 416-867-9516 Eastern Independent Telecommunications Ltd. P.O. Box 1509 101 Water Street West Brockville, ON K6V 5Y6 Julia Picotte, Controller EastLink Telephone 6080 Young Street, 8th Floor Box 8660, Stn. A Halifax, NS B3K 5M3 Natalie MacDonald Director, Regulatory Matters Tel. 902-431-9979 Fax. 902-431-9561 Regulatory.matters@corp.eastLink.ca FCI Broadband 280 Hillmount Road Unit 9 Markham, ON L6C 3A1 Kelly Collins Legal Services Tel. 905-284-4090 Fax. 905-284-4128 regulatory@corporate.fcibroadband.com Fraser Milner Casgrain LLP Suite 1420 99 Bank Street Ottawa, ON K1P 1H4 Kristen R. Embree Tel. 613-783-9616 Fax. 613-783-9690 Kristin.embree@fmc-law.com Gouvernement du Québec 225, Grande Allée Est, Bloc C, 3e étage Québec, QC G1R 5G5 Louise Caron Avocate Tel. 418-643-3929 Fax. 418-380-2308 andre.labrie@mcc.gouv.qc.ca Government of the Northwest Territories P.O. Box 1320 Yellowknife, NT X1A 2L9 Sheldon Toner Department of Justice, Legal Division Tel: 867-920-6143 Fax: 867-873-0307 Sheldon_toner@gov.nt.ca Lemay-Yates Associates Inc. 2075 University Street Suite 1000 Montréal, QC H3A 2L1 Robert K. Yates Co-President Tel. 514-288-6555 Fax. 514-288-6527 lya@lya.com Rogers Wireless Inc. (which has acquired Microcell Solutions Inc.) 800 de La Gauchetière Street West Suite 4000 Montréal, QC H5A 1K3 Simon-Pierre Olivier Regulatory Affairs Tel. 514-937-0102 ext. 8319 Fax. 514-572-1833 Regulatory.aff@fidomobile.ca Nelligan O'Brien Payne LLP 61 Simcrest Grove SW Calgary, AB T3H 4J9 Stephanie Traynor Tel. 403-240-0739 Fax. 403-788-2359 Stephanie.traynor@nelligan.ca Ontario 9-1-1 Advisory Board 703 Don Mills Rd. 8th Floor North York, ON M3C 3N3 Judy Broomfield Vice Chair Tel. 416-808-8899 Fax. 416-808-8862 communicationsservices@torontopolice.on.ca Openflows Networks Ltd. 40 Follis Avenue Toronto, ON M6G 1S3 Jesse Hirsh President Tel : 416-531-5944 Fax : 416-531-4616 jesse@openflows.org RBC Capital Markets 200 Bay Street Toronto, ON M5J 2W7 Jonathan Allen, Telecom Analyst Tel: 416-842-3806 Fax: 416-531-5944 Jonathan.allen@rbccm.com Mary Jean McFall Solicitor for RipNET Ltd. 9 Broad St. Brockville, ON K6V 6Z4 Tel: 613-498-4832 Fax: 613-498-6290 mjmcfall@mjmlaw.ca Telesat Canada 1601 Telesat Court Gloucester, ON K1B 5P4 Robert Power Director, Regulatory and Government Initiatives Tel. 613-748-0123 Fax. 613-748-8712 regmatters@telesat.ca The Corporation of the City of Thunder Bay 1046 Lithium Drive Thunder Bay, ON P7B 6G3 Robert Olenick Regulatory Analyst Tel. 807-684-2908 Fax. 807-623-5324 rolenick@tbaytel.com TIA Telecommunications Issues and Analysis 13 Carlaw Avenue Ottawa, ON K2G 0P9 George Hariton Tel. 613-828-8120 Fax: 613-828-8860 ghariton@sympatico.ca Union des consommateurs 1000, rue Amherst Bureau 300 Montreal, QC H2L 3K5 Genevieve Duschesne Tel: 514-521-6820 Fax: 514-521-0736 duchesne@consommateur.qc.ca View Communications Inc. 1668 Valentine Gdn. Mississauga, ON L5J 1H5 David McKeown Tel. 905-823-9996 Fax. 905-823-9288 dmckeown@viewcom.ca Wall Communications Inc. 114 First Avenue Ottawa, ON K1S 2G4 Bernie Lefebvre Tel. 613-235-1624 Fax. 613-235-1913 lefebvre@rogers.com Xit Telecom Inc. 1350 Place Royale Office 800 Trois-Rivières, QC G9A 4J4 Robert Proulx President Tel. 819-374-2556 ext. 268 Fax. 819-374-0395 reglementation@xittelecom.com Yak Communications (Canada) Inc. 300 Consilium Place Suite 500 Toronto, ON M1H 3G2 Benjamin D. Rovet Senior Regulatory Counsel Tel. 647-722-2740 Fax. 647-722-2763 brovet@yak.ca Attorney-General of British Columbia (on behalf of NetWork B.C.) Ministry of the Attorney-General of British Columbia 3rd Floor, 1001 Douglas Street Victoria, BC V8V 1X4 Gordon Houston, Senior Counsel Tel: 250-356-6175 Fax: 250-953-4348 Elginconnects (Elgin Community Futures Development Corporation) Donna Lunn Project Manager 300 South Edgeware Road St. Thomas, ON L5P 4L1 Donna Lunn, Project Manager Tel: 519-633-7597 ext. 27 Fax: 519-633-5070 donna@elgincfdc.on.ca Ministry of the Attorney General of Ontario (on behalf of Ministry of Economic Development and Trade on Behalf of Government of Ontario) 720 Bay Street, 8th Floor Toronto, ON M5G 2K1 Director Crown Law Office - Civil Tel: 416-326-2220 Fax: 416-326-4007 Anishinabek First Nations in Ontario Head Office Nipissing First Nation P.O. Box 711 North Bar, ON P1B 8J8 John Beaucage Grand Council Chief Tel: 705-497-9127 Fax: 705-497-9135 Canadian Centre for Emergency Preparedness 860 Harrington Court Burlington, ON L7N 3N4 Adrian Gordon Executive Director Tel: 905-331-2552 Fax: 905-331-1641 Canadian Red Cross National Office 170 Metcalfe St., Suite 300 Ottawa, ON K2P 2P2 Mr. John C. Mulvihill Deputy Secretary General, Operations Tel: 740-1944 Fax: 740-1911 Ontario Chamber of Commerce 180 Dundas Street West, Suite 505 Toronto, ON M5G 1Z8 Mr. Len Crispino President and CEO Tel: 416-482-5222 Fax: 416-482-5879 Public Safety and Emergency Preparedness Canada 340 Laurier Ave. West Suite 200 Ottawa, ON K1A 0P8 Michael Baker, Director General of Preparedness and Recovery Tel: 998-0035 Fax: 998-9589 Satcom Colibri 862, rue de Bretagne Baie-Comeau (QC) G5C 1X7 André Doré Directeur général Tel. 418-589-6900 Fax. 418-589-3759 Execulink Box 130 Burgessville, ON N0J 1C0 Keith Stevens, CEO Tel. 519-456-7890 Fax. 519-456-7278 kstevens@execulink.com Cable Cable Inc. 16 Cable Road Fenedflon ON K0M 1N0 Tony Fiorini Preident Tel. 705-887-6433 Fax. 705-887-2580 Township of Carling Jim Bunsch 2 West Carling Bay Rd RR #1 Nobel, ON P0G 1G0 Tel. 705-342-5856 Fax. 705-342-9527 Frank J. Van Veen PT. Lot 26 Concession 6 Whitchurch Stouffville, ON L3Y 4W1 APPEAL THE APPELLANT APPEALS to the Federal Court of Appeal from the order of the Canadian Radio-television and Telecommunications Commission (the "CRTC" or the "Commission") titled Disposition of Funds in the Deferral Accounts, Telecom Decision 2006-9, dated February 16, 2006 (the "Deferral Accounts Decision" or "Decision 2006-9") by which the CRTC: (a) determined that the funds collected in the deferral accounts maintained by the respondent Incumbent Local Exchange Carriers (the "ILECs") should be used to fund programs and services in their own local exchange areas. The funds were to be spent by the ILECs for two purposes: the expansion of uneconomic ILEC broadband initiatives and a minimum of 5% of the funds for improvements to accessibility of telecommunications for persons with disabilities. (b) rejected the payment of rebates to the subscribers that had paid the local rates that had caused the monies in the deferral accounts to accumulate. THE APPELLANT ASKS that this appeal be allowed and that an order be granted: (a) quashing the order of the Commission that provided directions for the clearing the balances in the ILECs' deferral accounts; (b) directing that the Commission clear the balances in a manner that would result in the refund or rebate of the monies accumulated in the ILECs deferral accounts to the ILEC subscribers who paid the rates that provided those monies; (c) awarding the Appellants their costs of this appeal; (d) such further and other relief as counsel may request and this Honourable Court deems appropriate. THE GROUNDS OF APPEAL are as follows: The Appellants 1. The Consumers Association of Canada and the National Anti-Poverty Organization, referred to collectively herein as the "Consumer Groups", were interested parties before the CRTC in the proceedings that culminated in the Deferral Accounts Decision. Just and Reasonable Rates 2. The Commission set rates for residential local exchange service offered by the respondents, the Incumbent Local Exchange Carriers ("ILECs"): Aliant Telecom Inc. [now Bell Aliant Regional Communications, Limited Partnership]; Bell Canada; MTS Allstream Inc.; Saskatchewan Telecommunications; Télébec, Société en commandite; Telus Communications Inc. and Telus Communications (Quebec) Inc. for a four year period commencing in 2002, that were in excess of an amount that was just and reasonable in accordance with s. 27 of the Telecommunications Act ("Act"). The Commission decided to charge the excess amount in residential local service telephone rates to benefit the competitors to the respondent ILECs. The Commission ordered the excess portion of rates, above the just and reasonable level, be collected by the respondent ILECs, and deposited into a deferral account maintained by each ILEC. 3. In the Deferral Accounts Decision, the Commission purported to clear the balances remaining in the deferral accounts effective May 31, 2006. The Commission did not order the return of the monies therein to subscribers, but ordered the ILECs to expend the funds on uneconomic broadband service to rural and remote subscribers, and improvements to disabled access to telecommunications facilities. 4. The Commission erred in law or exceeded its jurisdiction, in assessing a portion of rates in excess of the just and reasonable standard established by statute, and then failing to credit the subscribers of residential local exchange service who contributed the excess portion of rates when the balances of the deferral account were cleared. Deferral Accounts 5. The Commission lacked the statutory authority to order the establishment of deferral accounts by the respondent ILECs for the purpose of the deposit of rates in excess of the just and reasonable level arising in the manner described above. 6. As the Commission lacked the authority to establish such accounts, it also had no authority to clear the balances in accordance with the proposals approved by the Commission in the Deferral Accounts Decision. Impermissible Allocation of Costs in Rates 7. The Commission determination in the Deferral Accounts Decision that, in effect, residential local exchange subscribers of the respondent ILECs should exclusively fund uneconomic broadband expansion and additional telecommunication access for the disabled, was an impermissible use of its statutory rate-making powers pursuant to s. 27 of the Act. 8. The making of just and reasonable rates requires that subscribers pay rates that reflect a reasonable allocation of the costs that are necessary to serve them. The CRTC determination that one set of customers, residential subscribers of local exchange services, should fund the initiatives chosen by the Commission in the Deferral Accounts Decision, was an error in law and made in excess of the Commission's jurisdiction. The Commission Applied the Wrong Test to Benefiting Residential Subscribers 9. In the Deferral Accounts Decision, to clear the deferral accounts monies, the Commission applied a test to determine which proposal would be approved for use of the funds remaining in the deferral accounts. The test applied by the Commission was to determine which proposal would "provide longer-term and more permanent benefits" to residential subscribers. 10. The Commission concluded that rural Internet broadband connectivity and improved accessibility to telecommunications for persons with disabilities would "provide longer-term and more permanent benefits". 11. The Commission, in applying such a test, misdirected itself. The Commission failed to explain the justification for a test preferring a "longer-term and more permanent benefit" to a small number of business and residential subscribers that were substantially different from the subscriber base that contributed the funds, rather than a simple rebate to all residential telephone subscribers. The Commission Wrongly Concluded that Subscriber Rebates Were Not Practical 12. In dismissing customer rebates as a disposition of the deferral accounts funds in its Deferral Accounts Decision, the Commission cited administrative 'complexity' and cost. 13. The Commission's conclusion "that the cost of attempting to locate those residential subscribers who were customers during the current price cap period but are no longer customers would likely outweigh any benefits that might be derived from such an exercise" was not based upon evidence as to the cost of attempting to contact these customers, or whether those costs would in any way "outweigh" the benefits of returning over $650 million to subscribers. 14. The Commission failed to consider its own precedent of ordering rebates and also failed to consider the numerous precedents of customer rebates ordered by boards and tribunals regulating tribunals across North America. 15. The Commission's statements regarding both cost and complexity, therefore, are not based upon the evidence and constitute an error of law. Unjust Enrichment and Constructive Trust 16. The Deferral Accounts Decision deprived subscribers of residential local exchange service of their right to recover the excess portion of rates that the Commission had ordered to be collected and deposited in the deferral accounts by the ILECs without legal authority. The Deferral Accounts Decision also unjustly enriched the ILECs by enabling the contribution of subscriber funds from local telephone service rates to the credit of the operation of broadband services by the ILECs in rural and remote areas. 17. In the circumstances, the deferral account funds are subject to a constructive trust in favour of residential local exchange subscribers who contributed the funds. The carrying out of the Deferral Accounts Decision to expend these monies, instead of their return to the contributing subscribers, will deplete the monies subject to the constructive trust. Fiduciary Duty and Trust 18. The Commission became a fiduciary to subscribers of residential local exchange service in the context of the Deferral Accounts Decision. The Commission had scope for, and in Decision 2006-9 exercised, its discretion and power over the deferral accounts. The Commission unilaterally exercised that power or discretion so as to affect the residential subscribers' legal or practical interests in the payment of just and reasonable rates and the right to a rebate of monies paid in excess of those just and reasonable rates. Residential subscribers are peculiarly vulnerable to or at the mercy of the Commission, as a result of the discretion or power to decide the disposition of the deferral accounts. 19. Where by statute, agreement, or unilateral undertaking, one party has an obligation to act for the benefit of another, and that obligation carries with it a discretionary power, the party thus empowered becomes a fiduciary. 20. The Commission was under an obligation to act for the benefit of residential subscribers in setting just and reasonable rates. The creation of the deferral accounts with above-normal rates, coupled with the discretion of the Commission to expend that surplus, created a fiduciary relationship between the Commission and the ratepayers, with regard to the deferral accounts. 21. Residential subscribers paid local service rates to the ILECs on the understanding that such rates were approved as just and reasonable by the Commission. To the extent that the Commission increased rates allowed the excess portion of rates to fund the deferral accounts, it created a trust in favour of residential subscribers. Illegal Tax 22. The establishment and clearance of the Deferral Accounts in the aforesaid manner amounts to the levying of an illegal tax on the subscribers of residential local exchange service provided by the respondent ILECs. 23. The Commission has no power to tax within its rate-setting functions under section 27 of the Telecommunications Act. However, the Commission levied and collected rates from these subscribers in excess of the amounts properly assessed, in order to fund collateral public purposes. November 21, 2006 ____________________________ Michael Janigan LSUC#:20308V Public Interest Advocacy Centre Suite 1204 ONE Nicholas Street Ottawa, ON K1N 7B7 Tel (613) 562-4002 x26 Fax (613) 562-0007 Solicitor for the Appellants, CONSUMERS' ASSOCIATION OF CANADA and NATIONAL ANTI-POVERTY ORGANIZATION - 23 - END OF DOCUMENT