By Ahmad Hathout
OTTAWA – As part of its argument before the Federal Court of Appeal against a decision by the CRTC to slash the wholesale rate internet resellers pay to use incumbents’ networks, Bell Canada said forcing the big telecoms to give back the price difference over three years is effectively a tax that only Parliament can impose.
“The Telecommunications Act does not empower the CRTC to levy taxes,” Bell said in its official argument, filed Thursday. “Therefore, if the Retroactive Payments are a tax, they are unconstitutional” and outside the jurisdiction of the CRTC.
Last summer, in a decision that reverberated across the industry and has caused a large number of appeals and counters, the CRTC trimmed the final rate internet resellers pay incumbents for selling parts of their network by between 15% to 43% and ordered those rates be made retroactive to when it set interim rates in 2016, which amounted to about $325 million to be paid back to those wholesalers but not necessarily requiring the amount to be passed down to consumers. The move was followed by telecoms cutting investments, including to rural parts of the country and inducing overtures from the big players that the decision would overthrow their efforts to build 5G infrastructure in time.
It also caused some third party internet access providers to quickly cut their prices.
The telecoms were granted their leave to appeal applications to the court and also filed review and vary appeals with the CRTC, as well. The court put a stay on the decision, which paused the institution of the lowered rates and retroactivity.
“To the extent the Retroactive Payments influence behaviour at all, they punish investment in rural networks and reduce the ability of Carriers to make such investments in future, thereby undermining the CRTC’s regulatory purpose.” – Bell Canada
The retroactive portion is what supports Bell’s argument that the CRTC could not have made a decision that stood the test of its legal obligation to ensure that a decision of that nature was “just and reasonable.” The incumbents have argued the amount by which the CRTC slashed rates actually means it will receive compensation below its costs, making it unreasonable. Bell also argued that the CRTC rejected updated data it could’ve used toward a more equitable decision.
The levy argument is based on whether the retroactive payment meets the legal definition of a tax, while also not tripping up other legal exceptions that would disqualify it from being a tax. Bell argues in its filing the retroactive payments do not fund the CRTC’s regulatory scheme in any way, “but are simply a subsidy or wealth transfer from Carriers to Resellers, a classic taxation function,” and the payments do not “regulate behaviour by creating incentive structures,” such as a charge for use of a landfill to discourage waste production, it illustrated.
“To the extent the Retroactive Payments influence behaviour at all, they punish investment in rural networks and reduce the ability of Carriers to make such investments in future, thereby undermining the CRTC’s regulatory purpose,” reads the Bell filing.
Bell also argues the CRTC wholesale decision does not comply with section 47 of the Telecommunications Act to develop a telecommunications system throughout Canada, extend reliable communications to rural areas, enhance international competitiveness, allow for increased reliance on market forces, encourage innovation, use measures that are proportionate to their purpose and ensure competitive neutrality and not artificially favour resellers.
The company added the decision does not achieve these objectives and instead deters carriers “from investing in new, reliable and affordable networks – particularly in rural areas – while also leaving those same carriers with significantly less capital to develop innovative technologies like 5G.”
Bell is requesting that the appeal be allowed and the decision set aside.
The cable companies have also filed their arguments in the case. However, because of disruptions due to the evolving COVID-19 pandemic, the appeal court is not receiving requests that are not of an urgent matter and has suspended all hearings until mid April.
