Court wrestled with whether Ian Scott’s beer meeting with Bell CEO showed bias
By Ahmad Hathout
OTTAWA – Lawyers representing TekSavvy argued in front of the Federal Court of Appeal on Monday that the CRTC reneged on its obligation to make just and reasonable wholesale internet rates when it decided in 2021 to fall back on interim costs it set five years prior.
The independent telecom challenged the CRTC’s May 2021 decision that disregarded the lower rates it proposed in 2019, arguing that the regulator breached its mandate to meet the legitimate expectation of the industry for a full review and correction of the rates. The company is asking for the court to quash the decision, install the 2019 rates, and make retroactive to 2016 the costs wholesalers pay to incumbents for network access.
Colin Baxter, counsel for the Chatham-based company, said Monday that when the CRTC set the interim rates in 2016, it promised to do a comprehensive review of the rates he said created the expectation of a review and scrutiny of the costing studies that underpinned the rates. Instead, he alleged the regulator made the 2016 rates final in the 2021 decision without identifying what method or technique it used to make that decision.
Baxter said in doing so, the CRTC did not correct errors in the 2019 order, did not do a proper costing review and did not conclude that making the interim rates final would lead to just and reasonable rates. The CRTC said in the 2021 decision that embarking on a new study would have taken resources away from evaluating final rates for its new wholesale access framework.
That new regime is known as the disaggregated regime, which would provide third parties access to last mile fibre of the incumbents in exchange for detaching from a bundle the requirement that the incumbents also provide the middle mile, or traffic transport, infrastructure.
Baxter argued that the CRTC determined last month – as part of its review of the wholesale rate regime – that the disaggregated regime was not working except for in a couple of dense urban markets and that it would be making an expedited decision on third parties having access to the last mile fibre of the incumbents under the existing aggregated regime.
Baxter said the CRTC had known about the failings of the disaggregated regime, which – coupled with the recent flurry of large providers buying small wholesale-based ones – further adds to its argument that the final rates it set were not just and reasonable as required under the Telecommunications Act.
But cable company counsel Kent Thomson said the CRTC has broad discretion to determine how it comes to a decision on rates and that an “expectation is not an entitlement.”
Thomson argued that, in fact, TekSavvy asked for the commission to speed up its decision on the matter following the request to review the 2019 rates, not slow down and do a costing study, he alleges. He alleged this is a case of Teksavvy complaining about a “substantive determination” and is beyond the reach of reasonable expectations.
“TekSavvy hates the result,” he said, before Baxter said TekSavvy asked the commission to go back, fix the errors and do its job.
Was the CRTC chair’s meeting with Bell CEO over drinks a case of bias?
TekSavvy also argued in its application that former CRTC chairman Ian Scott could not weigh on the matter fairly because of a highly publicized meeting between him and Bell CEO Mirko Bibic at a bar in Ottawa after Bell challenged the 2019 rates decision. It also pointed to comments Scott made during an online event in which he stated a “personal preference” for facilities-based competition – a preference of the network-owning incumbents.
A good portion of time was spent in court Monday arguing whether these instances meant Scott was biased in his decision.
Baxter said “this court should be concerned” about the alleged appearance of bias and that there should have been a third-party present with Scott and Bibic during the meeting. He added that the resulting wholesale rates decision was what Bell expected, further lending suspicion.
But Bell counsel Steve Mason said the meeting was primarily about Bibic’s promotion to head of the company in January 2020, alleging TekSavvy’s claim has “a lot of speculation and no concrete evidence” of bias. He noted that proving bias is a high bar to clear.
The ethics commissioner ruled there was no conflict of interest emanating from the meeting.
On Scott’s preference for facilities-based competition, Mason noted the former chairman prefaced the comment by saying it was his personal view and not one made in his capacity as the commissioner or on behalf of the commission. Mason also argued that facilities-based competition has been a long-held policy view of the CRTC anyway.
TekSavvy had asked for the court to quash the decision, reinstall the 2019 rates and make retroactive the costs to 2016.
Mason said quashing the decision would be “highly disruptive” and “entirely inappropriate” because it is the expert panel at the CRTC who have identified a number of errors in the methodology underpinning the 2019 rates.
Justice David Stratas said the court would find it difficult to make such a determination because it doesn’t have the jurisdiction to set rates.
“I can’t see this as a clear-cut case as to what the rates ought to be,” Stratas said. “I’m in no position to say that.”
