Court opines on meetings between the regulator and the regulated
By Ahmad Hathout
The Federal Court of Appeal has ruled this week that the CRTC has discretion in determining the method it uses to establish wholesale internet access rates, rejecting TekSavvy’s argument on appeal that the regulator failed to institute any method or technique when it rejected its own proposed lower wholesale rates based on methodological errors.
The CRTC had initially proposed significantly lower wholesale rates in a 2019 decision, which would have allowed independent service providers like TekSavvy to lease internet space from the larger players at a reduced cost. But after appealing the decision, the regulator said in a 2021 decision that it realized it made several errors in how it calculated the lower rates, effectively torpedoing the 2019 decision.
TekSavvy was granted leave to appeal the 2021 ruling based on what it said was the CRTC’s failure to apply any method or technique in “arbitrarily reverting to the much higher rates set in 2016.”
But in a decision dated Monday, the Federal Court of Appeal said the “plain meaning of ‘method’ and ‘technique’ is broader and more general than Teksavvy’s constrained meaning that requires rigid concreteness, calculability and a solely objective basis. A ‘method’ is just a way of doing something. And a ‘technique’ is nothing more than a particular way of doing something.”
“The setting of ‘just and reasonable’ rates in this context is not something that tumbles out of a calculator once the numbers are punched in,” the decision continued.
“Instead, it is suffused by policy considerations, informed by multiple, often conflicting inputs, over which reasonable minds may differ, including regulatory experience, subjective weighings and assessments, factual appreciation, and many rival methodologies,” it said. “How to arrive at a rate involves more than the processing of information objectively and logically against fixed, legal criteria. Rather, it is a complex, multifaceted decision involving sensitive weighings of information, impressions and indications using criteria that may shift and be weighed differently from time to time depending upon changing and evolving circumstances and regulatory experience.”
The court added that the CRTC utilized a standard, called Phase II costing methodology, so it wasn’t an arbitrary decision.
Court addresses allegation of bias
The appeal court also said TekSavvy’s allegation that the CRTC chair was biased when the 2021 decision was made has no merit. At the time, then-CRTC chair Ian Scott said during an online event that the preference is for facilities-based competition, which stipulates that providers compete on their own networks rather than on, say, price and marketing — a product of wholesale-based competition.
“The Chair was doing nothing more than setting out the longstanding and frequently expressed policy position of the CRTC in general terms,” the court said. “As the Chair of a high-profile regulatory body, it was appropriate for him to communicate the policies of the regulator, as had been adopted in CRTC decisions and notices.”
The decision also touched on the allegation of bias TekSavvy argued emerged from a meeting between Scott and Bell CEO Mirko Bibic at an Ottawa pub, which was memorialized in a well-circulated photo.
While we don’t know what was discussed, the court said Bell filed a lobby communication – as it’s required to do with such a meeting – that noted this was a broadcasting-related meeting, not a telecom one – thus having no relevance to the matter of wholesale rates.
TekSavvy had opportunities to address some of the issues it outlined in its appeal to the regulator, the court said, including any appearance of bias because the meeting came before a decision on the rates matter.
“I cast no aspersions on Teksavvy here, which genuinely and in good faith pursued this submission—it is unseemly for a party to notice that a mistake or oversight has been made and then hide in the weeds, ready to pounce should the case go against it,” the court wrote. “Such a party has no real interest in correcting the mistake or oversight but rather wishes, for tactical reasons, to take out some insurance against an adverse result. Our administrative law never rewards purely tactical behaviour that benefits a party to the detriment of the larger public interest or the proper administration of justice.”
The court, however, warned about the dangers of regulators meeting with the regulated without a witness present.
“The CRTC’s Code of Conduct permits attendance at social events and other meetings between CRTC members and industry representatives as long as CRTC members do not discuss matters before the CRTC during the events. But this can still invite unwelcome questions that can multiply, with mounting risk,” the court said.
“Looking at this case as an example, why were the two together? What was discussed? Why were just the two of them there without any witnesses? Quite simply, meetings between two people, one a regulator and one a regulatee, without any independent witnesses or other evidence to substantiate why the meeting happened and what was discussed can be a recipe for trouble.
“In the evidentiary record before us is a CRTC policy that offers good practical guidance on this issue,” it continued. “It recognizes the benefits of regulator-regulatee meetings. But it also flags the risks and offers some ways the risks can be mitigated. For example, among other things, the policy suggests that a senior Commission staff person be present at such meetings. It also suggests that the purposes of the meeting be confirmed in writing.”
The appeal court’s decision comes before the CRTC is expected to make a decision on a renewed wholesale internet access framework by the end of the summer.
