Monday, September 21, 2009

Bell, Telus ordered to give subscribers credits

The Supreme Court of Canada released a recent judgment that provided a much needed boost to many Canadians. The Court upheld a decision of the CRTC that required carriers such as Bell Canada to give their subscribers credits or reduce their rates.

In May of 2002, the CRTC, in the exercise of its rate-setting authority, established a formula to regulate the maximum prices to be charged for certain services offered by carriers such as Bell Canada (the "Price Caps Decision"). Under the formula established by the Price Caps Decision, any increase in the price charged for services in a given year was limited to an inflationary cap, less a productivity offset to reflect the low degree of competition in the marketplace. The CRTC ordered carriers to establish deferral accounts as separate accounting entries in their ledgers to record amounts representing the difference between the rates actually charged and those otherwise determined by the formula.

In December of 2003, Bell Canada sought approval from the CRTC to use the balance in its deferral account to expand high-speed broadband internet services in remote and rural communities. After public consultation, the CRTC decided that the deferral account should be used to improve accessibility for individuals with disabilities and for broadband expansion. Any surplus amounts were to be distributed to residential subscribers either through a one time credit or through rate reductions. This was known as the "Deferral Accounts Decision".

Bell Canada appealed the order of giving one time credits. The Consumer Association of Canada and the National Anti-Poverty Organization appealed the decision that funds be used for broadband expansion. The Federal Court of Appeal dismissed the appeals finding that the Price Caps Decision always contemplated that the use of the deferral accounts would be subject to the CRTC's directions and that the CRTC was acting within its mandate. Telus Communications Inc. joined Bell Canada in appealing this decision to the Supreme Court of Canada.

The Supreme Court unanimously dismissed the appeal. It held that the CRTC's decisions were reasonable based on Canadian telecommunications policy objectives. The CRTC did exactly what it was mandated to do under the Telecommunications Act. It had the statutory authority to set just and reasonable rates, to establish deferral accounts, and to direct the disposition of the funds in those accounts. It was obliged to do so in accordance with the telecommunications policy objectives set out in the legislation and to balance and consider a wide variety of objectives and interests. The Supreme Court held that the CRTC did so in a reasonable way, both in ordering subscriber credits and in approving the use of the funds for broadband expansion.



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