Telecom lawyers expect brighter future for utility telecoms in regulatory regime

Current and pending decisions from the CRTC and from the courts offer a rosy regulatory regime for utility companies interested in getting into telecom. Two presentations at last week’s United Telecom Council (UTC) Canadian conference gave hope to those power producers that are considering expanding their offerings. The 2003 Canadian Utility Telecom Conference was held in Ottawa from March 5 to 7. One eagerly-awaited session was the Canadian Telecom Regulatory Update featuring Anthony Keenleyside, a partner with McCarthy Tétrault LLP (who has done work for the UTC), and Goodmans LLP lawyer Peter Ruby. The pair gave delegates updates on cases affecting telecommunications in general and commented on the implications for utels. Keenleyside titled his presentation, and accompanying paper, Canada’s Telecom Solution: Devolution, Evolution and Revolution? Under the first category, he referred to the Parliamentary review of the foreign ownership restrictions. He warned his audience not to expect great things from the process. "Politics can overshadow events," the Ottawa lawyer said. "The Liberal leadership race may mean that foreign ownership is not at the top of the agenda." A chart in Keenleyside’s background paper illustrated how incumbents benefit more than competitors under the current foreign investment regime. CRTC figures show that capex by ILECs has increased steadily while CLEC spending has remained relatively constant. The implications for UTC members vary according to their deployment plans, Keenleyside said. A traditional utility that would make spare conduit or excess transmission capacity available for lease or on an indefeasible right of use (IRU) basis should see no major impact. Lifting foreign ownership limits would help those companies that form separate telecom divisions. Current regulations prohibit the ownership or operation of facilities by non-Canadians, a point Keenleyside made to the House of Commons Standing Committee on Industry, Science and Technology (NL, Feb. 24/03). Easing those restrictions would permit utels to lease fibre lines to outsiders regardless of their country of origin. Two cases highlighted Ruby devoted much of his presentation to discussion of two major cases, the CCTA vs. Barrie Public Utilities and the FCM vs. AT&T Canada et al. The first, involving access to utility poles, has just been argued before the Supreme Court of Canada (NL, May 21/02); the second, popularly known as the Ledcor decision, is under leave to appeal to the high court (see related story). Ruby, who argued on behalf of electric companies in the pole decision, said he is "cautiously optimistic" about the outcome. Seven members of the court heard the case on February 19 and a final ruling is expected within four to eight months. "It’s never a good idea to try to predict how judges will vote," he cautioned. "But two justices appeared to be leaning toward our side, one leaning against and the other four I can’t call." The pole case hinges on the following two separate arguments: first, that section 43(5) of the Telecommunications Act does not give the CRTC jurisdiction over utility lines and second, since regulation of utilities is a provincial concern, constitutionally the original CRTC ruling is invalid. Ruby suggested there are three possible outcomes to the fight. The first is that the utilities could win on both the jurisdictional and constitutional fronts. A second option involves a win on the jurisdiction front, with the Supreme Court denying or giving no opinion on the constitutional argument. The third possibility is that the electric companies would lose on both sides of the argument. Regardless of the Supreme Court ruling, changes to legislation could be forthcoming, from either Parliament or provincial legislatures or assemblies, the Toronto lawyer warned. Ruby offered the opinion that the court will decline to hear the appeal of the Ledcor case. He also touched briefly on other contentious cases such as Suite Systems Inc. vs. Enmax, Bell West vs. Enmax (which is being conducted concurrently before the CRTC and the Competition Bureau) and Shaw vs. Thunder Bay Hydro. As an example of the evolution theory of regulation, Keenleyside cited the recent changes to the winback rules (NL Update, Dec. 9/02). The commission initially set up restrictions on winning back local service customers. Gradually it expanded the rules to include cablecos, high-speed Internet service and additional telephony bundles."It has taken six decisions to get where we are," he noted. "Change could affect UTC members in two ways. Clearly, if the environment becomes more competition friendly, a utility might be more interested in testing the retail waters itself. However, the more likely scenario is that with greater competition, comes more competitors and more potential wholesale customers for the widespread infrastructure that utilities already have in place. In other words, the right-of-way market and the carrier’s carrier market can potentially expand to support the expanding retail market." The revolutionary aspect of regulation was illustrated in Telecom Decision 2002-76 (NL, Dec. 16/02). In that ruling, the commission made a wide-ranging decision over Bell Canada using affiliate Bell Nexxia as its agent. The CRTC ruled Nexxia had acted as an agent of Bell and needed to file tariffs for more than 200 contracts. In addition, future contracts will be subject to the same conditions. This is a new approach for the commission and could have broad implications, both for the regulator and the industry itself. (Rumors buzzing around the UTC conference suggest that Nexxia may cease to exist as a separate entity and will be rolled into the greater BCE behemoth somehow.) "The more encouraging news is that – if this decision is the path of the future – the commission may be ready to issue practical pro-competitive decisions that have some teeth," Keenleyside said, "that apply on an industry-wide basis and that attempt, within the limits of regulatory foresight, to anticipate potential anti-competitive behaviour and to stop it before it has an opportunity to occur."

Telecom lawyers expect brighter future for utility telecoms in regulatory regime

News | 03/11/2003 5:00 am EST

To keep reading, get a free trial.

Already a Subscriber?

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us