ILECs up effort to overturn 12-month no-contact provision in winback rules

The constitutionality of incumbent telco winback restrictions has come under heavy fire in recent weeks as a flurry of activity at the commission culminated last week in a Federal Court of Appeals (FCA) case filed by the ILECs. On June 13, TELUS Corp., Bell Canada and SaskTel filed for leave to appeal the matter to the FCA which they want to declare the winback restrictions in the CRTC’s Voice over IP decision unconstitutional as an unreasonable restriction on their Charter of Rights and Freedoms guarantee to free speech. The filing follows fast on the heels of a similar request by Bell Canada and SaskTel to the CRTC by way of an April 25 Part VII application to find the same thing for winback rules in general, and as Aliant sees its own Part VII application to the commission for a temporary lifting of winback restrictions in its territory re-opened.On June 13, Bell, TELUS and SaskTel told the FCA that the winback rules with respect to VoIP, which prohibit an ILEC from directly contacting a customer for a year with special offers after losing a customer to a competitor, violate Charter speech guarantees without sufficient grounds. The same arguments, rooted in the theoretical underpinnings and jurisprudence of constitutional law, were made in the Bell/SaskTel Part VII. If the court hears the case, and there’s little reason to believe it won’t, the panel of judges will have to decide whether winback restrictions are, as the ILECs charge, intended to accomplish a relatively narrow aim – the retention of new customers by CLECs – at great cost, the loss of a fundamental freedom. Intervenors in the case, which will likely at least include the Canadian Cable Telecommunications Association (CCTA), will argue that Bell and TELUS’ narrow view of the issue is wrong, and that the goal of winback rules to protect telecom competition in Canada is a worthy one, at the relatively little cost of a minor infringement on the ILEC’s ability to advertise. The test will come down to an interpretation of the facts by the court against what is dubbed the Oakes test, a relatively arcane piece of jurisprudence that gained some prominence recently when it was invoked in the Supreme Court of Canada’s decision on private health care in Quebec. Oakes test Courts use the Oakes test to determine whether laws, regulations and the ilk are in line with Canada’s constitution. The Charter of Rights and Freedoms is not absolute, and limits can be applied provided that they have a "pressing and substantial objective", and that they meet a three-part test in their application: a "rational connection" to the objective that is not arbitrary, unfair or irrationally based; demonstrate "minimal impairment" and couldn’t be obtained in alternative ways that infringe Canadians’ rights to a lesser degree; and, that demonstrate "proportionality" between the effects and the objective. In the ILEC’s appeal, they write: "The speech at issue assists consumers in making enlightened choices about service providers. It is thus speech which advances an important aspect of individual self-fulfilment and personal autonomy and is worthy of significant protection." Though the argument isn’t made as forcefully in their leave to appeal, it’s likely the ILECs will resurrect the same position they took in the more general Part VII process to convince the FCA of grievous harm as a result of their loss of freedom of expression. In their April 25 application, Bell and SaskTel write:"Viewed separately, the Winback Rules and the Commission’s suspension of its consideration of ILEC tariff filings pertaining to local wireline promotions constitutes a prima facie violation of the Charter guarantees of freedom of expression. Viewed in combination, the effect is to eliminate virtually all marketing avenues available to the Companies of local and other communications servcies. Separately and in combination, the infringement, both for ILECs and their customers, is significant." (The April 25 Part VII application was filed prior to a CRTC decision allowing limited promotions; the ILECs have disputed the validity of remaining restrictions, though they have taken no action; NL, May 10/05; Telecom Decision 2005-25). Furthermore, adds Janet Yale, executive VP of government and regulatory affairs at TELUS, the original policy rationale for winback restrictions doesn’t apply to Voice over IP, making the link between the policy and the rationale for it tenuous. "It was originally the case that the CLECs who entered the market were originally both our customers and our competitors. They had to use our local infrastructure to offer service…There were rules that were put in place as we completed the switch from that customer being our retail customer to that customer being on our loop on a wholesale basis. They wanted to make sure that we didn’t take advantage of that sensitive competitive information…VoIP providers don’t use our infrastructure. Shaw uses its own infrastructure. Vonage and Primus don’t have infrastructure – the customer brings their infrastructure to the table with their own high-speed service. So, the rationale and logic for the rule – at least that element of it – is gone…"I think it’s important to understand that public policy context when you think about the logic of the court challenge that we’ve launched," says Yale. (Telus filed on March 24 a Part VII application seeking a lifting of winback rules in areas where it competes with Shaw. That file was closed May 16, citing the upcoming 2005-2 forbearance process, and the Bell/SaskTel Part VII that would deal with the Constitutional question.) In the April 25 Part VII process, the CCTA disagrees with Bell et al’s position. It writes in response to the CRTC application that winback rules serve a broad purpose: "While the Companies are free to challenge the rational connection of a rule that seeks to establish conditions that would permit CLECs an opportunity to build a stable customer base for the purpose of fostering competition, they should not be permitted to disregard the fact that the local winback rules are a direct manifestation of the Commission’s effort to foster competition and, hence, (are) reflective of that objective… As for the harm being done by the winback rules, the CCTA sees it as minimal. It notes: "Finally, CCTA submits that regardless of whether the consumers directly receive information in a targeted contact initiated by the ILEC, all the information remains freely available and accessible to the customer via the Companies’ prodigious marketing efforts and, if the customer is so inclined to initiate the contact, directly from the Companies themselves." The CCTA also sees more than a hint of hypocrisy in Bell’s position on winbacks, since the telco has been a vociferous defender of them when it comes to satellite television sold through its Bell ExpressVu arm. The cable association writes in its reply to the Part VII application: "The Companies’ mixed messages call into direct question their belief as to how far a Commission restriction on communication can go while remaining constitutionally valid." Ultimately, it will be up to the FCA to determine which side is right: the CCTA on the side of winbacks being a small price to pay for the greater good, or Bell, TELUS and SaskTel that argue winbacks are a large infringement of their rights to accomplish a small goal. Tellingly, the Public Interest Advocacy Centre (PIAC) tells Network Letter that it will not file for leave to intervene in the case since it sees little about it that would greatly affect its constituency, consumers. Though its absence from the list of usual intervenors on telecom matters won’t likely weigh too greatly on the minds of FCA judges preoccupied with the Constitutional issues, it does speak favourably to CCTA’s argument that, ultimately, only a very few Canadians are affected by the winback regulations to begin with. If Bell and TELUS wish to prove great harm, they will have to do so on something other than the basis of the small number of consumers – about 3% - who have switched providers to date.

ILECs up effort to overturn 12-month no-contact provision in winback rules

News | June 23, 2005

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