Top court affirms CRTC’s authority to set up deferral accounts and decide how money is spent

A three-year-old battle over the controversial use of deferral accounts came to an end on Friday when the Supreme Court of Canada ruled that the Telus Corp. and Bell Canada will have to reimburse consumers one-time credits totally about $300 million. The ruling also reaffirms the CRTC’s authority under the Telecommunications Act to use its rate-setting powers to pursue policy objectives. “The issues raised in these appeals go to the very heart of the CRTC’s specialized expertise,” the Supreme Court states. “The core of the quarrel in effect is with the methodology for setting rates and the allocation of certain proceeds derived from those rates, a polycentric exercise with which the CRTC is statutorily charged and which it is uniquely qualified to undertake.” The Supreme Court decision upholds a previous Federal Court of Appeal ruling that said the CRTC had the authority to use the deferral account money as it saw fit. The ILECs wanted the higher court to overturn a portion of the CRTC ruling that ordered customer rebates. The Federal Court ruling was also appealed by the Public Interest Advocacy Centre, which wanted all of the deferral account money held by the two carriers to be distributed to customers in the form of rebates. At the heart of the deferral accounts controversy is $650 million that was accumulated after urban subscribers were overcharged by the ILECs in the wake of the 2002 price cap decision. In 2006, the CRTC ruled that the carriers could use the funds to expand broadband coverage, but only for communities already served by broadband or communities that received previously funding for broadband initiatives. It also ruled that 5% of deferral account funds go to improving accessibility to telecommunications service for disabled people. Any money left over in the accounts was to be returned to subscribers – the same people who had paid into the deferral accounts in the first place. In 2008, some $300 million remained in the accounts. In its April 2008 appeal, Telus argued that it could make another round of broadband expansion proposals and fully use the deferral account funds for broadband rather than a combination of broadband and rate rebates. The commission didn't agree and neither did the Supreme Court. The top court also dismissed Bell’s argument that the CRTC doesn't have the power under Section 7 of the Telecommunications Act to order rate rebates on prices that had previously been deemed just and reasonable. “The CRTC did exactly what it was mandated to do under the Telecommunications Act,” the court writes. “It had the statutory authority to set just and reasonable rates, to establish the 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, as a result, to balance and consider a wide variety of objectives and interests.” For additional background on this issue, refer to Telus latest loser in fight to overturn deferral accounts (Oct. 20, 2008), Supreme Court grants leave to appeal deferral accounts (Sept. 29, 2008) and Bell Canada prepares for Supreme Court battle to keep customer rebates. (March 27, 2008).

Top court affirms CRTC’s authority to set up deferral accounts and decide how money is spent

News | September 21, 2009

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