Telus loses court battle over CRTC decision on government services contract

OTTAWA--In a Federal Court of Appeal decision Tuesday, Telus Corp. lost a bit of ground in its continuing fight over a CRTC decision that the company says will put a chill on the enterprise market’s interest in government services contracts. CRTC decision 2009-85, issued in January 2009, allowed Bell Canada to continue to charge for network services on a government contract that Telus had won because the transition wasn’t complete. Bell previously had an agreement through Public Works and Government Services Canada (PWGSC) to provide services “vital to national security” to the Department of National Defence, but in June 2007, Telus was awarded the $213 million services contract. But the transition did not go smoothly, and Telus could not complete the services switch by the time Bell’s contract was due to expire on Dec. 15, 2008. Telus says Bell is being compensated for a network transition that is effectively complete, but Bell says the switch can’t happen until the final circuit is cut. The CRTC decision gave Bell authority to continue to charge for network services past the end of its contract, and at a rate that Telus argues is too high. And that, it appears, is costing Telus money. The Federal Court of Appeal decision Tuesday—which struck down a Telus court appeal of the CRTC decision—noted that, as the government continues to pay Bell for services Telus could not provide by the deadline, Telus must compensate PWGSC an undisclosed amount. The unanimous, three-judge decision, issued by Justice John M. Evans, noted that CRTC decision 2009-85 “may indirectly cause TELUS financial loss.” In an interview with The Wire Report, Ted Woodhead, Telus’ vice-president of telecom policy and regulatory affairs, would not disclose how much the company is compensating PWGSC, but said the issue is not all about money. “That’s not the only reason here, obviously,” Woodhead said. He said the CRTC decision allows Bell to monetize the services transition and puts a chill on competitors that may be seeking to win major services contracts from incumbents. The CRTC decision, he said, will have “profound impacts” on the government’s procurement of large, public sector contracts. “People need to look, in the long run, at what the impact of this is on the enterprise market. It puts a chill on competition in that market,” Woodhead said. Telus is pulling out all the stops in its attempt to quash the CRTC decision. In April it filed a petition with the federal cabinet, asking the government to overturn the commission. The government has one year to respond to the request. Following the CRTC’s initial decision last year, Telus also filed a request that the CRTC review and vary the decision, but in subsequent decision 2010-11, issued on Jan. 14, 2010, the CRTC denied Telus’ request. In April of this year, Telus again asked the CRTC to reconsider the decision on the basis of procedural fairness. The commission is expected to issue a decision on that request by October. Telus had also appealed the CRTC decision to the Federal Court of Appeal, which issued its decision Tuesday. Woodhead said the company disagrees with the court ruling, and that it has no bearing on the cabinet petition or the CRTC review. “We have taken every available opportunity to cast a light on this process and this decision, and while the Federal Court of Appeal has heard us out and declined the CRTC’s decision on statutory or jurisdictional grounds, our general policy about the complete wrongness of this decision remains,” Woodhead said. Bell spokeswoman Marie-Eve Francoeur said by email Tuesday that the company is happy with the court decision. “We're also happy Bell has been able to continue to ensure uninterrupted communications service for Department of National Defense,” she wrote. “As the court notes, these services are clearly vital to national security.” Telus has said the situation should also be of concern to taxpayers. The government could end up compensating carriers for services they don’t provide, Woodhead told The Wire Report in a previous interview. The court decision was largely based on an administrative rules and whether Telus was treated fairly. Telus said it did not receive a fair opportunity to participate in the CRTC hearings on the issue, having been excluded from an in camera oral hearing at the CRTC between Bell and the Department of Defence. Telus was permitted to take part in the CRTC’s written proceeding, however. Telus also argued that the CRTC exceeded its statutory authority by basing its decision on final arbitration proceedings, rather than a consideration of whether Bell’s proposed service rates after December 2008 were reasonable. The CRTC’s final arbitration rules were not authoritative, Telus added, because they were not officially published in a notice in the Canada Gazette. However the justice dismissed Telus’ appeal, adding that he was not persuaded the rate that the CRTC set for Bell was unreasonable. “The facts do not establish that the CRTC abdicated its rate-setting responsibilities by simply selecting an offer made by one the parties,” Evans wrote. As part of the decision, the justice also ordered Telus to pay Bell’s court costs. sdoyle@thewirereport.ca

Telus loses court battle over CRTC decision on government services contract

News | July 20, 2010

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