Bell appealing deferral account ruling to Supreme Court

Bell Canada is taking its fight against local telephone customer rate rebates to the country's highest court, Network Letter has learned. The country's largest incumbent telco will ask the Supreme Court of Canada to overturn a recent lower court ruling that confirmed the CRTC's right to order the ILECs to give money back to urban local telephone subscribers. It has until May 7 to file its leave to appeal. Bell wasn't available for comment at press time. The commission mandated customer rebates as part of its February 16, 2006 deferral account ruling. The rebates were only a minor part of the decision as the vast majority of the money was to go to extending broadband to rural and remote regions of the country. At the time of the decision, the ILECs deferral accounts had ballooned to about $650 million resulting from overcharges paid by urban residential telephone subscribers. The deferral accounts go back to the 2002 Price Cap decision when the commission ordered the ILECs to establish them to accumulate surplus fees charged to urban customers. The excess charges were the result of a rate decrease ordered by the commission in that decision. However, the commission felt that it would be better for the ongoing development of competition in the local telephony markets to not allow the ILECS to lower rates. The CRTC said at the time that it would deal with the disposition of the deferral accounts at a later date. Bell launched its appeal of the original CRTC decision because it believed that rate rebates were akin to retroactive rate adjustments, something the commission couldn't do after deciding the rates were just and reasonable in the first place. The Consumers Association of Canada, the National Anti-Poverty Association and the Public Interest Advocacy Centre also appealed the decision but for different reasons. They believed that the CRTC didn't have the jurisdiction to order the establishment of the deferral accounts in the first place. The consumer groups argued as well that the commission erred again when it allowed the money to be used for broadband expansion. PIAC et al. believed the deferral account money should go back to the people that paid into it, namely urban telephone customers. But on March 7, the Federal Court of Appeal (FCA) dismissed both appeals, confirming the CRTC's authority to mandate rate rebates. The CRTC's jurisdiction to set rates, according to the FCA, "is not limited to considerations that have traditionally been considered relevant to ensuring a fair price for consumers and a fair rate of return to the provider of telecommunication services." The court also noted that the commission's decisions both in establishing the deferral accounts and allowing their use for broadband in rural and remote regions are allowed under section 7 of the Telecommunications Act. "In my view, none of the jurisprudence cited by the Consumers casts doubt on my conclusions as to the scope of the CRTC's jurisdiction in rate setting," wrote Justice Karen Sharlow. The FCA didn't agree with Bell's arguments that the commission's decision amounted to retroactive reductions on rates that were previously deemed to be just and reasonable. The decision indicated that the deferral accounts were established for a future order not to rectify past rate approvals. "The subscriber rebate in this case did not, in intent or in effect, reduce retrospectively any rates that had been determined to be just and reasonable. It was therefore entirely prospective," read the decision. The court noted also noted that if Bell didn't want to hand out subscriber rebates it could have developed a broadband expansion plan using more of its deferral account. "Under the deferral account regime as it finally evolved, Bell Canada had the opportunity to propose a use for the balance in its deferral account that would accord with a specific policy objective designated by the CRTC (broadband expansion in remote and rural areas), failing which it would be obliged to make a subscriber rebate," Justice Sharlow wrote. But the deferral accounts affairs became a little more complicated in January 2008 when the CRTC approved the ILECs broadband expansion plans. Many believed that upwards of $620 million would go to broadband expansion, but the commission only approved $300 million, meaning that the balance had to go to customer rebates. Bell has since filed a motion with the Federal Court of Appeal seeking a stay in the implementation of this decision as well as leave to appeal the ruling. So as the court room drama on deferral accounts continues, it appears as though consumers in rural and remote regions of the country are going to have to wait a little bit longer to get high-speed Internet and access to broadband services. Network Letter will have more details next week following interviews with Bell Canada and the PIAC.

Bell appealing deferral account ruling to Supreme Court

News | March 20, 2008

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