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Telecommunications - Rate-Setting. Teksavvy Solutions Inc. v. Bell Canada
In Teksavvy Solutions Inc. v. Bell Canada (Fed CA, 2024) the Federal Court of Appeal dismisses a CRTC rate-setting appeal:[2] Here, the setting of rates is in pursuit of a larger regulatory policy. To promote competition in the offering of internet services to the public, the CRTC requires telecommunications companies to provide Teksavvy, and other competing internet service providers, access to their internet facilities and infrastructure: Telecom Regulatory Policy CRTC 2015-326. Once they have access, Teksavvy and others can provide internet access to their own retail customers.
[3] In return for gaining access to internet facilities and infrastructure, Teksavvy and others must pay rates to the telecommunications companies. This is only fair, as the telecommunications companies have planned, built and maintained their facilities and infrastructure—often with great innovation and considerable cost in an environment fraught with risk.
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[12] Rate-setting and how to go about rate-setting are matters of discretion and policy founded on industry appreciation and specialized technical study—matters resting at the very core of the CRTC’s exclusive jurisdiction under the Telecommunications Act. They are something very much in the wheelhouse of the CRTC and are alien to us. For the most part, as an appeal court, we mainly handle matters of law and related matters such as procedural fairness. For the most part, we do not decide the merits of matters, especially those that draw on industry appreciation and specialized technical study.
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C. Must the CRTC’s decision be quashed because the CRTC erred in law by not using any "“method”" or "“technique”" in setting the rates?
[21] Teksavvy submits that the CRTC committed an error of law by failing to apply any "“method”" or "“technique”" in establishing the revised rates. Teksavvy formulates its submission in that way in order to cast this ground as an error of law. In my view, in reality, Teksavvy takes issue with the methods and techniques adopted by the CRTC that led it to adopt rates that Teksavvy does not like—matters that cannot be raised in an appeal to this Court.
[22] In this case, the CRTC was to set rates. The rates have to be "“just and reasonable”": Telecommunications Act, s. 27(1). This is a "“factually suffused question of mixed law and fact”", one that cannot be entertained in an appeal under subsection 64(1) of the Act: British Columbia Broadband at para. 66. Indeed, it is a question filled with broad policy considerations set out in the Act and discretions exercised by expert decision-makers, not objective legal principle: Bell Canada v. Bell Aliant Regional Communications, 2009 SCC 40, [2009] 2 S.C.R. 764; Allstream Corp. v. Bell Canada, 2005 FCA 247, 338 N.R. 177 at paras. 27-28, 31 and 34.
[23] Subsection 27(5) of the Act reinforces this, using language that is just about as broad as can be conceived: the CRTC "“may adopt any method or technique that it considers appropriate [to set rates], whether based on a carrier’s return on its rate base or otherwise”". In the words of the Supreme Court, the CRTC "“may set rates that are just and reasonable for the purposes of the Telecommunications Act through a diverse range of methods, taking into account a variety of different constituencies and interests”": Bell Aliant at para. 48. As this Court said in TELUS Communications Inc. v. Canada (Radio-television and Telecommunications Commission), 2004 FCA 365, [2005] 2 F.C.R. 388 at paragraph 49, "“it is difficult to envisage a broader power than the one given to ensure that rates are just and reasonable at all times”".
[24] Teksavvy submits that the terms "“method”" and "“technique”" in subsection 27(5) of the Act mean that the CRTC must adopt a "“concrete procedure that can be calculated using observable evidence or data”".
[25] In my view, the text, context and purpose of subsection 27(5) do not require the CRTC to adopt such a procedure. Instead, the words seem aimed at ensuring that the CRTC use some defensible, articulable methodology in setting rates to ensure good decision-making standards and accountability. Put conversely, subsection 27(5) aims at preventing the CRTC from arbitrarily inventing numbers just because it says so, forcing everyone else to trust it.
[26] I offer several reasons in support of that conclusion and against Teksavvy’s submission.
[27] The text of subsection 27(5) states that in setting a rate that is "“just and reasonable”", the CRTC "“may”" adopt "“any”" method or technique—words both permissive and open ended. Teksavvy’s interpretation seeks to constrain the CRTC far more than the statutory language does.
[28] The plain meaning of "“method”" and "“technique”" is broader and more general than Teksavvy’s constrained meaning that requires rigid concreteness, calculability and a solely objective basis. A "“method”" is just a way of doing something. And a "“technique”" is nothing more than a particular way of doing something.
[29] The setting of "“just and reasonable”" rates in this context is not something that tumbles out of a calculator once the numbers are punched in. Instead, it is suffused by policy considerations, informed by multiple, often conflicting inputs, over which reasonable minds may differ, including regulatory experience, subjective weighings and assessments, factual appreciation, and many rival methodologies. How to arrive at a rate involves more than the processing of information objectively and logically against fixed, legal criteria. Rather, it is a complex, multifaceted decision involving sensitive weighings of information, impressions and indications using criteria that may shift and be weighed differently from time to time depending upon changing and evolving circumstances and regulatory experience. See, for example, the similar rate-setting context discussed in CMRRA-SODRAC Inc. v. Apple Canada Inc., 2020 FCA 101 at paras. 49-50.
[30] The idea that a "“method”" or "“technique”" must always be concrete, calculable and based solely on objective data simply does not fit the practical reality of the exercise under subsection 27(5) of the Act.
[31] Here, the CRTC did not pluck figures from the air or throw darts at a dartboard. Instead, it relied on the 2016 decision that set rates and the "“Phase II Costing Methodology”", a method or technique it thought about and adopted for reasons that made sense to it on the evidence and based on its regulatory experience and policy appreciation: see the decision under appeal at paras. 293-297 and 304.
D. As a matter of law, are there enforceable "“legitimate expectations”" in this case?
[32] Teksavvy submits that the CRTC led Teksavvy to have an expectation that the CRTC would conduct an exhaustive costing exercise in establishing the revised rates. It cites the CRTC’s statement that final rates would be established based on a "“full assessment and review of costing inputs and costing methodologies”": Telecom Order 2016-396 at para. 26.
[33] Bell Canada submits that this statement was nothing more than a promise that the final rates would be based on a full record and, in the end, they were. It says that the statement was not a promise to follow any particular process or an undertaking to alter its well-established practices in variation proceedings such as this. I agree. The statement that is said to be responsible for an enforceable legitimate expectation on the part of Teksavvy does not create the result Teksavvy seeks to enforce.
[34] The respondents say that Teksavvy is impermissibly conducting an "“assault on the methods selected by the CRTC and its assessment of the evidence”" in order to quibble with the rates set. That wording ironically comes from this Court’s decision rejecting a similar attempt by many of these same respondents to quash the 2019 decision by transforming a policy disagreement—not litigable in this court—into a legal matter: British Columbia Broadband at para. 67.
[35] This much is certain: Teksavvy’s submission fails on multiple grounds.
[36] First, it relies too heavily on a single statement at a single point of time. The CRTC’s decision in this case was not made in isolation. Rather, it was the latest chapter in a complex, ongoing regulatory dispute.
[37] There are times when a regulatory decision is merely the latest chapter in a saga where many chapters are written. There are also times when regulatory statements, conduct or decisions are so intimately related to earlier events that they cannot be taken in isolation. In those situations, the Court must evaluate the matter in light of the whole context, not just an isolated event. See Bell Canada v. 7262591 Canada Ltd. (Gusto TV), 2016 FCA 123, 17 Admin. L.R. (6th) 175 at paras. 13-15; Canadian National Railway Company v. Canada (Transportation Agency), 2023 FCA 245 at para. 16; David Suzuki Foundation v. Canada (Health), 2019 FC 1637 at para. 36; Office and Professional Employees International Union v. Cougar Helicopters Inc., 2019 FCA 231 at para. 10.
[38] In this case, the exhaustive costing exercise to establish the revised rates had already been done, in the three-year rate-setting process that started in 2016 and culminated in the 2019 decision. In 2016, the CRTC analyzed cost studies submitted by facilities-based carriers and made adjustments based on the Commission’s application of the "“Phase II Costing Methodology”", a well-established framework developed by the CRTC. It was in that context that the statement was made: the CRTC noted that "“[t]he establishment of the final rates will be based on a full review and assessment of the relevant cost inputs and costing methodologies”": Telecom Order CRTC 2016-396 at paras. 23 and 26.
[39] Over the next three years, culminating in the 2019 decision, that is exactly what the CRTC did. It received enormous amounts of information and materials and dozens of submissions from industry participants, forming a record of thousands of pages of complex and highly technical information, which was placed before this Court in the appeal of the 2019 decision in British Columbia Broadband, above.
[40] Post 2019, the CRTC did not need to repeat or expand the extensive rate-setting process it had already engaged in. It concluded that the complex costing analysis it had conducted in the 2016-2019 period, along with certain additions to the record before it in the variation proceeding, allowed it to find that the rates decided upon in the 2016 decision were "“just and reasonable”", with some adjustments. Teksavvy concedes as much: memorandum of fact and law at paras. 60-61; see also the CRTC’s decision at para. 304. There were other important regulatory objectives at work here too: the completion of the transition "“to the adoption of disaggregated wholesale HSA service”" and the provision of critical certainty and finality. And given that the process of complex costing analysis had already been done, Teksavvy had no legitimate expectation that it would be needlessly repeated after the 2019 decision.
[41] In fact, there are a number of decisions where, due to the issue and circumstances before it and the nature of its past work, the CRTC has not re-done analyses or conducted fresh analyses and has finalized what were previously interim rates: Telecom Decision CRTC 2006-14 (29 March 2006) at paras. 53-54; Telecom Regulatory Policy CRTC 2013-180 (28 March 2013) at paras. 37 and 98-99; Telecom Order CRTC 2020-224 (15 July 2020) at paras. 6, 9 and 11-12; Telecom Decision 97-8 (1 May 1997) at paras. 190, 192, 227; Telecom Order CRTC 99-1127 (8 December 1999) at paras. 36-38, 55, 60, 62, 64 and 69-70; Telecom Order CRTC 2007-20 (25 January 2007) at para. 179; Telecom Decision CRTC 2007-77 (31 August 2007) at paras. 17-19. This Court has suggested that the CRTC "“is given a great amount of latitude in determining which method or technique it will use in determining the appropriateness of the rate”": Allstream at para. 30.
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