Bell Canada v. British Columbia Broadband Association

Bell Canada v. British Columbia Broadband Association
Court (s) Database
Federal Court of Appeal Decisions
Date
2020-09-10
Neutral citation
2020 FCA 140
File numbers
A-456-19, A-457-19
Notes
Reported DecisionA correction was mad on September 12, 2022
Decision Content
Date: 20200910
Dockets: A-456-19 (lead file)
A-457-19
Citation: 2020 FCA 140
CORAM:
DAWSON J.A.
STRATAS J.A.
WOODS J.A.
BETWEEN:
BELL CANADA, BELL MTS, MTS INC., BRAGG COMMUNICATIONS INCORPORATED (c.o.b. EASTLINK), COGECO COMMUNICATIONS
INC., ROGERS COMMUNICATIONS CANADA INC.,
SHAW CABLESYSTEMS G.P., and VIDEOTRON LIMITED
Appellants
and
BRITISH COLUMBIA BROADBAND ASSOCIATION, CANADIAN
NETWORK OPERATORS CONSORTIUM INC., DISTRIBUTEL
COMMUNICATIONS LIMITED, ICE WIRELESS INC., PUBLIC
INTEREST ADVOCACY CENTRE, VAXINATION INFORMATIQUE
and TEKSAVVY SOLUTIONS INC.
Respondents
Heard by online video conference hosted by the Registry on June 25 - 26, 2020.
Judgment delivered at Ottawa, Ontario, on September 10, 2020.
REASONS FOR JUDGMENT BY:
DAWSON J.A.
CONCURRED IN BY:
STRATAS J.A.
WOODS J.A.
Date: 20200910
Dockets: A-456-19 (lead file)
A-457-19
Citation: 2020 FCA 140
CORAM:
DAWSON J.A.
STRATAS J.A.
WOODS J.A.
BETWEEN:
BELL CANADA, BELL MTS, MTS INC., BRAGG COMMUNICATIONS INCORPORATED (c.o.b. EASTLINK), COGECO COMMUNICATIONS
INC., ROGERS COMMUNICATIONS CANADA INC.,
SHAW CABLESYSTEMS G.P., and VIDEOTRON LIMITED
Appellants
and
BRITISH COLUMBIA BROADBAND ASSOCIATION, CANADIAN
NETWORK OPERATORS CONSORTIUM INC., DISTRIBUTEL
COMMUNICATIONS LIMITED, ICE WIRELESS INC., PUBLIC
INTEREST ADVOCACY CENTRE, VAXINATION INFORMATIQUE
and TEKSAVVY SOLUTIONS INC.
Respondents
REASONS FOR JUDGMENT
DAWSON J.A.
Blank/En blanc
Para.
1. Introduction
1
2. The context in which TO 2019-288 was made and is to be considered by this Court
11
i. The legislative framework
11
ii. TO 2019-288’s policy pedigree
26
3. Do the appellants raise grounds of appeal that are not questions of law or jurisdiction properly before this Court?
48
i. Proper grounds of appeal
53
ii. Improper grounds of appeal
55
a) Whether the rates are just and reasonable is not a question of law or jurisdiction
56
b) The Commission’s consideration of policy objectives is not a question of law or jurisdiction
70
4. The issues to be decided
79
5. The standards of review to be applied to the issues
80
6. Did the CRTC breach the principles of procedural fairness or err in law or jurisdiction by engaging in arbitrary decision-making?
84
i. The nature of the asserted errors of law and jurisdiction
84
ii. The productivity factor
92
a) The appellants’ submissions
94
b) Context
95
c) The Commission’s reasons
104
d) Analysis
105
iii. Upstream traffic growth rates
110
a) The appellants’ submissions
111
b) Context
113
c) The Commission’s reasons
117
d) Analysis
118
iv. Attribution of segmentation costs
120
a) The appellants’ submissions
122
b) Context
124
c) The Commission’s reasons
127
d) Analysis
128
v. Speed-banding
129
a) The appellants’ submissions
134
b) Context
138
c) Analysis
141
vi. Unrecovered costs
143
a) The appellants’ submissions
147
b) Analysis
148
vii. Working fill factors (WFF)
152
a) The appellants’ submissions
156
b) Analysis
157
viii. Segmentation fibre facilities
167
ix. Coaxial cable facilitites
172
a) The appellants’ submissions
174
b) Context
176
c) Analysis
178
x. Annual development costs
180
a) The appellants’ submissions
181
b) Context
182
c) Analysis
183
xi. Conclusion on procedural fairness and arbitrary decision-making
184
7. Do the reasons of the CRTC fail to comply with a legislative reasons requirement?
185
8. Did the CRTC impose an unconstitutional tax?
208
9. Conclusion and costs
213
1. Introduction
[1] High-speed Internet is a resource vital to modern communications and participation in the digital economy.
[2] In Canada, Internet services are provided to retail customers by large telephone and cable companies or by independent Internet service providers. Small and medium sized independent Internet service providers that do not own their own wireless networks do not possess the required infrastructure to provide high-speed Internet access (HSA) directly to end-users. Therefore, to foster competition, large cable and telephone companies are required to make available parts of their respective networks to independent Internet service providers. These leased parts are referred to as wholesale services and are used by the independent Internet service providers, sometimes referred to as “competitors”, to provide high-speed Internet services to their retail customers.
[3] The Canadian Radio-television and Telecommunications Commission does not regulate the provision of Internet services to retail customers because the number of service providers is sufficient to bring competition, pricing discipline, innovation and consumer choice to the retail Internet services market. However, the CRTC does regulate the provision of wholesale high‑speed access services by large telephone and cable companies to the competitors. In particular, the CRTC sets the rates that the large telephone and cable companies are permitted to charge competitors for wholesale high-speed access services.
[4] On August 15, 2019, the CRTC issued Follow-up to Telecom Orders 2016-396 and 2016‑448 – Final rates for aggregated wholesale high-speed access services (15 August 2019), Telecom Order CRTC 2019-288 (TO 2019-288) which set final rates that the large telephone and cable companies may charge for aggregated wholesale high-speed access services provided to competitors. The order provided that the final rates would be applied retroactively.
[5] Bell Canada, MTS Inc., and Bell MTS, large telephone companies sometimes referred to as incumbent local exchange carriers or ILECs, sought and obtained leave to appeal TO 2019‑288 to this Court. Bragg Communications Incorporated , carrying on business as Eastlink, Cogeco Communications Inc., Rogers Communications Canada Inc., Shaw Cablesystems G.P. and Videotron Limited, large cable carriers referred to in these reasons as the Cable Carriers, also sought and obtained leave to appeal the order to this Court.
[6] Here, a brief procedural comment is warranted. On September 27, 2019, orders issued staying TO 2019-288 pending this Court’s determination of the motions for leave to appeal. On November 22, 2019, the leave applications were granted and orders issued staying TO 2019-288 until the issuance of the Court’s final judgments on the appeals. TO 2019-288 therefore remains stayed until the issuance of the judgments that accompany these reasons. Subsequently, the appeals were consolidated, case managed and set for an early hearing which took place by videoconference. In accordance with the consolidation order, a copy of these reasons shall be placed on each Court file.
[7] On this consolidated appeal the telephone companies argue that the CRTC “erred in law or jurisdiction” by:
failing to exercise its powers with a view to implementing the Canadian telecommunications policy objectives set out in section 7 of the Telecommunications Act, S.C. 1993, c. 38 (Act) and in accordance with a direction given to the CRTC by the Governor in Council, all as required by section 47 of the Act. Particular emphasis is placed on what is asserted to be a statutory reasons requirement imposed by paragraph 1(b)(i) of the direction issued by the Governor in Council;
failing to exercise its powers with a view to ensuring that the telephone companies charge “just and reasonable” rates in accordance with section 27 of the Act, and as required by section 47 of the Act; and
imposing an unconstitutional tax, contrary to section 53 of the Constitution Act, 1867.
[8] For their part, the Cable Carriers argue the CRTC committed “one or more legal or jurisdictional errors, either in issuing TO 2019-288 or during the rate-setting proceeding that culminated in the issuance of that Order”. More particularly, the Cable Carriers argue that the CRTC:
(a) failed to consider relevant and cogent evidence submitted by the Cable Carriers;
(b) made decisions on the basis of no evidence, irrelevant evidence or irrelevant considerations, including by preferring its own unsubstantiated “expectations” over the Cable Carriers’ evidence, even though that evidence directly contradicted such “expectations”;
(c) acted arbitrarily by treating the available evidence in an inconsistent and ad hoc fashion, including by (i) endorsing and applying outdated third-party data (from 2011 or earlier) in lieu of company-specific information, while (ii) rejecting without explanation more up-to-date data (from 2016 and 2017) provided by the same third party, and then (iii) criticizing the Cable Carriers for not submitting the very types of company-specific information that the CRTC had previously rejected;
(d) breached core principles of natural justice and procedural fairness by adopting unorthodox and unexpected methodologies that changed the “rules of the game” in a manner that defeated the Cable Carriers’ reasonable expectations, without giving the Cable Carriers either timely notice of its intention to do so or an adequate opportunity to meaningfully respond;
(e) disregarded established principles and rate-setting decisions on which the Cable Carriers had reasonably relied on a number of issues, while simultaneously fettering improperly its discretion by adhering to outdated or inapplicable assumptions and guidelines on other issues; and
(f) disregarded a binding Direction issued by Cabinet in 2006 … and ignored impermissibly the mandatory requirements imposed by sections 7, 27 and 47 of the Telecommunications Act.
(memorandum of fact and law, paragraph 4, footnotes and emphasis deleted)
[9] The respondents represent, or are, independent Internet service providers that purchase wholesale high-speed access services. They submit that all of the asserted grounds of appeal should be dismissed on their merits. Additionally, they submit that the appellants:
rely on post-decision evidence that is inadmissible;
raise grounds of appeal that are not questions of law or jurisdiction and so are outside the scope of the limited right of appeal conferred by subsection 64(1) of the Act; and,
advance a new, unconstitutional tax argument that should not be heard by this Court at first instance.
[10] Before turning to consider the issues raised on this appeal it is necessary to situate the impugned order in its proper context. Situating the order in its context requires consideration of the legislative framework in which the decision was made and the prior decisions of the Commission that led to and informed TO 2019-288—what has been referred to as its policy pedigree.
2. The context in which TO 2019-288 was made and is to be considered by this Court
i. The legislative framework
[11] The Telecommunications Act sets out the legislative framework that governs the telecommunications industry in Canada. The provisions described immediately below are central to the appellants’ argument that the CRTC impermissibly ignored mandatory requirements imposed upon it by the Act.
[12] The Act’s guiding objectives are enumerated in section 7. Pursuant to subsection 47(a), the CRTC must perform its duties with a view to implementing these objectives. Additionally, section 8 of the Act authorizes the Governor in Council “by order” to “issue to the Commission directions of general application on broad policy matters with respect to the Canadian telecommunications policy objectives.” An order made under section 8 is binding on the Commission (subsection 11(1); see also subsection 47(b)).
[13] The Governor in Council has given directions to the CRTC that were binding upon it at the time it issued the decision under appeal: Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, S.O.R./2006-355 (Cabinet Direction). Section 1 of the direction requires the CRTC, when exercising its powers and performing its duties under the Act, to “implement the Canadian telecommunications policy objectives set out in section 7” of the Act in accordance with a number of enumerated criteria. Of particular relevance to this appeal are three obligations:
(i) the obligation when relying on regulation to “use measures that are efficient and proportionate to their purpose and that interfere with the operation of competitive market forces to the minimum extent necessary to meet the policy objectives” (paragraph 1(a)(ii));
(ii) the obligation when relying on regulation to use measures that “if they are of an economic nature, neither deter economically efficient competitive entry into the market nor promote economically inefficient entry” (paragraph 1(b)(ii)); and,
(iii) the obligation when relying on regulation relating to regimes for access to networks to use measures that “ensure the technological and competitive neutrality of those arrangements or regimes, to the greatest extent possible, to enable competition from new technologies and not to artificially favour either Canadian carriers or resellers” (paragraph 1(b)(iv)).
[14] Paragraph 1(b)(i) of the Cabinet Direction requires the Commission, when relying on regulation, to “specify the telecommunications policy objective that is advanced by those measures and demonstrate their compliance with” the Cabinet Direction. The appellants assert this provision creates a reasons requirement.
[15] Subsection 47(a) of the Act also requires the Commission to perform its duties with a view to ensuring that Canadian carriers provide telecommunications services and charge rates in accordance with section 27 of the Act. Section 27 requires every rate charged by Canadian carriers to be “just and reasonable”. The power to determine and approve just and reasonable rates is a central responsibility of the Commission.
[16] To ensure that rates are just and reasonable the Act grants the Commission broad powers to, amongst other things, set and regulate rates for telecommunications services (sections 24 and 25). The Commission may also “determine any matter and make any order relating to the rates, tariffs or telecommunications services of Canadian carriers” (subsection 32(g)).
[17] Subsection 27(3) empowers the Commission to “determine in any case, as a question of fact, whether a Canadian carrier has complied with” specific provisions of the Act including sections 24, 25, and 27. Subsection 27(5) permits the Commission to “adopt any method or technique that it considers appropriate, whether based on a carrier’s return on its rate base or otherwise” when determining whether a rate is just and reasonable. The Commission also has the authority under subsection 37(1) to require a Canadian carrier “to adopt any method of identifying the costs of providing telecommunications services and to adopt any accounting method or system of accounts for the purposes of the administration” of the Act.
[18] The Commission’s decisions may be challenged in a number of ways. The following provisions are of particular relevance to the respondents’ argument that the appellants raise grounds of appeal that are outside the scope of the limited right of appeal conferred by subsection 64(1) of the Act.
[19] Subsection 64(1) of the Act permits, with leave of the Court, an appeal to this Court on “any question of law or of jurisdiction”. The Commission may determine any question of law or fact, and “its determination on a question of fact is binding and conclusive” (subsection 52(1)). On an appeal to this Court, the Court “may draw any inference that is not inconsistent with the findings of fact made by the Commission and that is necessary for determining a question of law or jurisdiction” (subsection 64(5)).
[20] Other avenues of redress exist.
[21] The Commission “may, on application or on its own motion, review and rescind or vary any decision made by it” (section 62).
[22] Within one year of a decision being made by the Commission, “the Governor in Council may, on petition in writing … or on the Governor in Council’s own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all or a portion of it.” (subsection 12(1)).
[23] Significantly, neither section 62 nor subsection 12(1) circumscribe the types of questions that may be raised before the CRTC or the Governor in Council. This stands in contradistinction to the prescription in subsection 64(1) that limits this Court to reviewing questions of law or jurisdiction.
[24] In addition to bringing these appeals, the appellants have filed applications with the CRTC asking that the Commission review and vary the order under appeal. The appellants have also filed separate petitions to the Governor in Council seeking the rescission of TO 2019-288. During the hearing, counsel advised that decisions on these requests are outstanding.
[25] While this decision was under reserve, counsel for the appellants advised that the Governor in Council had rendered a decision with respect to the petitions filed by the appellants. We were directed to Order to decline to vary, rescind or refer back for reconsideration Telecom Order CRTC 2019-288, P.C. 2020-0553. Counsel sought and received permission to file brief, written submissions on Order in Council P.C. 2020-0553. The Order in Council is discussed below when considering the appellants’ submissions that the Commission failed to exercise its powers with a view to implementing telecommunications policy objectives and the Cabinet Direction, and this failure was an error in law or jurisdiction.
ii. TO 2019-288’s policy pedigree
[26] TO 2019-288 did not spring into existence in a factual vacuum; it had antecedents. As this Court has noted, CRTC decisions fit into a “continuum” (Société Radio-Canada v. Métromédia Cmr Montréal Inc., 1999 CanLII 8947, 254 N.R. 266 (F.C.A.), at paragraph 14). Indeed, TO 2019‑288 is entitled Follow-up to Telecom Orders 2016-396 and 2016-448 – Final rates for aggregated wholesale high-speed access services.
[27] The decision expressly incorporates as “Related documents” a number of prior decisions of the CRTC including Telecom Regulatory Policies CRTC 2010-632, 2011-703 and 2015-326, Telecom Decisions CRTC 2013-73, 2013-76 and 2016-117 and Telecom Orders CRTC 2016‑396 and 2016-448, discussed and fully cited below. As counsel for the Cable Carriers acknowledged in oral argument, the reasons of the Commission in TO 2019-288 are not to be read in isolation. A reader, and a reviewing court, ought to go beyond the Commission’s reasons and read the related documents in order to fairly understand the reasoning of the Commission. Put another way, the related documents are inextricably linked to the decision under appeal.
[28] The decision does not reference as a related document Disposition of review and vary applications with respect to wholesale high-speed access services: Introductory statement (21 February 2013), Telecom Regulatory Policy CRTC 2013-70 (TRP 2013-70). In this introductory statement, the Commission frames a series of decisions on wholesale high-speed access services issued contemporaneously with it, including Telecom Decisions CRTC 2013-73 and 2013-76. These decisions, specifically listed by the Commission as related documents in TO 2019-288, should be read in the light of TRP 2013-70.
[29] A brief review of these policies and orders and Telecom Decision CRTC 2016-117 (TD 2016-117) will situate TO 2019-288.
[30] Wholesale high-speed access services proceeding (30 August 2010), Telecom Regulatory Policy CRTC 2010-632 (TRP 2010-632) is an early policy statement issued by the CRTC on wholesale high-speed access services. The decision followed what the Commission described to be “a comprehensive public proceeding” commenced in May 2009, to consider whether incumbent local exchange carriers and Cable Carriers should be required to offer certain high‑speed access facilities as wholesale services to competitors for resale. The Commission reviewed the evolution of Internet services from low-speed dial-up services to higher speed Internet services facilitated by the construction of more fibre facilities in access networks. The Commission “indicated its intention to apply its essential services framework for wholesale services in this proceeding on a forward-looking basis to provide appropriate incentives for continued investment in broadband infrastructure, encourage competition and innovation, and expand consumer choices.”
[31] The Commission went on to describe its determinations to be in accordance with the Act, including subsection 27(2), and to be made with a view to implementing the policy objectives found in subsections 7(a), (b), (c), (f), and (h) of the Act. The Commission also stated that its determinations were in accordance with the Cabinet Direction (TRP 2010-632, paragraphs 26 and 27). The Commission returned to a discussion of the policy objectives advanced by its decision at paragraphs 143 to 149 of its reasons (as quoted later in these reasons at paragraph 193). The Commission ended its decision by directing the major incumbent local exchange carriers and the Cable Carriers to file proposed tariffs with supporting Phase II cost studies, and by reciting the policy objectives advanced by its determinations.
[32] Here, it is helpful to provide a brief explanation about Phase II costing principles. Phase II costing principles, or simply Phase II costing, is the costing methodology used by the CRTC when conducting rate-setting proceedings. This methodology has been used, with various modifications, since 1979 for a variety of rate-setting functions performed by the CRTC. In brief, regulated Carriers are required to file Phase II costing manuals which are used to prepare cost studies that are submitted to the CRTC. The CRTC then uses these cost studies, as well as other information and considerations, to set rates. Rates developed pursuant to this methodology are based on the projected, actual costs that a regulated carrier will incur when providing a telecommunications service over a defined future study period, plus a reasonable markup. The markup recognizes overhead and other fixed costs and the need to provide an incentive for continued investment in new network infrastructure (see, for example, TRP 2011-703, paragraph 82 and footnote 30).
[33] TRP 2010-632 was followed a few months later by Billing practices for wholesale residential high-speed access services (15 November 2011), Telecom Regulatory Policy CRTC 2011-703 (TRP 2011-703) where the Commission reconsidered how large telephone and cable companies should charge competitors for access to, and use of, their HSA wholesale services. The Commission found two billing models to be acceptable: a capacity-based billing model and a flat rate model. The Commission decided that rates for either model should be based on each of the individual, large cable and telephone companies’ costs to provide the service plus a reasonable markup; further, the markups should be comparable for all cable and telephone companies. The Commission also addressed other important policy issues: the rate principles to be applied to the selected billing models and the reasonableness of the costs submitted by the network providers. When considering the reasonableness of the costs submitted by the network providers the Commission examined various issues associated with the Phase II cost studies that had been filed, including such things as annual capital unit cost changes (which will be discussed in more detail below). After discussing the implementation of the tariffs set by it establishing final wholesale rates, the Commission reviewed the extent to which its decision complied with the Cabinet Direction. Portions of this analysis are set out at paragraph 194 below.
[34] TRP 2011-703 essentially settled the basic form and structure of the wholesale rates at issue in this appeal. The Commission noted that it was important to “ensure that retail Internet service competition is sufficient to protect consumers’ interests” and that the services “provided by the independent service providers bring pricing discipline, innovation, and consumer choice to the retail Internet service market.”
[35] The Commission further clarified billing models and costing issues in TRP 2013-70. The Commission affirmed that it “sought to ensure that there is a competitive wholesale market that accurately compensates each incumbent for the costs incurred to make those wholesale services available to the independent service providers and, at the same time, to allow for effective and efficient competition to the benefit of Canadians.” (TRP 2013-703, paragraph 14).
[36] In the eight decisions issued with TRP 2013-70, the Commission sought to simplify the implementation of the new wholesale high-speed access service billing models, make adjustments to the wholesale high-speed access service rates to reflect cost adjustments and create a uniform pricing approach for business and residential wholesale high-speed access services. In associated orders, the Commission found errors in the service costs upon which rates set in TRP 2011-703 and TRP 2011-704 were based, and adjusted the 2011 rate accordingly. In some cases it was necessary to apply the rate adjustments retroactively “to ensure that the rates are at all times just and reasonable and in furtherance of the policy objectives set out in the Act.” (TD 2013-73, paragraphs 106 to 110, TD 2013-76, paragraph 46).
[37] TRP 2013-70 was followed by Review of wholesale wireline services and associated policies (22 July 2015), Telecom Regulatory Policy CRTC 2015-326 (TRP 2015-326). This policy is the most recent decision mandating access to the high-speed access services of the large telephone and cable companies. The decision followed a public proceeding conducted to review wholesale wireline services and associated policies. The Commission stated that as part of this proceeding it had “reviewed the existing wholesale services framework, various wholesale wireline services, and the approach it uses to set the rates for wholesale services to determine whether changes to the existing regulatory landscape are appropriate” (TRP 2015-326, preamble, paragraph 2). The Commission adjusted its mandating criteria for wholesale services and set out the rationale behind its determination to mandate the provision of certain wholesale high-speed access services, stating at paragraph 3:
Over the years, the Commission has established various policies, rules, and regulations to govern the provision of wholesale services. These regulatory measures are necessary because incumbent carriers have had considerable advantages over competitors. Without wholesale regulation, fewer competitive service options would be available to Canadians.
The Commission also determined the costing methodology to be applied to wholesale services. Rates for wholesale services would continue to be based upon the use of incremental costing supplemented by an approved markup (i.e. Phase II costing principles). Alternative costing approaches were rejected because, among other reasons, no evidence suggested that alternative approaches would improve regulatory efficiency (TRP 2015-326, paragraphs 233 to 241).
[38] Before leaving TRP 2015-326 I will deal with the Cable Carriers’ submission, made in reply argument, that this decision is irrelevant to TO 2019-288 because TRP 2015-326 phased out the mandated provision of aggregated HSA services and TO 2019-288 set final rates for those services.
[39] TRP 2015-326 is not irrelevant to the decision at issue. In TRP 2015-326 the Commission determined that aggregated wholesale HSA services would “no longer be mandated for the incumbent carriers under certain conditions and subject to an appropriate transition plan.” (TRP 2015-326, paragraph 143). “Incumbent carriers are expected to continue to file tariffs regarding the introduction of or modifications to the provision of aggregated wholesale HSA services until such services have been phased out within their respective serving territories.” (TRP 2015-326, paragraph 155). The final rates for aggregated wholesale HSA services set in TO 2019-288 are integral to the transition plan.
[40] In Review of costing inputs and the application process for wholesale high-speed access services (31 March 2016), Telecom Decision CRTC 2016-117 (TD 2016-117) the Commission made its determinations with two particular objectives in mind: i) to establish a streamlined tariff application process, and ii) to ensure that the inputs to wholesale high-speed access service providers’ cost models remained appropriate. To meet the first objective, the Commission adopted a simplified cost-based approach for rate-setting referred to as “speed-banding”. More will be said about speed-banding below. To meet the second objective, the Commission made determinations with respect to some components of cost studies. Of relevance to this appeal are determinations made with respect to the annual traffic growth assumption (necessary because the annual growth of Internet traffic had increased significantly since TRPs 2011-703 and 2011-704) and the annual capital unit cost change assumption. More will also be said below about these cost components.
[41] The Commission also changed the study period from the then current ten-year period to a shorter five-year study period. This reflected the fact that wholesale HSA service speeds were rapidly changing; many service speed offerings might not have a life span of more than five years. Finally, the Commission converted the then current wholesale rates paid by competitors into interim rates. The Commission’s determination that changes were necessary to certain costing assumptions demonstrated to it that “current wholesale HSA service rates are likely not just and reasonable.” The HSA service providers were required to submit new cost studies. The Commission stated it would assess whether rates should be set retroactively when the new cost studies were submitted (TD 2016-117, paragraph 105).
[42] Generally, Telecom Orders apply established policies to the facts found in the proceeding. They are the practical application of the policy framework set out in TRPs to specific fact situations. Two orders are of particular relevance. After the issuance of TD 2016-117, the Commission considered the new cost studies submitted by the parties and issued TO 2016‑396 and TO 2016-448. These orders established new interim rates. These interim rates were lower than the rates previously paid by competitors.
[43] In Tariff notice applications concerning aggregated wholesale high-speed access services – Revised interim rates (6 October 2016), Telecom Order CRTC 2016-396 (TO 2016‑396) the Commission observed, at paragraph 19, that some of the proposed costs submitted by wholesale HSA service providers were “not reasonable due to deviations from Phase II costing principles, the lack of pertinent costing details, including descriptions of input data variables, and modelling assumptions without supporting rationale. Accordingly, the Commission concludes that the proposed monthly rates for certain wholesale HSA service providers are, on a prima facie basis, not based on reasonable costs.” Therefore, the Commission set revised, lowered interim rates for aggregated wholesale HSA.
[44] In Bragg Communications Incorporated, operating as Eastlink – Revised interim rates for aggregated wholesale high-speed access service (10 November 2016), Telecom Order CRTC 2016-448 (TO 2016-448) the Commission concluded, for similar reasons, that “Eastlink’s proposed monthly rates are, on a prima facie basis, not reasonable” (paragraph 13).
[45] In response, new proposed wholesale rates based on updated cost studies were submitted by the telephone and cable companies. This culminated in the issuance of the order under appeal that established final wholesale rates that were lower than the interim rates set in 2016. The rates applied retroactively to March 31, 2016 for Bell Canada, Bell MTS, Cogeco, Eastlink, Sasktel, TCI and Videotron, and to January 31, 2017 for Shaw (TO 2019-288, paragraphs 331 and 332).
[46] It is relevant to end this portion of the reasons with the observation that aside from the present appeal none of the policies, decisions and orders described above were appealed.
[47] Having situated the appeal in its statutory and historical context, I turn to consider the proper scope of the appeal.
3. Do the appellants raise grounds of appeal that are not questions of law or jurisdiction properly before this Court?
[48] In Canadian National Railway Company v. Emerson Milling Inc., 2017 FCA 79, [2018] 2 F.C.R. 573, this Court considered the scope of the statutory appeal authorized under subsection 41(1) of the Canada Transportation Act, S.C. 1996, c. 10 (CTA). Subsection 41(1), like subsection 64(1) of the Telecommunications Act, permits an appeal to this Court, with leave, on questions of law or jurisdiction. There are other important similarities between the Acts and the limited right of appeal each grants:
Both Acts deal with highly specialized, expert regulatory bodies.
Findings of the Canada Transportation Agency on questions of fact, like those of the CRTC, are binding and conclusive (CTA, section 31).
The Agency, like the CRTC, may review, rescind or vary any decision or order made by it (CTA, section 32).
The Governor in Council may also vary or rescind any decision, order, rule or regulation of the Agency (CTA, section 40), in the same manner as it may review decisions of the CRTC.
[49] Looking at the text, context and purpose of subsection 41(1) of the CTA, this Court concluded in Emerson Milling that a question of jurisdiction “includes at least issues of procedural fairness, even if those issues are factually suffused” (Emerson Milling, paragraph 19). As to what constitutes a question of law, this Court found that the standard of “extricable questions of law or legal principle” is the applicable standard for determining whether a question of mixed fact and law is a “question of law” appealable under subsection 41(1) of the CTA (Emerson Milling, paragraph 26).
[50] In my view, the Court’s analysis and conclusion in Emerson Milling are equally apposite to appeals under subsection 64(1) of the Telecommunications Act.
[51] In Emerson Milling this Court also recognized that the mere say-so of a party that a “legal test” is implicated is insufficient to found an appeal. Grounds of appeal may be expressed in an artful way to make them appear to raise legal questions when they do not. Accordingly, what is required is to look at the substance of what is raised, not the form. The true subject‑matter of an appeal may be identified by construing the notice of appeal. As well, an appellant’s memorandum of fact and law may be useful in providing a realistic appreciation of the appeal’s essential character (Emerson Milling, paragraphs 29 and 30).
[52] With this background, I turn to the grounds of appeal presented by the appellants in this case. To summarize briefly, these grounds of appeal are: i) the Commission breached the principles of procedural fairness and engaged in arbitrary decision-making; ii) the Commission failed to comply with a statutory reasons requirement; iii) the Commission imposed an unconstitutional tax; iv) the Commission failed to exercise its powers with a view to ensuring that the appellants’ rates are “just and reasonable”; and, v) the Commission failed to exercise its powers with a view to implementing the Canadian telecommunications policy objectives set out in section 7 of the Act and the Cabinet Direction.
i. Proper grounds of appeal
[53] I am satisfied the first three of the profferred grounds of appeal at least on the surface raise questions of law or jurisdiction.
[54] This is so because the allegation of breach of procedural fairness was characterized to be a question of jurisdiction in Emerson Milling; the related issue described by the Cable Carriers to be “arbitrary decision-making” (discussed in more detail below) may, as a matter of law, rise to the level of an extricable question of law if, for example, a decision‑maker renders a decision in the absence of any evidence (see, for example, Telus Communications Inc. v. Canada (Canadian Radio-Television and Telecommunications Commission), 2004 FCA 365, [2005] 2 F.C.R. 388, at paragraphs 40 to 43). The remaining two issues of a statutory reasons requirement and an unconstitutional tax also raise extricable questions of law.
ii. Improper grounds of appeal
[55] The remaining two profferred grounds of appeal are more problematic: the ground that the CRTC failed to exercise its powers with a view to ensuring that the appellants’ rates are “just and reasonable” and the ground that it failed to exercise its powers with a view to implementing the Canadian telecommunications policy objectives set out in section 7 of the Act and the Cabinet Direction. Each will be considered in turn.
a) Whether the rates are just and reasonable is not a question of law or jurisdiction
[56] As explained above, subsection 47(a) of the Act requires the Commission to exercise its powers and perform its duties with a view to ensuring that the rates it sets are “just and reasonable”. The appellants argue that:
A just and reasonable rate must allow a carrier to recover its costs, and the final rates set in the decision do not allow the carriers to recover their costs.
Nowhere in the reasons does the CRTC advert to the importance of setting rates that ensure a return on investment.
This error is an error of jurisdiction.
[57] I begin consideration of this point by noting that the Cable Carriers do not cite any evidence in support of their submission that the final rates are insufficient to cover their costs (memorandum of fact and law, paragraph 91). The evidence Bell relies upon to argue that the actual cost of providing wholesale HSA services is substantially higher than the CRTC rate is new evidence, found in the affidavit of its Vice-President Regulatory Law. In his affidavit, the officer swore that:
28. In short, the process we employed closely mirrors the approach used by the CRTC in reaching the Decision, except that we used Bell’s actual capital costs, from Bell’s financial records, rather than the theoretical assumed capital costs used in Phase II Costing. Using this methodology, we determined that the per-subscriber per-month cost of FTTN access is substantially higher than the $14.78 rate ordered by the CRTC in the Decision.
29. The Decision thus orders Bell to provide wholesale FTTN Access at below cost.
(emphasis in original)
[58] The respondents object that this evidence was not before the Commission, and is improperly placed before this Court.
[59] I agree.
[60] In Bell Canada v. 7262591 Canada Ltd. (Gusto TV), 2016 FCA 123, 17 Admin. L.R. (6th) 175, this Court discussed the purpose of the general rule against allowing new evidence on a statutory appeal:
[11] The purpose of the general rule is two-fold:
• To respect the role of the administrative decision-maker. The administrative decision-maker is the merits decider. It decides what evidence or information it should rely upon, it considers that evidence and information, and it makes findings of fact. That is not the role of the reviewing court. See Bernard, Access Copyright and Delios, all above.
• To further the role of the reviewing court. The reviewing court must assess the administrative decision-maker’s decision against the evidence and information the administrative decision-maker took into account. If certain of that evidence and information is withheld from the reviewing court, the review may be artificial and lead to inaccurate outcomes. See the discussion in Canadian Copyright Licensing Agency (Access Copyright) v. Alberta, 2015 FCA 268 at paras. 1