Bell Canada v. Bell Aliant Regional Communications

Bell Canada v. Bell Aliant Regional Communications
Collection
Supreme Court Judgments
Date
2009-09-18
Neutral citation
2009 SCC 40
Report
[2009] 2 SCR 764
Case number
32607, 32611
Judges
McLachlin, Beverley; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Charron, Louise; Rothstein, Marshall; Cromwell, Thomas Albert
On appeal from
Federal Court of Appeal
Subjects
Administrative law
Communications law
Notes
SCC Case Information: 32611, 32607
Decision Content
SUPREME COURT OF CANADA
Citation: Bell Canada v. Bell Aliant Regional Communications, 2009 SCC 40, [2009] 2 S.C.R. 764
Date: 20090918
Docket: 32607, 32611
Between:
Bell Canada
Appellant
v.
Bell Aliant Regional Communications, Limited Partnership, Consumers’
Association of Canada, National Anti‑Poverty Organization, Public Interest
Advocacy Centre, MTS Allstream Inc., Société en commandite Télébec and
TELUS Communications Inc.
Respondents
‑ and ‑
Canadian Radio‑television and Telecommunications Commission
Intervener
and between:
TELUS Communications Inc.
Appellant
v.
Bell Canada, Arch Disability Law Centre, Bell Aliant Regional Communications,
Limited Partnership, Canadian Radio‑television and Telecommunications
Commission, Consumers’ Association of Canada, National Anti‑Poverty Organization,
Public Interest Advocacy Centre, MTS Allstream Inc., Saskatchewan
Telecommunications and Société en commandite Télébec
Respondents
and between:
Consumers’ Association of Canada and National Anti‑Poverty Organization
Appellants
v.
Canadian Radio‑television and Telecommunications Commission,
Bell Aliant Regional Communications, Limited Partnership, Bell Canada,
Arch Disability Law Centre, MTS Allstream Inc., TELUS Communications Inc.
and TELUS Communications (Québec) Inc.
Respondents
Coram: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.
Reasons for Judgment:
(paras. 1 to 78)
Abella J. (McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Charron, Rothstein and Cromwell JJ. concurring)
Bell Canada v. Bell Aliant Regional Communications, 2009 SCC 40, [2009] 2 S.C.R. 764
Bell Canada Appellant
v.
Bell Aliant Regional Communications, Limited Partnership,
Consumers’ Association of Canada, National Anti‑Poverty
Organization, Public Interest Advocacy Centre, MTS
Allstream Inc., Société en commandite Télébec and TELUS
Communications Inc. Respondents
and
Canadian Radio‑television and Telecommunications
Commission Intervener
‑ and ‑
TELUS Communications Inc. Appellant
v.
Bell Canada, Arch Disability Law Centre, Bell Aliant
Regional Communications, Limited Partnership, Canadian
Radio‑television and Telecommunications Commission,
Consumers’ Association of Canada, National Anti‑Poverty
Organization, Public Interest Advocacy Centre, MTS
Allstream Inc., Saskatchewan Telecommunications and
Société en commandite Télébec Respondents
‑ and ‑
Consumers’ Association of Canada and National Anti‑Poverty
Organization Appellants
v.
Canadian Radio‑television and Telecommunications
Commission, Bell Aliant Regional Communications, Limited
Partnership, Bell Canada, Arch Disability Law Centre,
MTS Allstream Inc., TELUS Communications Inc. and TELUS
Communications (Québec) Inc. Respondents
Indexed as: Bell Canada v. Bell Aliant Regional Communications
Neutral citation: 2009 SCC 40.
File Nos.: 32607, 32611.
2009: March 26; 2009: September 18.
Present: McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ.
on appeal from the federal court of appeal
Communications law — Telephone — Regulation of rates charged by telecommunications carriers — Canadian Radio‑television and Telecommunications Commission ordering carriers to create deferral accounts — Accounts being collected from urban residential telephone service revenues to enhance competition — CRTC directing that accounts be disposed of to increase accessibility of telecommunications services for persons with disabilities and to expand broadband coverage — Remaining amounts, if any, being distributed to subscribers — Whether Telecommunications Act authorizes CRTC to direct disposition of deferral account funds as it did — Telecommunications Act, S.C. 1993, c. 38, ss. 7 , 47 .
Administrative law — Appeals — Standard of review — Canadian Radio‑television and Telecommunications Commission — Standard of review applicable to CRTC’s decision to direct disposition of deferral accounts — Telecommunications Act, S.C. 1993, c. 38, ss. 7 , 47 , 52(1) .
In May 2002, the Canadian Radio‑television and Telecommunications Commission (“CRTC”), in the exercise of its rate-setting authority, established a formula to regulate the maximum prices to be charged for certain services offered by incumbent local exchange carriers, including for residential telephone services in mainly urban non-high cost serving areas (the “Price Caps Decision”). Under the formula established by the Price Caps Decision, any increase in the price charged for these services in a given year was limited to an inflationary cap, less a productivity offset to reflect the low degree of competition in that particular market. The CRTC ordered the carriers to establish deferral accounts as separate accounting entries in their ledgers to record funds representing the difference between the rates actually charged and those as otherwise determined by the formula. At the time, the CRTC did not direct how the deferral account funds were to be used.
In December 2003, Bell Canada sought approval from the CRTC to use the balance in its deferral account to expand high-speed broadband internet services in remote and rural communities. The CRTC invited submissions and conducted a public process to determine the appropriate disposition of the deferral accounts. In February 2006, it decided that each deferral account should be used to improve accessibility for individuals with disabilities and for broadband expansion. Any unexpended funds were to be distributed to certain current residential subscribers through a one-time credit or via prospective rate reductions. This was known as the “Deferral Accounts Decision”.
Bell Canada appealed the order of one-time credits, while the Consumers’ Association of Canada and the National Anti‑Poverty Organization appealed the direction that the funds be used for broadband expansion. The Federal Court of Appeal dismissed the appeals, finding that the Price Caps Decision regime always contemplated that the disposition of the deferral accounts would be subject to the CRTC’s directions and that the CRTC was at all times acting within its mandate. TELUS Communications Inc. joined Bell Canada as an appellant in this Court.
Held: The appeals should be dismissed.
The CRTC’s creation and use of the deferral accounts for broadband expansion and consumer credits was authorized by the provisions of the Telecommunications Act which lays out the basic legislative framework of the Canadian telecommunications industry. In particular, s. 7 of the Act sets out certain broad telecommunications policy objectives and s. 47 (a) directs the CRTC to implement them when exercising its statutory authority, balancing the interests of consumers, carriers and competitors. A central responsibility of the CRTC is to determine and approve just and reasonable rates to be charged for telecommunications services. Pursuing policy objectives through the exercise of its rate-setting power is precisely what s. 47 requires the CRTC to do in setting just and reasonable rates. [1] [28] [36]
The issues raised in these appeals go to the very heart of the CRTC’s specialized expertise. 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 standard of review is therefore reasonableness. [38]
In ordering subscriber credits and approving the use of funds for broadband expansion, the CRTC acted reasonably and in accordance with the policy objectives of the Telecommunications Act . In the Price Caps Decision, the CRTC indicated that the amounts in the deferral accounts would help achieve the CRTC’s objectives. When the CRTC approved the rates derived from the Price Caps Decision, the portion of the revenues that went into the deferral accounts remained subject to the CRTC’s further directions. The deferral accounts, and the fact that they were encumbered by the possibility of the CRTC’s future directions, were therefore an integral part of the rate-setting exercise. The allocation of deferral account funds to consumers was neither a variation of a final rate nor, strictly speaking, a rebate. From the Price Caps Decision onwards, it was understood that the disposition of the deferral account funds might include an eventual credit to subscribers once the CRTC determined the appropriate allocation. [64‑65] [77]
There was no inappropriate cross-subsidization between residential telephone services and broadband expansion. The Telecommunications Act contemplates a comprehensive national telecommunications framework. The policy objectives that the CRTC is always obliged to consider demonstrate that it need not limit itself to considering solely the service at issue in determining whether rates are just and reasonable. It properly treated the statutory objectives as guiding principles in the exercise of its rate‑setting authority, and came to a reasonable conclusion. [73] [75] [77]
Cases Cited
Referred to: Telecom Decision CRTC 2002‑34, May 30, 2002; Telecom Decision CRTC 2005‑69, December 16, 2005; Telecom Decision CRTC 2003‑15, March 18, 2003; Telecom Decision CRTC 2003‑18, March 18, 2003; Telecom Decision CRTC 2006-9, February 16, 2006; Telecom Decision CRTC 2008‑1, January 17, 2008; Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650; Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190; Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339; Northwestern Utilities Ltd. v. City of Edmonton, [1929] S.C.R. 186; ATCO Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140; Re General Increase in Freight Rates (1954), 76 C.R.T.C. 12; Canadian National Railways Co. v. Bell Telephone Co. of Canada, [1939] 1 S.C.R. 308; Telecom Decision CRTC 97‑9, May 1, 1997; Telecom Decision CRTC 94‑19, September 16, 1994; Edmonton (City) v. 360Networks Canada Ltd., 2007 FCA 106, [2007] 4 F.C.R. 747, leave to appeal refused, [2007] 3 S.C.R. vii; Barrie Public Utilities v. Canadian Cable Television Assn., 2003 SCC 28, [2003] 1 S.C.R. 476; Telecom Decision CRTC 93‑9, July 23, 1993; Bell Canada v. Canada (Canadian Radio‑television and Telecommunications Commission), [1989] 1 S.C.R. 1722; EPCOR Generation Inc. v. Energy and Utilities Board, 2003 ABCA 374, 346 A.R. 281; Reference Re Section 101 of the Public Utilities Act (1998), 164 Nfld. & P.E.I.R. 60.
Statutes and Regulations Cited
Railway Act, R.S.C. 1985, c. R-3, s. 340(1).
Telecommunications Act, S.C. 1993, c. 38, ss. 7 , 24 , 25(1) , 27 , 32 (g), 35(1) , 37(1) , 42(1) , 46.5(1) , 47 , 52(1) .
Authors Cited
Ryan, Michael H. Canadian Telecommunications Law and Regulation. Scarborough: Carswell, 1993 (loose-leaf updated 2008, release 2).
APPEALS from a judgment of the Federal Court of Appeal (Richard C.J. and Noël and Sharlow JJ.A.), 2008 FCA 91, 375 N.R. 124, 80 Admin. L.R. (4th) 159, [2008] F.C.J. No. 397 (QL), 2008 CarswellNat 544, affirming a decision of the Canadian Radio‑television and Telecommunications Commission, 2006 LNCRTCE 9 (QL), 2006 CarswellNat 6317. Appeals dismissed.
Neil Finkelstein, Catherine Beagan Flood and Rahat Godil, for the appellant/respondent Bell Canada.
Michael H. Ryan, John E. Lowe, Stephen R. Schmidt and Sonya A. Morgan, for the appellant/respondent TELUS Communications Inc. and the respondent TELUS Communications (Québec) Inc.
Richard P. Stephenson, Danny Kastner and Michael Janigan, for the appellants/respondents the Consumers’ Association of Canada and the National Anti‑Poverty Organization and the respondent the Public Interest Advocacy Centre.
Michael Koch and Dina F. Graser, for the respondent MTS Allstream Inc.
John B. Laskin and Afshan Ali, for the respondent/intervener the Canadian Radio‑television and Telecommunications Commission.
No one appeared for the respondents Société en commandite Télébec, Arch Disability Law Centre, Bell Aliant Regional Communications, Limited Partnership, and Saskatchewan Telecommunications.
The judgment of the Court was delivered by
[1] Abella J. — The Telecommunications Act, S.C. 1993, c. 38 , sets out certain broad telecommunications policy objectives. It directs the Canadian Radio-television and Telecommunications Commission (“CRTC”) to implement them in the exercise of its statutory authority, balancing the interests of consumers, carriers and competitors in the context of the Canadian telecommunications industry. The issue in these appeals is whether this authority was properly exercised.
[2] While distinct questions arise in each of the appeals before us, the common problem is whether the CRTC, in the exercise of its rate-setting authority, appropriately directed the allocation of funds to various purposes. In the Bell Canada and TELUS Communications Inc. appeal, the challenged purpose is the distribution of funds to customers, while in the Consumers’ Association of Canada and National Anti-Poverty Organization appeal, the impugned allocation was directed at the expansion of broadband infrastructure. For the reasons that follow, in my view the CRTC’s allocations were reasonable based on the Canadian telecommunications policy objectives that it is obliged to consider in the exercise of all of its powers, including its authority to approve just and reasonable rates.
Background
[3] The CRTC issued its landmark “Price Caps Decision”[1] in May 2002. Exercising its rate-setting authority, the CRTC established a formula to regulate the maximum prices charged for certain services offered by incumbent local exchange carriers (“ILECs”), who are primarily well-established telecommunications carriers.
[4] As part of its decision, the CRTC ordered the affected carriers to create separate accounting entries in their ledgers. These were called “deferral accounts”. The funds contained in these deferral accounts were derived from residential telephone service revenues in non‑high cost serving areas (“non‑HCSAs”), which are mainly urban. Under the formula established by the Price Caps Decision, any increase in the price charged for these services in a given year was limited to an inflationary cap, less a productivity offset to reflect the low degree of competition in that particular market.
[5] More specifically, the effect of the inflationary cap was to bar carriers from increasing their prices at a rate greater than inflation. The productivity offset, on the other hand, put downward pressure on the rates to be charged. While market forces would normally serve to encourage carriers to reduce both their costs and their prices, the low level of competition in the non-HCSA market led the CRTC to conclude that an offsetting factor was necessary as a proxy for the effect of competition.
[6] Given the countervailing factors at work in the Price Caps Decision formula, there was the potential for a decrease in the price of residential services in these areas if inflation fell below a certain level. Rather than mandating such a decrease, however, the CRTC concluded that lower prices, and therefore the prospect of lower revenues, would constitute a barrier to the entry of new carriers into this particular telecommunications market. It therefore ordered that amounts representing the difference between the rates actually charged, not including the decrease mandated by the Price Caps Decision formula, and the rates as otherwise determined through the formula, were to be collected from subscribers and recorded in deferral accounts held by each carrier. These accounts were to be reviewed annually by the CRTC. The intent of the Price Caps Decision was, therefore, that prices for these services would remain at a level sufficient to encourage market entry, while at the same time maintaining the pressure on the incumbent carriers to reduce their costs.
[7] The principal objectives the CRTC intended the Price Caps Decision to achieve were the following:
a) to render reliable and affordable services of high quality, accessible to both urban and rural area customers;
b) to balance the interests of the three main stakeholders in telecommunications markets, i.e., customers, competitors and incumbent telephone companies;
c) to foster facilities‑based competition in Canadian telecommunications markets;
d) to provide incumbents with incentives to increase efficiencies and to be more innovative; and
e) to adopt regulatory approaches that impose the minimum regulatory burden compatible with the achievement of the previous four objectives. [para. 99]
[8] The CRTC discussed the future use of the deferral account funds as follows:
The Commission anticipates that an adjustment to the deferral account would be made whenever the Commission approves rate reductions for residential local services that are proposed by the ILECs as a result of competitive pressures. The Commission also anticipates that the deferral account would be drawn down to mitigate rate increases for residential service that could result from the approval of exogenous factors or when inflation exceeds productivity. Other draw downs could occur, for example, through subscriber rebates or the funding of initiatives that would benefit residential customers in other ways. [Emphasis added; para. 412.]
At the time, it did not specifically direct how the deferral account funds were to be used, leaving the issue subject to further submissions. While some participants objected to the creation of the deferral accounts, no one appealed the Price Caps Decision (Bell Canada v. Canadian Radio-television and Telecommunications Commission, 2008 FCA 91, 80 Admin. L.R. (4th) 159, at para. 14).
[9] The Price Caps Decision was to apply to services offered by Bell Canada, TELUS, and other affected carriers for the four-year period from June 1, 2002 to May 31, 2006. In a decision in 2005, the CRTC extended this price regulation regime for another year to May 31, 2007.[2] The CRTC allowed some draw-downs of the deferral accounts following the Price Caps Decision that are not at issue in these appeals.
[10] In March 2003, in two separate decisions, the CRTC approved the rates for Bell Canada and TELUS.[3] In the Bell Canada decision, the CRTC appeared to contemplate the continued operation of the deferral accounts established in the Price Caps Decision. It ordered, for example, that certain tax savings be allocated to the deferral accounts:
The Commission, in Decision 2002‑34, established a deferral account in conjunction with the application of a basket constraint equal to the rate of inflation less a productivity offset to all revenues from residential services in non‑HCSAs. The Commission considers that AT&T Canada’s proposal to allocate the Ontario GRT and the Quebec TGE tax savings associated with all capped services to the price cap deferral account is inconsistent with that determination. The Commission finds that Bell Canada’s proposal to include the Ontario GRT and Quebec TGE tax savings associated with the residential local services in non‑HCSAs basket in the price cap deferral account is consistent with that determination. [Emphasis added; para. 32.]
[11] On December 2, 2003, Bell Canada sought the approval of the CRTC to use the balance in its deferral account to expand high‑speed broadband internet service to remote and rural communities. In response, on March 24, 2004, the CRTC issued a public notice requesting submissions on the appropriate disposition of the deferral accounts.[4] Pursuant to this notice, the CRTC conducted a public process whereby proposals were invited for the disposition of the affected carriers’ deferral accounts. The review was extensive and proposals were received from numerous parties.
[12] This led to the release of the “Deferral Accounts Decision” on February 16, 2006.[5] In this decision, the CRTC directed how the funds in the deferral accounts were to be used. These directions form the foundation of these appeals.
[13] After considering the various policy objectives outlined in the applicable statute, the Telecommunications Act , and the purposes set out in the Price Caps Decision, the CRTC concluded that all funds in the deferral accounts should be targeted for disposal by a designated date in 2006:
The attachment to this Decision provides preliminary estimates of the deferral account balances as of the end of the fourth year of the current price cap period in 2006. The Commission notes that the deferral account balances are expected to be very large for some ILECs. It also notes the concern that allowing funds to continue to accumulate in the accounts would create inefficiencies and uncertainties.
. . .
Accordingly, the Commission considers it appropriate not only to provide directions on the disposition of all the funds that will have accumulated in the ILECs’ deferral accounts by the end of the fourth year of the price cap period in 2006, but also to provide directions to address amounts recurring beyond this period in order to prevent further accumulation of funds in the deferral accounts. The Commission will provide directions and guidelines for disposing of these amounts later in this Decision. [Emphasis added; paras. 58 and 60.]
[14] The CRTC further decided that the deferral accounts should be disbursed primarily for two purposes. As a priority, at least 5 percent of the accounts was to be used for improving accessibility to telecommunications services for individuals with disabilities. The other 95 percent was to be used for broadband expansion in rural and remote communities. Proposals were invited on how the deferral account funds should be applied. If the proposal as approved was for less than the balance of its deferral account, an affected carrier was to distribute the remaining amount to consumers.
[15] In summary, therefore, the CRTC decided that the affected carriers should focus on broadband expansion and accessibility improvement. It also decided that if these two objectives could be fulfilled for an amount less than the full deferral account balances, credits to subscribers would be ordered out of the remainder. It should be noted that customers were not to be compensated in proportion to what they had paid through these credits because of the potential administrative complexity of identifying these individuals and quantifying their respective shares. Instead, the credits were to be provided to certain current subscribers. Prospective rate reductions could also be used to eliminate recurring amounts in the accounts.
[16] At the time, the balance in the deferral accounts established under the Price Caps Decision was considerable. Bell Canada’s account was estimated to contain approximately $480.5 million, while the TELUS account was estimated at about $170 million.
[17] It is helpful to set out how the CRTC explained its decision on the allocation of the deferral account funds. Referencing the importance of telecommunications in connecting Canada’s “vast geography and relatively dispersed population”, it stressed that Canada had fallen behind in the adoption of broadband services (paras. 73-74). It contrasted the wide availability of broadband service in urban areas with the less developed network in rural and remote communities. Further, it noted that the objectives outlined in the Price Caps Decision and in the Telecommunications Act at s. 7 (b) provided for improving the quality of telecommunications services in those communities, and that their social and economic development would be favoured by an expansion of the national broadband network. In its view, this initiative would also provide a helpful complement to the efforts of both levels of government to expand broadband coverage. It therefore concluded that broadband expansion was an appropriate use of a part of the deferral account funds (paras. 73-80).
[18] The CRTC also explained that while customer credits would be consistent with the objectives set out in s. 7 of the Telecommunications Act and with the Price Caps Decision, these disbursements should not be given priority because broadband expansion and accessibility services provided greater long-term benefits. Nevertheless, credits effectively balanced the interests of the “three main stakeholders in the telecommunications markets” (para. 115), namely customers, competitors and carriers. It concluded that credits did not contradict the purpose of the deferral accounts, and contrasted one‑time credits with a reduction of rates. In its view, credits, unlike rate reductions, did not have a sustained negative impact on competition in these markets, which was the concern the deferral accounts were set up to address (paras. 112-16).
[19] A dissenting Commissioner expressed concerns over the disposition of the deferral account funds. In her view, the CRTC had no mandate to direct the expansion of broadband networks across the country. The CRTC’s policy had generally been to ensure the provision of a basic level of service, not services like broadband, and she therefore considered the CRTC’s reliance on the objectives of the Telecommunications Act to be inappropriate.
[20] On January 17, 2008, the CRTC issued another decision dealing with the carriers’ proposals to use their deferral account balances for the purposes set out in the Deferral Accounts Decision.[6] Some carriers’ plans were approved in part, with the result that only a portion of their deferral account balances was allocated to those projects. Consequently, the CRTC required them to submit, by March 25, 2008, a plan for crediting the balance in their deferral accounts to residential subscribers in non-HCSAs.
[21] Bell Canada, as well as the Consumers’ Association of Canada and the National Anti-Poverty Organization, appealed the CRTC’s Deferral Accounts Decision to the Federal Court of Appeal. The Deferral Accounts Decision was stayed by Richard C.J. in the Federal Court of Appeal on January 25, 2008. The decision requiring further submissions on plans to distribute the deferral account balances was also stayed by Sharlow J.A. pending the filing of an application for leave to appeal to this Court on April 23, 2008. Both stay orders were extended by this Court on September 25, 2008. The stay orders do not apply to the funds allocated for the improvement of accessibility for individuals with disabilities.
[22] In a careful judgment by Sharlow J.A., the court unanimously dismissed the appeals (2008 FCA 91, 80 Admin. L.R. (4th) 159), concluding that the Price Caps Decision regime always contemplated the future disposition of the deferral account funds as the CRTC would direct, and that the CRTC acted within its broad mandate to pursue its regulatory objectives. For the reasons that follow, I agree with the conclusions reached by Sharlow J.A.
Analysis
[23] The parties have staked out diametrically opposite positions on how the balance of the deferral account funds should be allocated.
[24] Bell Canada argued that the CRTC had no statutory authority to order what it claimed amounted to retrospective “rebates” to consumers. In its view, the distributions ordered by the CRTC were in substance a variation of rates that had been declared final. TELUS joined Bell Canada in this Court, and argued that the CRTC’s order for “rebates” constituted an unjust confiscation of property.
[25] In response, the CRTC contended that its broad mandate to set rates under the Telecommunications Act includes establishing and ordering the disposal of funds from deferral accounts. Because the deferral account funds had always been subject to the possibility of disbursement to customers, there was therefore no variation of a final rate or any impermissible confiscation.
[26] The Consumers’ Association of Canada was the only party to oppose the allocation of 5 percent of the deferral account balances to improving accessibility, but abandoned this argument during the hearing before the Federal Court of Appeal. Together with the National Anti-Poverty Organization, it argued before this Court that the rest of the deferral account balances should be distributed to customers in full, and that the CRTC had no authority to allow the use of the funds for broadband expansion.
[27] These arguments bring us directly to the statutory scheme at issue.
[28] The Telecommunications Act lays out the basic legislative framework of the Canadian telecommunications industry. In addition to setting out numerous specific powers, the statute’s guiding objectives are set out in s. 7 . Pursuant to s. 47 (a), the CRTC must consider these objectives in the exercise of all of its powers. These provisions state:
7. It is hereby affirmed that telecommunications performs an essential role in the maintenance of Canada’s identity and sovereignty and that the Canadian telecommunications policy has as its objectives
(a) to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions;
(b) to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;
(c) to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;
(d) to promote the ownership and control of Canadian carriers by Canadians;
(e) to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada;
(f) to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;
(g) to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services;
(h) to respond to the economic and social requirements of users of telecommunications services; and
(i) to contribute to the protection of the privacy of persons.
. . .
47. The Commission shall exercise its powers and perform its duties under this Act and any special Act
(a) with a view to implementing the Canadian telecommunications policy objectives and ensuring that Canadian carriers provide telecommunications services and charge rates in accordance with section 27 ;
The CRTC relied on these two provisions in arguing that it was required to take into account a broad spectrum of considerations in the exercise of its rate‑setting powers, and that the Deferral Accounts Decision was simply an extension of this approach.
[29] The Telecommunications Act grants the CRTC the general power to set and regulate rates for telecommunications services in Canada. All tariffs imposed by carriers, including rates for services, must be submitted to it for approval, and it may decide any matter with respect to rates in the telecommunications services industry, as the following provisions show:
24. The offering and provision of any telecommunications service by a Canadian carrier are subject to any conditions imposed by the Commission or included in a tariff approved by the Commission.
25. (1) No Canadian carrier shall provide a telecommunications service except in accordance with a tariff filed with and approved by the Commission that specifies the rate or the maximum or minimum rate, or both, to be charged for the service.
. . .
32. The Commission may, for the purposes of this Part,
. . .
(g) in the absence of any applicable provision in this Part, determine any matter and make any order relating to the rates, tariffs or telecommunications services of Canadian carriers.
[30] The guiding rule of rate-setting under the Telecommunications Act is that the rates be “just and reasonable”, a longstanding regulatory principle. To determine whether rates meet this standard, the CRTC has a wide discretion which is protected by a privative clause:
27. (1) Every rate charged by a Canadian carrier for a telecommunications service shall be just and reasonable.
. . .
(3) The Commission may determine in any case, as a question of fact, whether a Canadian carrier has complied with section 25, this section or section 29, or with any decision made under section 24 , 25 , 29 , 34 or 40 .
. . .
(5) In determining whether a rate is just and reasonable, the Commission may adopt any method or technique that it considers appropriate, whether based on a carrier’s return on its rate base or otherwise.
. . .
52. (1) The Commission may, in exercising its powers and performing its duties under this Act or any special Act, determine any question of law or of fact, and its determination on a question of fact is binding and conclusive.
[31] In addition to the power under s. 27(5) to adopt “any method or technique that it considers appropriate” for determining whether a rate is just and reasonable, the CRTC also has the authority under s. 37(1) to order a carrier to adopt “any accounting method or system of accounts” in view of the proper administration of the Telecommunications Act . Section 37(1) states:
37. (1) The Commission may require a Canadian carrier
(a) 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 this Act;
[32] The CRTC has other broad powers which, while not at issue in this case, nevertheless further demonstrate the comprehensive regulatory powers Parliament intended to grant. These include the ability to order a Canadian carrier to provide any service in certain circumstances (s. 35(1) ); to require communications facilities to be provided or constructed (s. 42(1) ); and to establish any sort of fund for the purpose of supporting access to basic telecommunications services (s. 46.5(1) ).
[33] This statutory overview assists in dealing with the preliminary issue of the applicable standard of review. Although the Federal Court of Appeal accepted the parties’ position that the applicable standard of review was correctness, Sharlow J.A. acknowledged that the standard of review could be more deferential in light of this Court’s decision in Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15, [2007] 1 S.C.R. 650, at paras. 98-100. This was an invitation, it seems to me, to clarify what the appropriate standard is.
[34] Bell Canada and TELUS concede that the CRTC had the authority to approve disbursements from the deferral accounts for initiatives to improve broadband expansion and accessibility to telecommunications services for persons with disabilities, and that they actually sought such approval. In their view, however, this authority did not extend to what they characterized as retrospective “rebates”. Similarly, in the Consumers’ appeal the crux of the complaint is with whether the CRTC could direct that the funds be disbursed in certain ways, not with whether it had the authority to direct how the funds ought to be spent generally.
[35] This means that for the Bell Canada and TELUS appeal, the dispute is over the CRTC’s authority and discretion under the Telecommunications Act in connection with ordering credits to customers from the deferral accounts. In the Consumers’ appeal, it is over its authority and discretion in ordering that funds from the deferral accounts be used for the expansion of broadband services.
[36] A central responsibility of the CRTC is to determine and approve just and reasonable rates to be charged for telecommunications services. Together with its rate-setting power, the CRTC has the ability to impose any condition on the provision of a service, adopt any method to determine whether a rate is just and reasonable and require a carrier to adopt any accounting method. It is obliged to exercise all of its powers and duties with a view to implementing the Canadian telecommunications policy objectives set out in s. 7 .
[37] The CRTC’s authority to establish the deferral accounts is found through a combined reading of ss. 27 and 37(1) . The authority to establish these accounts necessarily includes the disposition of the funds they contain, a disposition which represents the final step in a process set in motion by the Price Caps Decision. It is self-evident that the CRTC has considerable expertise with respect to this type of question. This observation is reflected in its extensive statutory powers in this regard and in the strong privative clause in s. 52(1) protecting its determinations on questions of fact from appeal, including whether a carrier has adopted a just and reasonable rate.
[38] In my view, therefore, the issues raised in these appeals go to the very heart of the CRTC’s specialized expertise. In the appeals before us, 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. This argues for a more deferential standard of review, which leads us to consider whether the CRTC was reasonable in directing how the funds from the deferral accounts were to be used. (See Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, at para. 54; Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339, at para. 25; and VIA Rail Canada, at paras. 88-100.)
[39] This brings us to the nature of the CRTC’s rate-setting power in the context of this case. The predecessor statute for telecommunications rate-setting, the Railway Act, R.S.C. 1985, c. R-3, also stipulated that rates be “just and reasonable” (s. 340(1)). Traditionally, those rates were based on a balancing between a fair rate for the consumer and a fair return on the carrier’s investment. (See, e.g., Northwestern Utilities Ltd. v. City of Edmonton, [1929] S.C.R. 186, at pp. 192-93, and ATCO Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140, at para. 65.)
[40] Even before the expansive language now found in the Telecommunications Act , regulatory agencies had enjoyed considerable discretion in determining the factors to be considered and the methodology that could be adopted for assessing whether rates were just and reasonable. For instance, in dismissing a leave application in Re General Increase in Freight Rates (1954), 76 C.R.T.C. 12 (S.C.C.), Taschereau J. wrote:
[I]f the Board is bound to grant a relief which is just to the public and secures to the railways a fair return, it is not bound to accept for the determination of the rates to be charged, the sole method proposed by the applicant. The obligation to act is a question of law, but the choice of the method to be adopted is a question of discretion with which, under the statute, no Court of law may interfere. [Emphasis added; p. 13.]
In making this determination, he relied on Duff C.J.’s judgment in Canadian National Railways Co. v. Bell Telephone Co. of Canada, [1939] S.C.R. 308, for the following proposition in the particular statutory context of that case:
The law dictates neither the order to be made in a given case nor the considerations by which the Board is to be guided in arriving at the conclusion that an order, or what order, is necessary or proper in a given case. True,