Consumer advocacy groups are outraged at the Canadian
Radio-television and Telecommunications Commission's (CRTC)
decision, announced yesterday, to funnel $652.7 million resulting
from deliberate overbillings of telephone customers to expansion of
broadband services instead of refunding the money. There is no
legal precedent [for the CRTC decision] across North
America.Michael Janiganexecutive director of the Ottawa-based
Public Interest Advocacy CentreText
"This is not a happy birthday fund for the Commission," says
Michael Janigan, executive director of the Ottawa-based Public
Interest Advocacy Centre (PIAC), which represents a coalition of
consumer groups. "This money was held in trust for ratepayers, and
should be returned to ratepayers."
The history behind the decision is complex. Back in 2002, the
CRTC decided to set telephone rates higher than necessary to allow
telcos to recoup costs in order to attract new entrants and
encourage competition in the telco space. In effect, rates have had
a built-in buffer for three years that telcos such as Bell Canada
and Telus Corp. were told to place into deferral accounts.
But the federal regulator ruled yesterday that most of the money
b about $50 per customer b is to be used to expand high-speed
Internet broadband offerings in underserved markets such as rural
and remote communities, on the grounds that this is an important
social and economic goal.
"Canada is a world leader in broadband access and today's
decision builds on this enviable record. It serves to ensure that
reliable, affordable, high-quality telecommunications services are
extended to Canadian who would not otherwise be served," said
Charles Dalfen, CRTC chairman, in a statement.
The CRTC is charged with setting just and reasonable rates for
local telephone services for companies across Canada, says Janigan.
When price caps were set in 2002, he says, the idea was to build in
a cushion to cover inflation. But if the telcos' productivity is
greater than the rate of inflation, then rates are supposed to be
reduced, according to standard price cap theory. But the Commission
rejected this option, he says.
"The rates would be too low for competitors to come in and
provide service at that price. Of course, the very reason you want
competition in the telco space is to lower price, so it's kind of a
strange argument," says Janigan. "Rates that are too high for
competitors is not one of the factors the CRTC is supposed to look
at under the act in order to set just and reasonable rates."
Janigan points out that the funding for expansion of broadband
services into high-cost serving areas is coming out of residential
customers' pockets only. "Only they are being asked to contribute
to this. The higher rates are set for residential customers, but
business and other customers that will be using these broadband
services won't be contributing a nickel," he says.
The CRTC's decision is unprecedented, says Janigan. In filing
their arguments against it, PIAC commissioned a regulatory expert
from Michigan State University to conduct research into the
disposition of deferral funds in similar scenarios in other
jurisdictions. "He could not find any example of anything of this
kind. There is no legal precedent across North America," he
says.
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