Telus Battles the CRTC
Page 1 of 2
[Edmonton, ALBERTA] The telecommunications industry's volatile relationship with the Canadian Radio-television and Telecommunications Commission (CRTC) was further underlined late yesterday when Telus, Western Canada's telecommunications heavyweight, announced that it was appealing the CRTC's Decision 2000-745, which lists changes to the contribution regime.
Announced on November 30, 2000 and effective January 1, 2001, the decision modifies the way in which subsidies are collected in order to support local residential telephone service in rural Canada which is just as competitively priced as those in metropolitan areas, but inevitably more expensive for telecommunications providers to offer. The new method of subsidization requires all telecommunications service providers to contribute a percentage of their revenues to a national subsidy fund. Previously, subsidies were collected exclusively from long-distance service providers on a per-minute basis.
In its appeal, Telus is questioning the CRTC's attention (or, according to the firm, the lack thereof) to the embedded capital costs telecommunications companies incur when they provide services to out-of-the-way places. Furthermore, the Commission's decision has the potential to affect other utilities industries, a Telus executive pointed out.
"In making this determination, the CRTC has disregarded a fundamental regulatory and common law principle that has defined the relationship between regulators and regulated utilities for nearly a century," said Willie Grieve, vice president of government and regulatory affairs at Telus. "The statutory imperative to set just and reasonable rates is central to the Telecommunications Act as well as public utility legislation governing natural gas and electric utilities ... This is a compelling case for the Court to grant leave to appeal. It has public policy implications that go beyond the telecommunications industry."
"In the final analysis, the main issue Telus would like the Federal Court of Appeal to address is whether the CRTC, by suddenly changing the conditions of the long-standing 'regulatory bargain' and now ignoring the ability of a regulatory utility to cover its embedded costs, is in fact abdicating its statutory responsibility under the Telecommunications Act," he said.
Telus is not the only company to question the CRTC's latest move. On December 13, Bell Canada filed an application directly with the CRTC, requesting that the Commission make adjustments to Decision 2000-745. Bell's request specifically cites the portion of the decision that requires telecommunications companies to contribute 4.5 percent of revenues for 2001. The CRTC will then re-calculate the subsidy requirement for 2002. According to Bell, the impact that this initial percentage on some members of the industry will be too extreme.
"The most practical solution is for the CRTC to reduce the tax rate for 2001 to