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 Janigan>Text
“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 – about $50 per customer – 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 [this] decision builds on this enviable record. It serves to ensure that reliable, affordable, high-quality telecommunications services are extended to Canadians 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 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.
If the CRTC is going to set such a precedent and simply divert money to its favorite corporations, ignoring the source of that money, why not just forget about the market and simply make the state the owner of everything; then let the CRTC dictate what the future is for everything, not just communications. —Cesar Fernandez-Stoll, Cambridge, ON
The CRTC is charged with setting just and reasonable rates for local telephone services to protect the consumer – period. It doesn’t have a mandate to make investments or charitable donation decisions on my behalf. With decisions like this one, the CRTC has left the barn door wide open – again – to every corporate abuse one can think of. These abuses will later be justified on grounds of “need” and “corporate philanthropy.” My name for this is: fleecing of the consumer under the umbrella of government protection. Incidentally, this practice is frowned upon by the Consumer Protection branch of the same government. When is all of this going to stop? Whatever happened to the free market? – Darius Morawski, Whitby
I am absolutely in favour of using the money (from the overbillings) to expand our broadband network. Universal braodband is essential to Canada’s efficient management of our vast natural and human resources. The geography requiring coverage is large. We have a global responsibility to nurture and sustainably develop Canada’s legacy, and this funding is imperative.- Barry Monette, Renfrew, ON