2020 FCA 140, 2020 FCA 140

A-456-19 (lead file) A-457-19 2020 FCA 140 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 ) v. 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 ) Indexed as: Bell Canada v.

British Columbia Broadband Association Federal Court of Appeal, Dawson, Stratas and Woods JJ.A.—By videoconference, June 25 and 26; Ottawa, September 10, 2020.

Telecommunications — Consolidated appeals from Canadian Radio-television and Telecommunications Commission (CRTC or Commission) order called 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 large telephone, cable companies could charge for aggregated wholesale high-speed access services provided to competitors — Order provided that final rates would be applied retroactively — Bell Canada, MTS Inc., Bell MTS, large telephone companies, sought, obtained leave to appeal TO 2019-288 — Bragg Communications Incorporated, Cogeco Communications Inc., Rogers Communications Canada Inc., Shaw Cablesystems G.P., Videotron Limited, large cable carriers, also sought, obtained leave to appeal Order — While CRTC not regulating provision of Internet services to retail customers, CRTC regulating provision of wholesale high-speed access services by large telephone, cable companies to competitors — Whether appellants raising grounds of appeal that were not questions of law or jurisdiction properly before Court; whether CRTC breaching principles of procedural fairness or engaged in arbitrary decision-making; whether CRTC’s reasons failed to comply with statutory reasons requirement; whether CRTC imposed unconstitutional tax — While appellants’ first three grounds of appeal ((

i) Commission breaching principles of procedural fairness, engaged in arbitrary decision-making; (ii) Commission failing to comply with statutory reasons requirement; (iii) Commission imposing unconstitutional tax) raising questions of law or jurisdiction, remaining two grounds ((iv) Commission failing to exercise its powers with view to ensuring that appellants’ rates “just and reasonable”; (

v) Commission failing to exercise its powers with view to implementing Canadian telecommunications policy objectives set out in Telecommunications Act , s. 7 , Cabinet Direction ) being problematic — Whether rates just, reasonable not question of law or jurisdiction — Cable carriers not citing any evidence in support of submission that final rates insufficient to cover their costs while Bell relying on new evidence to support argument — Act , s. 27(1) read in conjunction with s. 27(3) demonstrating that whether rates just, reasonable under statute is factually suffused question of mixed law, fact — Commission may adopt any method or technique that it considers appropriate to determine whether rate just, reasonable — Challenges to Commission’s choice of methodologies, assessment of evidence relating to selected methodologies not matters of law or jurisdiction properly before Court — Appellants’ argument that Commission failed to implement or consider policy objectives enumerated in Act , s. 7 not question of law or jurisdiction properly before Court — Given Commission’s broad authority to consider any or all policy objectives, Commission’s treatment of policy objectives not raising questions of law or jurisdiction — Therefore, these two grounds of appeal not questions of law or jurisdiction; falling outside scope of Act , s. 64(1) — Cable carriers asserted that CRTC breaching principles of procedural fairness, impermissibly fettered its discretion, or acted arbitrarily with respect to specific costing factors — However, appellants not demonstrating any error of law or jurisdiction arising out of any breach of procedural fairness or arbitrary decision-making — CRTC’s reasons not failing to comply with legislative reasons requirement — Assuming, without deciding, that Commission subject to mandatory requirement to give reasons explaining its implementation of telecommunications policy objectives set out in Act , s. 7 , show compliance with Cabinet Direction , it did so — Commission’s reasons satisfactorily addressed policy objectives, arguments, issues raised by parties; reasons thus adequate — Commission aware of policy concerns appellants identified; engaged with those concerns, addressed them adequately in its reasons — Under Act, s. 52(1), Commission authorized to determine any question of law, including constitutional issues — Appellants knew that issue before Commission was whether final rates should be set retroactively; provided no explanation as to why unconstitutional tax issue not raised before Commission — Therefore, Bell appellants could not be permitted to raise this issue for first time on appeal — Appeals dismissed.

These were consolidated appeals from a Canadian Radio-television and Telecommunications Commission (CRTC or Commission) order called 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 could charge for aggregated wholesale high-speed access services provided to competitors. The order provided that the final rates would be applied retroactively.

Bell Canada, MTS Inc., and Bell MTS, large telephone companies, sought and obtained leave to appeal TO 2019- 288. 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, also sought and obtained leave to appeal the order. The leave applications were granted and orders issued staying TO 2019-288 until the issuance of the Court’s final judgments on the appeals. Subsequently, the appeals were consolidated.

While the CRTC does not regulate the provision of Internet services to retail customers, it 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. On this consolidated appeal, the telephone companies argued that the CRTC “erred in law or jurisdiction” by, in particular, failing to exercise its powers with a view to implementing the Canadian telecommunications policy objectives set out in

section 7 of the Telecommunications Act ( 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 ; 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 by imposing an unconstitutional tax, contrary to

section 53 of the Constitution Act, 1867 . For their part, the cable carriers argued 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 argued that the CRTC failed to consider relevant and cogent evidence they submitted and made decisions on the basis of no evidence, irrelevant evidence or irrelevant considerations; acted arbitrarily by treating the available evidence in an inconsistent and ad hoc fashion; and breached some principles of natural justice. As for the respondents, they are or represent independent Internet service providers that purchase wholesale high-speed access services. They submitted, in particular, that all of the asserted grounds of appeal should be dismissed on their merits.

The Governor in Council gave 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 , SOR/2006-355 ( Cabinet Direction . TO 2019-288 did not spring into existence in a factual vacuum; it had antecedents. The decision expressly incorporated as “Related documents” a number of prior decisions of the CRTC, including Telecom regulatory policies and orders.

The issues were whether the appellants raised grounds of appeal that were not questions of law or jurisdiction properly before the Court; whether the CRTC breached the principles of procedural fairness or engaged in arbitrary decision-making; whether the reasons of the CRTC failed to comply with a statutory reasons requirement; and whether the CRTC imposed an unconstitutional tax. Held , the appeals should be dismissed. The grounds of appeal presented by the appellants in this case were: (

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. While the first three of the proffered grounds of appeal raised questions of law or jurisdiction , the remaining two were more problematic. Whether the rates were just and reasonable was not a question of law or jurisdiction. The cable carriers did not cite any evidence in support of their submission that the final rates were insufficient to cover their costs. The evidence Bell relied upon to argue that the actual cost of providing wholesale HSA services was substantially higher than the CRTC rate was new evidence.

Subsections 27(1) , (3) and (5) of the Act , which deal with this issue, were relevant. Reading subsection 27(1) in conjunction with subsection (3) demonstrates that whether rates are “just and reasonable” under the statute is a factually suffused question of mixed law and fact. This type of question cannot be entertained under subsection 64(1) of the Act , a view reinforced by subsection 27(5) . The Commission may adopt any method or technique that it considers appropriate to determine whether a rate is just and reasonable.

It enjoys considerable deference in determining the factors to be considered and the methodology that may be adopted for assessing whether rates are just and reasonable. Challenges to the Commission’s choice of methodologies and its assessment of evidence relevant to the selected methodologies were not matters of law or jurisdiction properly before the Court. A similar conclusion was reached respecting the appellants’ argument that the Commission failed to implement or even consider the policy objectives enumerated in

section 7 of the Act , thus committing a jurisdictional error. The appellants’ argument that the Commission failed to implement or consider the policy objectives enumerated in

section 7 of the Act again was not a question of law or jurisdiction properly before the Court. Given in particular the Commission’s broad authority to consider any or all policy objectives, the Commission’s treatment of the policy objectives did not raise questions of law or jurisdiction. Any disagreement with the Commission’s policy choices was a matter to be pursued with the Commission or the Governor in Council—not the Court. Therefore, these two grounds of appeal were not questions of law or jurisdiction and thus fell outside the scope of subsection 64(1) of the Act .

The cable carriers asserted that the CRTC breached the principles of procedural fairness, impermissibly fettered its discretion, or acted arbitrarily with respect to the following costing factors: the productivity factor, upstream traffic growth rates, the attribution of segmentation fibre costs to Internet services, speed-banding, unrecovered costs, working fill factors, segmentation fibre facilities, coaxial cable facilities and annual development costs. The telephone companies alleged the same error regarding the productivity factor as the cable carriers asserted.

Three elements of the duty of fairness were said to be breached by the CRTC: (

i) the right to have the rates determined by a fair, impartial and open-minded decision maker; (ii) the right to know the case the cable carriers had to meet and to put forward their case fully and fairly; and (iii) the right to receive reasons that met the requirements of the Act and the Cabinet Direction. There was no breach of procedural fairness, arbitrary decision-making or disregard of any legitimate expectation as to the conduct of the rate-setting process. The parties knew the issues that were in play and were afforded the opportunity to adduce evidence and make submissions on those issues.

The parties’ real complaint was that the Commission rejected their submissions. As to the productivity factor, in TD 2016-117, the CRTC established an annual productivity factor of minus 26.4 percent. The issue before the Court was not the correctness or reasonableness of this productivity factor but whether the cable carriers’ right to procedural fairness was breached when the Commission selected this productivity factor or whether the Commission arbitrarily, without explanation, preferred obsolete data. The cable carriers did not demonstrate any procedural unfairness or arbitrariness.

The Commission sought company-specific information and gave clear and fair warning of the consequence that would follow from a failure to provide such information or a rationale for a deviation that was accompanied by supporting evidence. Reading the reasons in the light of the record, the explanation for the Commission’s use of a productivity factor of minus 26.4 percent was clear. It wished company-specific information, not third-party data.

While the choice to require company-specific information may not have been what the cable carriers wanted, the CRTC may select any method it considers appropriate when setting rates. The cable carriers were given a fair process, which they chose not to follow. In substance, the cable carriers objected to the reasonableness of the productivity factor determined by the Commission. This was not a question of law or jurisdiction properly before the Court.

Concerning upstream traffic growth rates, there was no procedural unfairness. The 32 percent growth rate set in TD 2016-117 was a substantive finding of the CRTC, which was revised in TO 2019-288 in the face of new evidence. As the doctrine of legitimate expectation protects procedural, not substantive expectations, neither Rogers nor Cogeco could have any enforceable reasonable expectation that rates would be set on the basis of an assumed 32 percent annual growth rate.

Further, both Rogers and Cogeco must be assumed to have understood the express premise of TD 2016-117 and to have known that their historical annual peak period upstream traffic growth rates had been declining. Armed with that knowledge, they were able to make informed submissions to the Commission on an appropriate rate. The fact that the Commission rejected those submissions did not amount to a breach of procedural fairness.

As to attribution of segmentation costs, the Commission remained of the view that because the facilities were used to provide a variety of services, it would not be appropriate to attribute 100 percent of the cost of these facilities to retail Internet and wholesale HSA services. In the absence of any evidence about any incremental cost for other services, the Commission determined that the attribution factor of 75 percent continued to be appropriate. There was no procedural unfairness.

The cable carriers were aware of the issue, filed their evidence, offered their submissions and replied to requests for information. Their complaint was with the Commission’s decision not to attribute 100 percent of the cost of segmentation facilities to Internet services, not with the fairness of the Commission’s process. With respect to speed banding, in one of its prior decisions, (TD 2016-117) the Commission determined that rate-setting for all wholesale HSA services would be done in accordance with the speed-banding approach.

It did not establish how the various costs would be allocated to different rate components. Also, the Commission specifically solicited submissions from the parties on the issue of speed- banding further to its decision. Accordingly, new costing models were solicited; however, there was no evidence suggesting that the cable carriers provided such cost studies. The cable carriers knew this issue was in play and were given the opportunity to file new costing models. There was no procedural unfairness.

The doctrine of legitimate expectations does not protect a substantive expectation that the CRTC would continue to set access rates that vary across speed-bands. Regarding unrecovered costs, during the rate-setting hearing at issue, Rogers submitted evidence of two categories of unrecovered costs totalling $52.3 million. It also submitted proposed rates for consideration by the Commission based upon its revised cost study and which included unrecovered costs.

In the decision at issue, the CRTC not only rejected the higher rates proposed by Rogers but found that the interim rates set in 2016 were not just and reasonable. The Commission set rates that were lower than the then existing interim rates and made such rates retroactive in order to ensure that wholesale HSA service providers applied just and reasonable rates. Thus, the Commission’s reasons disposed of both parts of Rogers’ unrecovered costs claim. Rogers’ cost study was rejected because the CRTC found it overestimated how much it actually cost Rogers to provide wholesale HSA services.

There was no valid claim for breach of procedural fairness or arbitrariness. Rogers’ real complaint was with the quantum of the tariff approved by the Commission, a complaint that was outside the scope of the Court’s reviewing function. As to working fill factors, they represent the point at which network equipment must be upgraded to handle increased usage. In a previous Telecom Regulatory Policy, the Commission determined that companies could propose a company-specific working fill factor (WFF) for a particular facility for use in a cost study so long as the company met five enumerated conditions.

The Commission also determined that when a company-specific proposed WFF did not meet the enumerated conditions, the Commission-mandated WFFs were to be used. Throughout the rate-setting proceedings under review, the appellants proposed company-specific WFFs. The CRTC found these proposals did not satisfy the relevant conditions and so it rejected them. The Commission did not fetter its discretion. An administrative decision maker fetters the exercise of their discretion by relying exclusively on an administrative policy without regard to the law. This is not what the Commission did in this case.

The CRTC also did not close its eyes to the evidence. The Commission found the proposed company-specific measured WWFs were not appropriate for use in cost studies not satisfying all the conditions. This was a determination open to the Commission. Segmentation fibre facilities transport various services, such as television and Internet, to end-users. The cable carriers submitted that the Commission should abandon the technology cost factor methodology used to estimate segmentation fibre facility costs. Instead, they advocated use of the replacement cost approach.

During the course of the rate-setting proceeding, the CRTC sought submissions about the appropriateness of estimating the costs for segmentation fibre facilities using the technology cost factor in place of the cable carriers’ proposed approach. The Commission received and considered the submissions it received in response. The cable carriers’ assertion that the Commission ignored evidence was unfounded. Their real complaint was with how the CRTC interpreted and applied the facts before it.

Respecting coaxial cable facilities, the Commission did not reject the application of capacity costing to new coaxial facilities as the relevant Manuals mandate to estimate costs associated with shared facilities such as coaxial cable facilities. In its reasons, the CRTC confirmed that capacity costing is generally used when the use of existing shared facilities results in the advancement of future relief of facilities.

However, in the case of existing coaxial facilities, the Commission determined that there was no cost advancement because, while segmentation requires the addition of an optical node along with fibre facilities, no additional coaxial facilities were required. Also, the Commission did not apply a “novel and unwarranted methodology” but confirmed that it included depreciation and operating expense amounts provided by the cable carriers to estimate coaxial facility costs. Therefore, the cable carriers did not demonstrate any breach of procedural fairness.

As to annual development costs, the Commission disallowed most of the costs Rogers sought on this level. While the relevant Manual states that detailed cost information is required only for key reporting cost categories, in a previous Telecom decision the Commission determined that expenses associated with development activities that are not causal to a service are fixed common expenses and are to be excluded from regulatory economic studies.

Rogers did not establish that the quantum of the development costs relieved it from the initial burden of proving that the costs were causal to the provision of services and not a fixed common expense. Therefore, there was no breach of procedural fairness in requiring Rogers to demonstrate that claimed costs were causal to the provision of a service. The CRTC’s reasons did not fail to comply with a legislative reasons requirement. Subparagraph 1 (b)(

i) of the Cabinet Direction sets out in particular that, in exercising its powers and performing its duties under the Act , the Commission shall implement the Canadian telecommunications policy objectives set out in

section 7 of the Act and should specify the telecommunications policy objective advanced by the measures it takes and demonstrate compliance with that Order. The question whether the Cabinet Direction imposed a mandatory, as opposed to a directory or permissive requirement did not need to be resolved. Assuming, without deciding, that the

Commission was subject to a mandatory requirement to give reasons explaining its implementation of the telecommunications policyobjectives set out in

section 7 of the Act and show compliance with the Cabinet Direction, it did so. The Commission’s reasonssatisfactorily addressed the policy objectives, the arguments and issues raised by the parties, and they were adequate. The Commissionwas aware of the policy concerns identified by the appellants and it engaged with those concerns and addressed them adequately in itsreasons. Regarding whether the CRTC imposed an unconstitutional tax, the Bell appellants relied upon their written submissions to argue that theretroactive payments constituted a tax, which the CRTC is not empowered to levy.

The respondents submitted in particular that Bell wasprecluded from raising this issue on this appeal because it did not raise the issue before the Commission. Parliament authorized theCommission “[to] determine any question of law” (subsection 52(1) of the Act). This includes constitutional issues. The appellants wellknew that an issue before the Commission was whether final rates should be set retroactively; they provided no explanation as to whythe unconstitutional tax issue was not raised before the Commission.

Therefore, the Bell appellants could not be permitted to raise thisissue for the first time on appeal. STATUTES AND REGULATIONS CITED Canada Transportation Act, S.C. 1996, c. 10, ss. 31, 32, 40, 41(1). Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.),

Schedule to the Constitution Act,1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], s. 53. Federal Courts Rules, SOR/98-106, r. 407, Tariff B, Columns III, V. Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives, SOR/2006-355, s. 1. Order to decline to vary, rescind or refer back for reconsideration Telecom Order CRTC 2019-288, P.C. 2020-0553. Telecommunications Act, S.C. 1993, c. 38, ss. 7, 8, 11(1), 12(1), 24, 25, 27, 32(g), 47, 52(1), 62, 64(1),(5). CASES CITED APPLIED: Canadian National Railway Company v.

Emerson Milling Inc., 2017 FCA 79, [2018] 2 F.C.R. 573; Canada (Minister of Citizenship andImmigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653; Forest Ethics Advocacy Association v. Canada (National Energy Board),2014 FCA 245, [2015] 4 F.C.R. 75.

CONSIDERED: Canadian Network Operators Consortium Inc. – Application to review and vary Telecom Regulatory Policies 2011-703 and 2011-704(21 February 2013), Telecom Decision CRTC 2013-73; Rogers Communication Partnership – Application to review and vary TelecomRegulatory Policy 2011-703 (21 February 2013), Telecom Decision CRTC 2013-76; Review of costing inputs and the applicationprocess for wholesale high-speed access services (31 March 2016), Telecom Decision CRTC 2016-117; Bragg CommunicationsIncorporated, operating as Eastlink – Revised interim rates for aggregated wholesale high-speed access service (10 November 2016),Telecom Order CRTC 2016-448; Regulatory Economic Studies Manuals – Follow-up proceeding to Telecom Decision 2008-14 (25August 2008), Telecom Order CRTC 2008-237; Tariff notice applications concerning aggregated wholesale high-speed access services– Revised interim rates (6 October 2016), Telecom Order CRTC 2016-396; Terms and rates approved for large cable carriers’ highspeed access service (21 August 2000), Order CRTC 2000-789.

Bell Canada v. 7262591 Canada Ltd. (Gusto TV), 2016 FCA 123, 17Admin. L.R. (6th) 175; Cogeco, Rogers, Shaw and Videotron – Third party internet access service rates (21 December 2006), TelecomDecision CRTC 2006-77; Bragg Communications Incorporated, operating as Eastlink – Application to review and vary or stay TelecomOrder 2016-448 regarding wholesale high-speed access service interim rates (25 May 2017), Telecom Decision CRTC 2017-167;Regulatory Policy – Review of certain Phase II costing issues (21 February 2008), Telecom Decision CRTC 2008-14. REFERRED TO: Société Radio-Canada v.

Métromédia Cmr Montréal Inc. (1999), 254 N.R. 266, (C.A.); TELUS Communications Inc.v. Canada (Radio-Television and Telecommunications Commission), 2004 FCA 365, [2005] 2 F.C.R. 388; Baker v. Canada (Minister ofCitizenship and Immigration), (SCC), [1999] 2 S.C.R. 817, (1999), 174 D.L.R. (4th) 193; Bell Canada v. Bell AliantRegional Communications, 2009 SCC 40, [2009] 2 S.C.R 764; Agraira v. Canada (Public Safety and Emergency Preparedness),2013 SCC 36, [2013] 2 S.C.R. 559; Stemijon Investments Ltd v. Canada (Attorney General), 2011 FCA 299, 425 N.R. 341; Alberta(Information and Privacy Commissioner) v.

Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654; Ontario (Energy Board)v. Ontario Power Generation Inc., 2015 SCC 44, [2015] 3 S.C.R. 147; 620 Connaught Ltd. v. Canada (Attorney General), 2008 SCC 7,[2008] 1 S.C.R. 131. AUTHORS CITED Canadian Radio-television and Telecommunications Commission. Billing practices for wholesale residential high-speed access services(15 November 2011), Telecom Regulatory Policy CRTC 2011-703, CRTC 2011-704. Canadian Radio-television and Telecommunications Commission.

Disposition of review and vary applications with respect to wholesalehigh-speed access services: Introductory statement (21 February 2013), Telecom Regulatory Policy CRTC 2013-70. Canadian Radio-television and Telecommunications Commission. Review of costing inputs and application process for wholesale high-speed access services (28 May 2015), Telecom Notice of Consultation CRTC 2015-225.

Canadian Radio-television and Telecommunications Commission. Review of the use of company-specific working fill factors and the recovery of past introduction costs not fully recovered (14 May 2009), Telecom Regulatory Policy CRTC 2009-274. Canadian Radio-television and Telecommunications Commission. Review of wholesale wireline services and associated policies (22 July 2015), Telecom Regulatory Policy CRTC 2015-326. Canadian Radio-television and Telecommunications Commission. Telecom Procedural Letter Addressed to Distribution List (16 December 2016). Canadian Radio-television and Telecommunications Commission.

Telecom Procedural Letter Addressed to Distribution List (31 March 2016). Canadian Radio-television and Telecommunications Commission. Wholesale high-speed access services proceeding (30 August 2010), Telecom Regulatory Policy CRTC 2010-632. Scott Marcus J. The Economic Impact of Internet Traffic Growth on Network Operators , October 24, 2014.

CONSOLIDATED APPEALS from a Canadian Radio-television and Telecommunications Commission order called 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 could charge for aggregated wholesale high-speed access services provided to competitors. Appeals dismissed. APPEARANCES Steven G. Mason , Brandon Kain , Richard J. Lizius and Adam Goldenberg for appellants Bell Canada, Bell MTS, MTS Inc. Kent E.

Thomson , Matthew Milne-Smith , Steven G. Frankel , Anthony M.C. Alexander , Maura O’Sullivan and Pierre Bienvenu for appellants Bragg Communications Incorporated (c.o.b. Eastlink), Cogeco Communications Inc., Rogers Communications Canada Inc., Shaw Cablesystems G.P., and Videotron Limited. Colin Baxter , Julie Mouris and Marion Sandilands for respondent Teksavvy Solutions Inc. C hristian S. Tacit , Christopher Copeland , Crawford G. Smith , Rahool P.

Agarwal , Philip Underwood and John Carlo Mastrangelo for respondents British Columbia Broadband Association, Canadian Network Operators Consortium Inc., Distributel Communications Limited, Ice Wireless Inc., Public Interest Advocacy Centre and Vaxination Informatique. SOLICITORS OF RECORD McCarthy Tétrault LLP , Toronto, for appellants Bell Canada, Bell MTS, MTS Inc. Davies Ward Phillips & Vineberg LLP , Toronto and Norton Rose Fulbright Canada LLP , Montréal for appellants Bragg Communications Incorporated (c.o.b.

Eastlink), Cogeco Communications Inc., Rogers Communications Canada Inc., Shaw Cablesystems G.P., and Videotron Limited. Conway Baxter Wilson LLP/s.r.l ., Ottawa, for respondent Teksavvy Solutions Inc. Tacit Law , Ottawa and Lax O’Sullivan Lisus Gottlieb LLP , Toronto for respondents British Columbia Broadband Association, Canadian Network Operators Consortium Inc., Distributel Communications Limited, Ice Wireless Inc., Public Interest Advocacy Centre and Vaxination Informatique. The following are the reasons for judgment rendered in English by Dawson J.A. : Table of Contents 1. Introduction 2.

The context in which TO 2019-288 was made and is to be considered by this Court i. The legislative framework ii. TO 2019-288’s policy pedigree 3. Do the appellants raise grounds of appeal that are not questions of law or jurisdiction properly before this Court? i. Proper grounds of appeal ii. Improper grounds of appeal (

a) Whether the rates are just and reasonable is not a question of law or jurisdiction (

b) The Commission’s consideration of policy objectives is not a question of law or jurisdiction 4. The issues to be decided

5. The standards of review to be applied to the issues 6. Did the CRTC breach the principles of procedural fairness or err in law or jurisdiction by engaging in arbitrary decision-making? i. The nature of the asserted errors of law and jurisdiction ii. The productivity factor (

a) The appellants’ submissions (

b) Context (

c) The Commission’s reasons (

d) Analysis iii. Upstream traffic growth rates (

a) The appellants’ submissions (

b) Context (

c) The Commission’s reasons (

d) Analysis iv. Attribution of segmentation costs (

a) The appellants’ submissions (

b) Context (

c) The Commission’s reasons (

d) Analysis v. Speed-banding (

a) The appellants’ submissions (

b) Context (

c) Analysis vi. Unrecovered costs (

a) The appellants’ submissions (

b) Analysis vii. Working fill factors (WFF) (

a) The appellants’ submissions (

b) Analysis viii. Segmentation fibre facilities ix. Coaxial cable facilitites (

a) The appellants’ submissions (

b) Context (

c) Analysis x. Annual development costs (

a) The appellants’ submissions (

b) Context (

c) Analysis xi. Conclusion on procedural fairness and arbitrary decision-making

7. Do the reasons of the CRTC fail to comply with a legislative reasons requirement? 8. Did the CRTC impose an unconstitutional tax? 9. Conclusion and costs 1. Introduction [Back to table of contents ] [ 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 [CRTC] 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: i. 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 subparagraph 1(b)(

i) of the direction issued by the Governor in Council; ii. 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 iii. 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: i. rely on post-decision evidence that is inadmissible; ii. 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, iii. 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 [Back to table of contents ] i. The legislative framework [Back to table of contents ] [ 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 paragraph 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 paragraph 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 , SOR/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” (subparagraph 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” (subparagraph 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” ( subparagraph 1 (b)(iv)). [ 14 ] Subparagraph 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 ] Paragraph 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” ( paragraph 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 madeby 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 theGovernor in Council’s own motion, by order, vary or rescind the decision or refer it back to the Commission for reconsideration of all ora 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 orthe Governor in Council. This stands in contradistinction to the prescription in subsection 64(1) that limits this Court to reviewingquestions of law or jurisdiction. [24] In addition to bringing these appeals, the appellants have filed applications with the CRTC asking that the Commission reviewand vary the order under appeal. The appellants have also filed separate petitions to the Governor in Council seeking the rescission of TO2019-288.

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 decisionwith respect to the petitions filed by the appellants. We were directed to Order to decline to vary, rescind or refer back forreconsideration Telecom Order CRTC 2019-288, P.C. 2020-0553. Counsel sought and received permission to file brief, writtensubmissions 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 theCabinet Direction, and this failure was an error in law or jurisdiction. ii. TO 2019-288’s policy pedigree [Back to table of contents] [26] TO 2019-288 did not spring into existence in a factual vacuum; it had antecedents. As this Court has noted, CRTC decisions fitinto a “continuum” (Société Radio-Canada v. Métromédia Cmr Montréal Inc. (1999), 254 N.R. 266, (C.A.), atparagraph 14).

Indeed, TO 2019-288 is entitled Follow-up to Telecom Orders 2016-396 and 2016-448 – Final rates for aggregatedwholesale high-speed access services. [27] The decision expressly incorporates as “Related documents” a number of prior decisions of the CRTC including TelecomRegulatory Policies CRTC 2010-632, [CRTC] 2011-703 [TRP 2011-703] and [CRTC] 2015-326 [TRP 2015-326], Telecom DecisionsCRTC 2013-73 [TD 2013-73], [CRTC] 2013-76 [TD 2013-76] and [CRTC] 2016-117 [TD 2016-117] and Telecom Orders CRTC 2016-396 [TO 2016-396] and [CRTC] 2016-448 [TO 2016-448], discussed and fully cited below.

As counsel for the Cable Carriersacknowledged in oral argument, the reasons of the Commission in TO 2019-288 are not to be read in isolation. A reader, and a reviewingcourt, ought to go beyond the Commission’s reasons and read the related documents in order to fairly understand the reasoning of theCommission.

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 wholesalehigh-speed access services: Introductory statement (21 February 2013), Telecom Regulatory Policy CRTC 2013-70 (TRP 2013-70). Inthis introductory statement, the Commission frames a series of decisions on wholesale high-speed access services issuedcontemporaneously with it, including Telecom Decisions CRTC 2013-73 and [CRTC] 2013-76.

These decisions, specifically listed bythe 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 theCommission described to be “a comprehensive public proceeding” commenced in May 2009, to consider whether incumbent localexchange carriers and Cable Carriers should be required to offer certain high-speed access facilities as wholesale services to competitorsfor resale. The Commission reviewed the evolution of Internet services from low-speed dial-up services to higher speed Internet servicesfacilitated by the construction of more fibre facilities in access networks.

The Commission [at paragraph 23] “indicated its intention toapply its essential services framework for wholesale services in this proceeding on a forward-looking basis to provide appropriateincentives for continued investment in broadband infrastructure, encourage competition and innovation, and expand consumer choice.” [31] The Commission went on to describe its determinations to be in accordance with the Act, including subsection 27(2), and to bemade with a view to implementing the policy objectives found in subsections 7(a), (b), (c), (f), and (

h) of the Act. The Commission alsostated that its determinations were in accordance with the Cabinet Direction (TRP 2010-632, paragraphs 26 and 27). The Commissionreturned to a discussion of the policy objectives advanced by its decision at paragraphs 143 to 149 of its reasons (as quoted later in thesereasons at paragraph 193).

The Commission ended its decision by directing the major incumbent local exchange carriers and the CableCarriers to file proposed tariffs with supporting Phase II cost studies, and by reciting the policy objectives advanced by itsdeterminations. [32] Here, it is helpful to provide a brief explanation about Phase II costing principles. Phase II costing principles, or simply Phase IIcosting, is the costing methodology used by the CRTC when conducting rate-setting proceedings. This methodology has been used, withvarious modifications, since 1979 for a variety of rate-setting functions performed by the CRTC.

In brief, regulated Carriers are requiredto file Phase II costing manuals which are used to prepare cost studies that are submitted to the CRTC. The CRTC then uses these coststudies, as well as other information and considerations, to set rates. Rates developed pursuant to this methodology are based on theprojected, 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 continuedinvestment 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 [at paragraph 3] 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? [Back to table of contents ] [ 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: i. Both Acts deal with highly specialized, expert regulatory bodies. ii. Findings of the Canada Transportation Agency on questions of fact, like those of the CRTC, are binding and conclusive ( CTA,

section 31 ). iii. The Agency, like the CRTC, may review, rescind or vary any decision or order made by it ( CTA,

section 32 ). iv. 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 [Back to table of contents ] [ 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 amatter 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 anyevidence (see, for example, TELUS Communications Inc. v. Canada (Radio-Television and Telecommunications Commission), 2004FCA 365, [2005] 2 F.C.R. 388, at paragraphs 40 to 43). The remaining two issues of a statutory reasons requirement and anunconstitutional tax also raise extricable questions of law. ii.

Improper grounds of appeal [Back to table of contents] [55] The remaining two profferred grounds of appeal are more problematic: the ground that the CRTC failed to exercise its powerswith a view to ensuring that the appellants’ rates are “just and reasonable” and the ground that it failed to exercise its powers with a viewto implementing the Canadian telecommunications policy objectives set out in

section 7 of the Act and the Cabinet Direction. Each willbe considered in turn. (

a) Whether the rates are just and reasonable is not a question of law or jurisdiction [Back to table of contents] [56] As explained above, paragraph 47(

a) of the Act requires the Commission to exercise its powers and perform its duties with aview 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 torecover 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 thatthe final rates are insufficient to cover their costs (memorandum of fact and law, paragraph 91).

The evidence Bell relies upon to arguethat the actual cost of providing wholesale HSA services is substantially higher than the CRTC rate is new evidence, found in theaffidavit of its Vice-President Regulatory Law. In his affidavit [paragraphs 28 and 29], the officer swore that: In short, the process we employed closely mirrors the approach used by the CRTC in reaching the Decision, except that we used Bell’sactual capital costs, from Bell’s financial records, rather than the theoretical assumed capital costs used in Phase II Costing.

Using thismethodology, we determined that the per-subscriber per-month cost of FTTN access is substantially higher than the $14.78 rateordered by the CRTC in the Decision. 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 purposeof the general rule against allowing new evidence on a statutory appeal [at paragraph 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 whatevidence or information it should rely upon, it considers that evidence and information, and it makes findings of fact. That is not the roleof 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 againstthe evidence and information the administrative decision-maker took into account. If certain of that evidence and information is withheldfrom the reviewing court, the review may be artificial and lead to inaccurate outcomes. See the discussion in Canadian CopyrightLicensing Agency (Access Copyright) v. Alberta, 2015 FCA 268 at paras. 13-14. [61] I am satisfied that admitting Bell’s new evidence about its asserted cost of providing service would violate the CRTC’s role asthe fact finder and decider of the merits.

The cost of providing service was an issue squarely before the Commission. [62] Further, accepting the evidence would not facilitate this Court’s review of the CRTC’s decision against the evidence before it. Aswill be seen below when considering the allegations of breach of procedural fairness and arbitrary decision-making, there were instanceswhen the appellants declined to put company-specific evidence before the Commission.

It would be particularly inappropriate in thiscircumstance for this Court to now rely upon evidence that Bell did not put before the Commission. [63] Contrary to the submissions of the Cable Carriers, the affidavit evidence provided by the appellants is generally not profferred toprovide general background information to assist the Court or to shed light on the factors identified in Baker v. Canada (Minister ofCitizenship and Immigration), (SCC), [1999] 2 S.C.R. 817, (1999), 174 D.L.R. (4th) 193.

The evidence I have rejectedabout Bell’s asserted costs is intended to add new evidence directly relevant to the merits of the appeal. [64] The result is that the appellants’ argument that the Commission committed a jurisdictional error by setting rates that are not justand reasonable is unsupported by an evidentiary basis. However, in any event, I am satisfied that the question of whether the rates inquestion are just and reasonable is a question of fact—not a question of law or jurisdiction.

I reach this conclusion for the followingreasons. [65] For ease of reference I set out subsections 27(1), (3) and (5) of the Act:

Just and reasonable rates 27

(1) Every rate charged by a Canadian carrier for a telecommunications service shall be just and reasonable. … Questions of fact

(3) The Commission may determine in any case, as a question of fact , whether a Canadian carrier has complied with this

section or

section 25 or 29, or with any decision made under

section 24 , 25 , 29, 34 or 40 . … Method

(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. [Underlining added.] [ 66 ] Reading subsection 27(1) in conjunction with subsection (3) demonstrates that whether rates are “just and reasonable” under the statute is a factually suffused question of mixed law and fact. This type of question cannot be entertained under subsection 64(1) of the Act . [ 67 ] This view is reinforced by subsection 27(5) .

The Commission may adopt any method or technique that it considers appropriate to determine whether a rate is just and reasonable. The Commission enjoys considerable deference in determining the factors to be considered and the methodology that may be adopted for assessing whether rates are just and reasonable ( Bell Canada v. Bell Aliant Regional Communications , 2009 SCC 40 , [2009] 2 S.C.R 764, at paragraphs 40 and 41 ). As the CRTC is empowered to choose the method for setting rates, the appellants’ arguments are necessarily an assault on the methods selected by the CRTC and its assessment of the evidence.

The chosen methods of calculating rates and the CRTC’s findings of fact are not subject to appeal under subsection 64(1) . [ 68 ] This conclusion is demonstrated in the grounds of appeal set out in the notice of appeal filed on behalf of the large telephone companies. At paragraph 17 it is asserted that: The CRTC’s reasoning process contains several fundamental legal errors that are hallmarks of an irrational decision. The CRTC considered irrelevant factors like outdated data, ignored relevant factors like current data, and adopted methodologies that are contrary to its own earlier decisions.

It greatly underestimated the costs of Bell’s services . It thus erred in law by unreasonably applying its statutory rate-setting power to these facts. [Underlining added.] [ 69 ] Challenges to the Commission’s choice of methodologies and its assessment of evidence relevant to the selected methodologies are not matters of law or jurisdiction properly before this Court. The appellants’ avenues for redress on these points lies with the Commission itself and the Governor in Council. (

b) The Commission’s consideration of policy objectives is not a question of law or jurisdiction [Back to table of contents ] [ 70 ] I reach a similar conclusion with respect to the appellants’ argument that the Commission failed to implement or even consider the policy objectives enumerated in

section 7 of the Act , thus committing a jurisdictional error. [ 71 ] The appellants argue that: •

Section 47 requires the Commission to exercise its powers with a view to implementing the Act ’s policy objectives and the Cabinet Direction . • The Commission failed to do so. The decision not only fails to implement the policy objectives but is directly contrary to the geographic and competitive goals of the policy. • This error deprived the Commission of jurisdiction. [ 72 ] I begin consideration of these submissions by observing that the appellants again point to inadmissible, new evidence to support their submissions.

Such inadmissible evidence includes adverse commentary on the decision at issue (for example, the TD Securities Equity Research report, appeal book, tab 136T) and the appellants’ own post-decision statements (for example, Cogeco’s, Eastlink’s, Rogers’, Shaw’s, Videotron’s and Bell’s parent company’s post-decision announcements). As discussed above beginning at paragraph 60, this new evidence is inadmissible in this proceeding.

Receiving this evidence would not respect the differing roles of this reviewing Court and the CRTC. [ 73 ] This said, I am satisfied that the appellants’ argument that the Commission failed to implement or consider the policy objectives enumerated in

section 7 of the Act again is not a question of law or jurisdiction properly before the Court. [ 74 ] In Bell Aliant , at paragraph 43, the Supreme Court quoted with approval the following passage from the reasons of Justice Sharlow, writing for this Court in the decision then under appeal: Because of the combined operation of

section 47 and

section 7 of the Telecommunications Act …, the CRTC’s rating jurisdiction is not limited to considerations that have traditionally been considered relevant to ensuring a fair price for consumers and a fair rate of return to the provider of telecommunication services .

Section 47 of the Telecommunications Act expressly requires the CRTC to consider, as well, the policy objectives listed in

section 7 of the Telecommunications Act . What that means, in my view, is that in rating decisions under the Telecommunications Act , the CRTC is entitled to consider any or all of the policy objectives listed in

section 7 ….[Underlining added.]

[ 75 ] During oral argument, counsel for the telephone companies conceded that the Commission: • was not obliged to advance all of the policy objectives enumerated in

section 7 of the Act ; • did advance some of the objectives articulated in

section 7; and, • the manner in which the Commission chose to balance policy objectives is not a question of law or jurisdiction. [ 76 ] In my view, these proper concessions, coupled with the broad authority of the Commission to consider any or all policy objectives, is fatal to the appellants’ assertion that the Commission’s treatment of the policy objectives raises questions of law or jurisdiction.

Again, any disagreement with the Commission’s policy choices is a matter to be pursued with the Commission or the Governor in Council—not this Court. [ 77 ] Indeed, in Order in Council P.C. 2020-0553 the Governor in Council considered “that the final rates set by [TO 2019-288] do not, in all instances, appropriately balance the objectives of the wholesale services framework recognized in Order in Council P.C. 2016- 332 … and that they will, in some instances, undermine investment in high-quality networks”.

This said, the Governor in Council found it premature to vary or refer TO 2019-288 back to the Commission because the Commission has already launched a public proceeding to consider the appellants’ applications asking that it review and vary the decision. [ 78 ] As the issue of the CRTC’s treatment of policy objectives is not properly before this Court it is unnecessary to consider the supplementary written submissions filed by the parties. 4.

The issues to be decided [Back to table of contents ] [ 79 ] Having found the two grounds of appeal discussed above are not questions of law or jurisdiction, and therefore fall outside the scope of subsection 64(1), the remaining issues to be determined are: i. Did the CRTC breach the principles of procedural fairness or engage in arbitrary decision-making? ii. Do the reasons of the CRTC fail to comply with a statutory reasons requirement? iii. Did the CRTC impose an unconstitutional tax? 5. The standards of review to be applied to the issues [Back to table of contents ] [ 80 ] In Canada (Minister of Citizensh

[…]