Secret Information Undermines the Legitimacy of CRTC Decisions

casl lawyer ontarioThe CRTC’s wholesale mobile wireless decision (Telecom Regulatory Policy CRTC 2015-177) is notable in its thoroughgoing abandonment of regulatory forbearance in wholesale roaming matters. Since the introduction of cell phones 30 years ago, the CRTC has taken a hands-off approach to the regulation of wireless carriers.

The CRTC in its decision has found that the three national carriers, Rogers, Bell and Telus, have market power and that the forces of competition are insufficient to lead to competitive outcomes for businesses and consumers. The CRTC has decided that rates charged to wholesale customers of the three national carriers should be based on carrier costs (as opposed to a percentage discount from retail rates).

In theory, the CRTC is on surer ground on building rates up from the cost base as opposed to reducing them from retail prices. However, the cost-based method requires that the CRTC determine the actual costs incurred by the national carriers in providing wholesale services. It is in determining carrier costs that the CRTC has its greatest difficulty, and the incumbents the greatest advantage. What is worse, the competitors and wholesale customers of the national carriers are, through the CRTC’s own processes, hugely disadvantaged in the cost determination process.39 of the Telecommunications Act permits a carrier that provides information to the CRTC to designate any or all of it confidential. The designation by the carrier automatically renders it subject to strict confidentiality requirements. While the CRTC has the power to require disclosure of designated information where it determines the disclosure would be in the public interest, this apparent safeguard is far less effective than might be hoped for. In practice, the CRTC places the onus on those seeking disclosure to prove that the disclosure is in the public interest. The default position of the CRTC has been to accept that the designation of confidentiality by the carrier is reasonable, shifting the onus of proof on those who have not seen the information to demonstrate the designation was unreasonable.

As can be imagined, challenging designations of confidentiality has rarely proved successful. As a result, persons seeking to challenge the facts submitted to the CRTC to support a rate application are shooting in the dark. They have to work from surmise. Without access to the secret information, their analysts and experts cannot provide them with advice to impeach the cost formulations made by the carriers. The CRTC is not in a position to systematically challenge the numbers submitted by the carriers – it lacks the resources both in numbers and expertise – to adequately review the masses of data submitted by the carriers.

The CRTC could do better within its current legal framework. It could require the carriers to prove the reasonableness of their confidentiality designations. It could take a more proactive approach toward openness. However, the Telecommunications Act has been with us for more than 20 years, and one cannot expect the CRTC to hive off into new directions on such fundamental issues: this is particularly sad given that the wholesale wireless decisions will require yet more cost proceedings, with yet more parties unable to challenge the information on which the incumbent carriers rely.

The CRTC, in the exercise of its powers in relation to telecommunications, is addressing the potential (and reality) of the abuse of market power by Canadian carriers. In making its determinations, it is trying to level the playing field so that Canadian consumers and business enjoy the benefits that true competition might otherwise have brought them. The CRTC is not alone in grappling with such issues, and is not alone in having to address claims to business secrets: both the Competition Tribunal and the Canadian International Trade Tribunal routinely deal with those issues. In the case of the Competition Tribunal, its rules recognise that there may be a need for confidence in some documents. However, its rules favour discovery by interested parties, and those seeking confidentiality orders have to identify specific direct harms to justify a confidentiality order. The Canadian International Trade Tribunal likewise routinely deals with the most intimate business secrets of fierce competitors. Its founding statute specifically provides that information that has been designated as confidential can be disclosed to opposing counsel and experts who are acting under the direction of counsel. There are safeguards to prevent the information being disclosed to the actual competitor, but the competitor, through its counsel and experts, can effectively challenge the confidential evidence.

There is nothing that hinders the CRTC, on its own motion, from moving in a direction more consistent with the procedures adopted by the Competition Tribunal or the Canadian International Trade Tribunal – it just never has. If the CRTC is unable to see how untenable its practices are to the establishment and interpretation of the facts on which it must make decisions of national consequence, then perhaps it is time for a consumer friendly Government to amend the Telecommunications Act in order to ensure a heightened degree of procedural fairness.

We can all recognise that there are true business confidences that should be protected from the prying eyes of competitors. The problem is that the CRTC does not seem to realise that its deference to the judgment of the carriers not only weakens the fairness of its proceedings, but undermines the legitimacy of the decisions it makes based on information that is shielded from scrutiny. While this issue may be seen as technical, it is one of fundamental importance to the effective functioning of our telecommunications regulatory regime and to obtaining outcomes that benefit all Canadian telecommunications users.

Posted in Administrative Law, Blog, CRTC, Telecommunications, Wholesale Access, Wireless, Wireline Telecommunications Tagged with: , , , ,