ARCHIVED - Order CRTC 2001-300

Order CRTC 2001-300

Ottawa, 12 April 2001

CRTC denies RSL's request for an interim and final stay of the requirement in Decision 2000-745 that it pay monthly contribution based on a 4.5% revenue charge, beginning in May 2001

Reference: 8662-R7-01/01

The Commission denies RSL COM Canada Inc.'s request for an interim and final stay of the requirement in Decision CRTC 2000-745 "Changes to the contribution mechanism", that it pay monthly contribution based on a 4.5% revenue charge, beginning in May 2001.

The application

On 21 February 2001, RSL COM Canada Inc. filed an application, pursuant to section 62 of the Telecommunications Act and Part VII of the CRTC Telecommunications Rules of Procedure.

RSL requested that, for RSL and only for the year 2001, the Commission issue an immediate order granting an interim stay, followed by a final order granting a permanent stay of that portion of Changes to the contribution regime, Decision CRTC 2000-745, dated 30 November 2000, requiring monthly remittances of contribution based on a 4.5% revenue charge starting in May 2001. The company submitted that, should the stay be granted, it would resume remitting contribution, as indicated in the decision, beginning in 2002.

RSL noted that it requested the relief based on the fact that, according to the company's calculations, by 15 March 2001, it will have already made contribution payments that are equivalent to 4.5% of its total anticipated contribution-eligible revenues for 2001.

RSL submitted that, under Decision 2000-745, it is required to continue paying contribution until the point at which the Commission has approved the final 2001 revenue-percentage charge and the Central Fund Administrator (CFA) determines that RSL has overpaid its 2001 contribution to the subsidy.

RSL argued that, under the circumstances, this would have a serious negative cash flow impact on the company.

RSL explained that it is requesting the immediate interim stay so that it is not required to remit contribution payments above and beyond its estimated 4.5% of contribution-eligible revenues for the year. RSL reasoned that this would give the Commission time to properly consider RSL's application for a final stay.

RSL claimed that its request for both an interim and final stay meets each of the three criteria as set out by the Supreme Court of Canada in A.G. (Manitoba) v. Metropolitan Stores Ltd.,[1987] 1 S.C.R. 110, as supplemented by RJR-MacDonald Inc. v. Canada (Attorney-General), [1994] 1 S.C.R. 311.

RSL submitted that the Commission has erred in failing to address the circumstances presently facing RSL. Further, the Commission has not provided any mechanism to deal with carriers that pay more than their yearly requirement in the first few months of 2001.

RSL submitted that the balance of convenience favours the granting of a stay as no other party would be adversely affected. Further it would begin making contribution payments in the event that its liability exceeds its forecasted revenues.

RSL submitted that, if its request is granted, it is prepared to submit an affidavit respecting its forecast and/or actual contribution payments to the CFA and affected incumbent local exchange carriers (ILECs). Further, it would provide monthly reports to the CFA indicating the amount of contribution payable that month, and showing the variance to the amount already paid by RSL.

In the event that the company exceeds its forecasted revenues for 2001, resulting in a deficit position with the Central Fund, RSL submitted that it would resume making monthly payments in the month in which the deficit appears.

In its response dated 23 March 2001, TELUS Communications Inc. (TELUS) argued that RSL's application should be denied. TELUS stated that its submissions also represent the views of Clearnet Communications Inc. and Québec-Téléphone (now TELUS Québec).

TELUS argued that RSL's request for a final stay is tantamount to a request to review and vary Decision 2000-745 and that the criteria for that relief should be addressed.

In any event, TELUS argued that RSL has failed to demonstrate that it meets the tests that it cited from the Supreme Court of Canada cases noted above. TELUS argued that RSL has not raised a prima facie question to be tried. The Commission has already provided for the possibility of rebates in paragraph 134 of its decision. Further, RSL has failed to demonstrate any irreparable harm. TELUS noted that it is normal that in the transition from one contribution collection regime to another that some parties may pay more and others less during an interim period of time. In this case, provision has been made for recovery of any over or under collection that may occur. In TELUS' view, irreparable harm will occur if a stay is granted because the total amount of contribution required for 2001 will be jeopardized. TELUS argued that the balance of convenience favours the status quo.

Finally, TELUS noted that RSL chose not to participate in the CRTC Ad Hoc Contribution Collection Mechanism Implementation Committee Process and Systems Working Group, (the CCM working group) where this issue has been discussed. Granting RSL the relief requested would permit one party to skirt the processes the rest of the industry has been working on to ensure successful implementation of the new contribution mechanism.

In its reply dated 2 April 2001, RSL argued that there is substantial doubt as to the correctness of the reconciliation process put in place by the Commission in the decision. RSL also argued that there is a serious issue to be tried regarding the timing for the reimbursement of its overpayment, which does not resolve the negative cash-flow impact on RSL. RSL argued that the requirement to wait to be reimbursed could have a significant adverse impact on the financial health of RSL. 

Commission's determination

The Commission notes that the transition from a per-minute to a revenue-based contribution mechanism necessarily involves changes in amounts of contribution that are due. To address this issue, at paragraph 134 of Decision 2000-745, the Commission stated that, once it has approved the final 2001 revenue-percentage charge, the CFA will be required to reconcile the total amount collected to date from each company and the amount that should have been paid as if the final percent revenue charge had been in effect since 1 January 2001.

The Commission recognized that the over/under payments determined at the time of the CFA's reconciliation could be the result of the change from the interim to the final revenue charge and/or from the change from the per-minute to the revenue-based mechanism effective 1 January 2001.

At paragraph 134 of the decision, the Commission also considered that the differences by company should be prorated as an adjustment to the monthly payment to the CFA over the remaining months of the current year.

Therefore, pursuant to this transition process, RSL will have full opportunity to recover its overpayment following the results of the reconciliation that the CFA is required to undertake once the final percentage revenue charge is established.

Further, the Commission does not consider that RSL's concerns regarding managing scarce cash resources demonstrate that it will suffer irreparable harm.

In light of the foregoing, the Commission finds that RSL has failed to demonstrate irreparable harm.

The Commission notes that RSL's liability for contribution under the new regime is significantly less than under the previous regime in place up until 31 December 2000. Thus, RSL is benefiting considerably from the new contribution regime.

In any event, the Commission finds that the balance of convenience lies in favour of the status quo. The Commission notes that, once the CFA has finalized the reconciliation, RSL will cease having to make payments and will begin to be reimbursed for its overpayment. The Commission cannot agree with RSL that a stay will have no impact on anyone other than RSL. Just as RSL is claiming to have overpaid, others can be expected to have underpaid. If RSL is permitted to cease making payments prior to the CFA's determination of telecommunications service providers (TSPs') over and underpayments then the proper operation of the fund could be jeopardized. The Commission notes that if it were to grant RSL's request, the Commission would inevitably be obliged to consider the same treatment for other TSPs in similar circumstances. This could have a considerable impact on the subsidy available for service to high-cost areas.

Finally, with regard to RSL's arguments that the reconciliation approach adopted by the Commission in the decision fails to take into account the financial impact upon parties such as RSL, and that it constitutes a new principle arising from the decision, the Commission considers that the approach set out in paragraph 134 of the decision to address over and underpayments is adequate and appropriate to ensure an efficient, effective and equitable transition to the new contribution regime.

In light of the above, the Commission denies RSL's application for an interim and final stay. 

Secretary General

This document is available in alternative format upon request and may also be examined at the following Internet site: www.crtc.gc.ca