ARCHIVED - Telecom Costs Order CRTC 2002-2

Telecom Costs Order CRTC 2002-2

Ottawa, 1 March 2002

Action Réseau Consommateur et al. application for costs - Price cap review proceeding

Reference: 8678-C12-11/01 and 4754-194

1.

By letter dated 2 November 2001, Action Réseau Consommateur (ARC), the Consumers' Association of Canada, the Fédération des associations coopératives d'économie familiale, and the National Anti-Poverty Organization (ARC et al.), applied for costs associated with its participation in the proceeding initiated by Public Notice CRTC 2001-37, Price cap review and related issues, dated 13 March 2001.

Position of parties

2.

ARC et al. submitted that it satisfied the criteria for an award of costs set out in section 44 of the CRTC Telecommunications Rules of Procedure (the Rules).

3.

ARC et al. noted that it had made special efforts to reduce its costs by co-ordinating their intervention with other consumer groups and the City of Calgary in respect of pre-filed evidence, and with the B.C. Old Age Pensioners' Organization (BCOAPO), Council of Senior Citizens' Organizations of B.C., Federated Anti-Poverty Groups of B.C., Senior Citizens' Association of B.C., West End Seniors' Network, Consumers' Association of Canada, End Legislated Poverty, and Tenants Rights Action Coalition (BCOAPO et al.), in respect of cross-examination and argument.

4.

ARC et al. identified as appropriate respondents to its application Bell Canada, Aliant Telecom Inc. (Aliant Telecom), Saskatchewan Telecommunications (SaskTel), MTS Communications Inc. (MTS), TELUS Communications Inc. (TCI), AT&T Canada Corp. (AT&T Canada), Call-Net Enterprises Inc. (Call-Net), Rogers Wireless Inc. (RWI) and GT Group Telecom Services Corp. (Group Telecom).

5.

By letter dated 15 November 2001, Aliant Telecom, Bell Canada, MTS and SaskTel (collectively, the companies) provided their response to ARC et al.'s application. The companies stated that, with two exceptions, they did not oppose ARC et al.'s claim for costs. The companies also agreed with ARC et al.'s choice of respondents.

6.

The companies objected to any claim for costs by ARC et al. regarding the participation of Ms. Barbara Alexander and Dr. Trevor Roycroft. Both Ms. Alexander and Dr. Roycroft had appeared as expert witnesses on behalf of ARC et al.

7.

With respect to Ms. Alexander, the companies submitted that she did not participate in the proceeding in a responsible manner and that she did not contribute, through her evidence and interrogatory responses, to the Commission's better understanding of the issues.

8.

In the case of Dr. Roycroft, the companies asserted that, while he participated in a responsible manner at the proceeding, Dr. Roycroft did not further the Commission's understanding of the issues in this proceeding.

9.

The companies submitted that the evidence put forward by Ms. Alexander contained a number of unsubstantiated and misleading claims on the effect of price cap regulation on service quality in some U.S. states. The companies further asserted that Ms. Alexander's evidence also included a poorly explained and incorrect formula that was the foundation of her proposed penalty system for telephone companies that might fail to meet quality of service standards. The companies argued that her responses to interrogatory questions regarding the forms of regulation and service quality in certain U.S. states did not answer fully the question that was asked or indicated that she simply had no evidence to support her conclusions.

10.

In the case of Dr. Roycroft, the companies submitted that Dr. Roycroft's analysis cannot be given any weight because of three flaws:

a) the state level data used by Dr. Roycroft to estimate total factor productivity (TFP) growth was unreliable;

b) the methodology used to estimate TFP growth was overly simplistic and, in some cases, wrong; and

c) the regression results were neither plausible nor credible.

11.

In addition to the correspondence from the companies, the Commission also received comments from RWI in a letter dated 26 November 2001 regarding the issue of appropriate respondents.

12.

While not generally objecting to the application, RWI submitted that it was not an appropriate respondent for costs to this application. RWI submitted that the appropriate respondents for ARC et al.'s application were the incumbent local exchange carriers (ILECs) - namely the companies and TCI. In RWI's view, the ILECs were the only appropriate respondents as they were the ones who would derive the principle benefit of price cap regulation. RWI supported its argument by asserting that its approach was consistent with the Commission's findings in previous proceedings respecting price cap regulation. RWI cited Telecom Costs Orders CRTC 98-4 and 98-6, both dated 18 February 1998, in support of its position.

13.

By letter dated 26 November 2001, ARC et al. filed reply comments addressing the issues raised by the companies with respect to Ms. Alexander and Dr. Roycroft.

14.

With respect to Dr. Roycroft, ARC et al. submitted that the companies' objections seem to be based solely on an analytical disagreement with Dr. Roycroft's work. ARC et al. noted that the study, which the companies objected to, was published in two refereed journals.

15.

With respect to the three flaws that the companies asserted existed in Dr. Roycroft's evidence, ARC et al. submitted that:

a) Dr. Roycroft used data collected by the U.S. Federal Communications Commission (FCC);

b) Dr. Roycroft used a TFP calculation methodology developed by FCC staff that was conservative in its estimate of TFP growth; and

c) Dr. Roycroft's regression analysis calculated changes in TFP growth attributable to regulation and other factors that were consistent with observed changes in average TFP growth.

16.

ARC et al. also noted that the piece of Dr. Roycroft's evidence that the companies objected to comprised only a small part of his evidence and participation in the proceeding. In fact, Dr. Roycroft did not bill ARC et al. for the report objected to by the companies.

17.

With respect to Ms. Alexander, ARC et al. submitted that, as in the case of Dr. Roycroft, the companies' allegations focused solely on relatively minor aspects of Ms. Alexander's testimony regarding quality of service.

18.

According to ARC et al., Ms. Alexander provided the Commission with the only independent outside expertise on approaches to quality of service under price caps or alternative forms of regulation.

19.

ARC et al. asserted that all of the errors in Ms. Alexander's evidence that the companies alleged were either not, in fact, errors or were so minor that they did not detract from the points that Ms. Alexander was attempting to make in her evidence.

20.

With respect to Ms. Alexander's responses to interrogatories, ARC et al. submitted that Ms. Alexander responded to the best of her ability based on all of the relevant information in her possession.

21.

ARC et al. submitted that it would be inappropriate for the Commission to agree with the companies to disallow the costs claim for the entire amount submitted on account of the two experts, even if the Commission accepted the companies' arguments. In ARC et al.'s view, disallowing any claim for costs based on minor errors in an expert's evidence would have a chilling effect on public-interest interventions in Commission proceedings.

Commission determination

22.

The Commission notes that it has previously disallowed or reduced claims for costs where, in the Commission's view, the expert evidence did not contribute to the Commission's better understanding of the issues.

23.

The Commission finds that such action would not be appropriate in this case.

24.

With respect to Ms. Alexander, the Commission notes that, in this proceeding, parties were asked to file submissions and evidence regarding quality of service. Ms. Alexander's report was the only rate component plan filed with the Commission that was not generated by a member of the telecommunications industry.

25.

In the Commission's view, Ms. Alexander answered all interrogatories to the best of her ability and corrected any minor errors in a timely fashion.

26.

The Commission finds that any errors in Ms. Alexander's work are not significant and do not affect the Commission's ability to assess its potential usefulness to address quality of service issues.

27.

In the Commission's view, Ms. Alexander's work furthers the Commission's understanding of quality of service issues.

28.

In the case of Dr. Roycroft, the Commission finds that his analysis provides the Commission with some insight regarding TFP growth in the U.S., as well as insight with respect to productivity in a second price cap period.

29.

Therefore, the Commission finds that ARC et al. has satisfied the criteria for an award of costs under section 44 of the Rules.

30.

In terms of the appropriate respondents to this cost application, the Commission is of the view that the companies, TCI, AT&T Canada, Group Telecom, RWI and Call-Net are the appropriate respondents.

31.

The Commission weighed the arguments provided by RWI on the issue of appropriate respondents and the costs orders referred to by RWI. However, the Commission finds that, as it determined in Telecom Costs Order CRTC 96-17, while the main beneficiaries of a price cap regime are the ILECs, those companies in competition with the ILECs also have a significant interest in the outcome of the proceeding.

Directions as to costs

32.

The Commission approves ARC et al.'s application for costs in this proceeding.

33.

For the reasons set out above, the award of costs to ARC et al. shall be paid by the named respondents in the following proportions:

AT&T Canada

2%

Call-Net

2%

Group Telecom

2%

RWI

2%

Bell Canada

52%

Aliant Telecom

5%

MTS

5%

SaskTel

5%

TCI

25%

34.

The costs awarded herein shall be subject to taxation in accordance with the Rules.

35.

The costs awarded herein shall be taxed by James Wilson.

36.

ARC et al. shall, within 30 days of the issuance of this order, submit a Bill of Costs and an affidavit of disbursements directly to the taxing officer, serving a copy on the respondents for costs.

37.

The respondents for costs may, within two weeks of receipt of those documents, file comments directly with the taxing officer in response to the claim for costs, serving a copy on ARC et al.

38.

ARC et al. may, within two weeks of receipt of any comments submitted by the respondents for costs, file a reply to such comments, serving a copy on the respondents.

39.

All documents to be filed or served by a specific date must actually be received, and not merely sent by that date.

Secretary General

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