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Telecom Decision CRTC 2003-34
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Ottawa, 30 May 2003
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Application by ARC et al. to review and vary Telecom Costs Orders CRTC 2002-2 and 2002-9
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Reference: 8662-P8-04/02
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In this decision, the Commission approves an application by the Public Interest Advocacy Centre (PIAC) on behalf of Action Réseau Consommateur (ARC), the Consumers' Association of Canada, the Fédération des associations coopératives d'économie familiale du Québec, and the National Anti-Poverty Organization to review and vary Action Réseau Consommateur et al. application for costs - Price cap review proceeding, Telecom Costs Order CRTC 2002-2, 1 March 2002 and Action Réseau Consommateur, the Consumers' Association of Canada, Fédération des associations coopératives d'économie familiale du Québec, and the National Anti-Poverty Organization application for costs - Public Notice CRTC 2000-124, Telecom Costs Order CRTC 2002-9, 21 June 2002.
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Background
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1.
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In Action Réseau Consommateur et al. application for costs - Price cap review proceeding, Telecom Costs Order CRTC 2002-2, 1 March 2002 (Costs Order 2002-2), the Commission approved an application by the Public Interest Advocacy Centre (PIAC) on behalf of Action Réseau Consommateur (ARC), the Consumers' Association of Canada, the Fédération des associations coopératives d'économie familiale du Québec, and the National Anti-Poverty Organization (collectively, ARC et al.) for costs in the price cap review proceeding and named Bell Canada, Aliant Telecom Inc., MTS Communications Inc. and Saskatchewan Telecommunications (collectively, Bell Canada et al.), TELUS Communications Inc. (TELUS), AT&T Canada Corp. (AT&T Canada), Rogers Wireless Inc. (RWI), Call-Net Enterprises Inc. (Call-Net) and GT Group Telecom Services Inc. (Group Telecom) as respondents. Subsequently, in Costs awarded to Action Réseau Consommateur et al. - Public Notice CRTC 2001-37, Telecom Taxation Order CRTC 2002-2, 19 April 2002 (Taxation Order 2002-2), the taxation officer taxed the total amount of costs payable to ARC et al. at $296,352.42. Group Telecom's share of this costs award was $5,927.05.
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2.
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In Action Réseau Consommateur, the Consumers' Association of Canada, Fédération des associations coopératives d'économie familiale du Québec, and the National Anti-Poverty Organization application for costs - Public Notice CRTC 2000-124, Telecom Costs Order CRTC 2002-9, 21 June 2002 (Costs Order 2002-9), the Commission awarded costs to ARC et al. for their participation in Seeking public input on access to multi-dwelling units, in-building wiring and riser space, Public Notice CRTC 2000-124, 25 August 2000 (Public Notice 2000-124). The Commission fixed ARC et al.'s costs at $13,946.93 and named Bell Canada, TELUS, Group Telecom, AT&T Canada, and Call-Net as respondents. Group Telecom's share of this costs award was $1,394.69.
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The application
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3.
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On 4 December 2002, ARC et al. filed an application pursuant to Part VII of the CRTC Telecommunications Rules of Procedure and section 62 of the Telecommunications Act. In their application, ARC et al. requested that the Commission review and vary Costs Orders 2002-2and2002-9 (the costs orders).
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4.
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Specifically, ARC et al. requested that the Commission vary the costs orders so as to direct the other respondents to those orders upon proof of non-recovery or incomplete recovery from Group Telecom, or its receiver in bankruptcy, to pay the outstanding amounts.
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5.
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Comments opposing the application were filed by TELUS dated 3 January 2003, Bell Canada et al. dated 6 January 2003, and RWI dated 7 January 2003. ARC et al. filed reply comments dated 9 January 2003.
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Position of parties
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ARC et al.
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6.
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ARC et al. submitted that they had received no payment from Group Telecom pursuant to the costs orders, despite sending reminders to Group Telecom and demanding payment forthwith.
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7.
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ARC et al. noted that, on 26 June 2002, Group Telecom obtained court protection under the provisions of the Companies' Creditors Arrangement Act (CCAA) staying any proceedings against Group Telecom for the collection of outstanding debts. According to ARC et al., on 28 June 2002, Group Telecom obtained similar protection in the United States under the U.S. Bankruptcy Code.
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8.
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ARC et al. indicated that they had received notice of the CCAA proceedings, on 19 July 2002, from Pricewaterhouse Coopers Inc., who had been appointed the Monitor by the court under the CCAA.
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9.
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According to ARC et al., the proposed CCAA Plan of Compromise or Arrangement (the Plan) under the CCAA might not provide ARC et al. with full recovery of the outstanding amounts owing under the costs orders. In ARC et al.'s view, if the Plan was implemented, they believed that they would receive approximately $1,500. If the Plan was not implemented, however, ARC et al. believed that they would not recover anything from a liquidation of Group Telecom's assets.
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10.
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ARC et al. submitted that their application met the criteria for a review and vary application as articulated by the Commission in Guidelines for Review and Vary Applications, Telecom Public Notice CRTC 98-6, 20 March 1998 (Public Notice 98-6). Specifically, ARC et al. argued that there had been a fundamental change in circumstances since the date the two costs orders were issued, in that Group Telecom had obtained CCAA court protection because it was unable to pay its creditors.
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11.
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ARC et al. argued that this fundamental change in circumstances went to the heart of the costs orders, in that a named respondent was no longer able to pay its share of the awards. According to ARC et al., respondents to costs orders are selected on the basis of their interest and participation in the proceeding. In ARC et al.'s view, that interest and participation assumed an ongoing presence as a solvent player in the market, long enough at least for the company to meet its financial obligations under the costs order. ARC et al. submitted that if a company was unable to meet these financial obligations, it was not an appropriate respondent.
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12.
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ARC et al. submitted that the point of costs awards was to reimburse interveners for their reasonably incurred costs of participating in Commission proceedings. ARC et al. submitted that such costs awards are only effective insofar as the respondents are able to pay. In ARC et al.'s view, a costs order that cannot be enforced cannot be considered correct.
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TELUS
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13.
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TELUS submitted that at the time the costs orders were issued, Group Telecom was a viable company and there was no reason for the Commission to doubt that Group Telecom would be able to meet its financial obligations.
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14.
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TELUS quoted from the initial order of the court under the CCAA that granted a stay of proceedings to Group Telecom:
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- ..no person (a term which in this Order includes, without limitation, an individual, a corporation, firm, partnership, agent, government, governmental authority, regulatory or administrative body, trade union or any other entity) shall commence or continue any suit, action, enforcement process, extra-judicial proceeding or other proceeding of any kind against or in respect of the Applicants [Group Telecom] or any assets, undertakings and property. of the Applicants, and all proceedings already commenced against or in respect of the Applicants or the property are stayed and suspended.
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15.
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TELUS submitted that this stay prevented any action in respect of the debts of Group Telecom during the stay period. TELUS argued that in making its application to review and vary the costs orders, ARC et al. was in clear violation of the terms of the stay. TELUS further submitted that the Commission was prohibited by the terms of the stay from taking any actions in respect of the debts of Group Telecom during the stay period.
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16.
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TELUS noted that Group Telecom's unsecured creditors, which included ARC et al., had approved the Plan. According to TELUS, the Plan provided for partial payment of the debt owed to the unsecured creditors and released Group Telecom from the balance of the debt.
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17.
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TELUS argued that, with the approval of the Plan, ARC et al. had no further claim against Group Telecom or any other party in respect of portions of Group Telecom's debts not recovered in the CCAA process. TELUS submitted that as these debts had been extinguished by operation of law, there was no basis for the Commission to act on ARC et al.'s application.
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18.
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Finally, TELUS submitted that the Commission could not contradict, vary or nullify an order made under a statute of general application, such as the CCAA, absent express language to that effect in the Telecommunications Act. TELUS submitted that no such express language existed and, therefore, the orders made pursuant to the CCAA could not be attacked directly, or indirectly, in a Commission proceeding.
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Bell Canada et al.
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19.
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Bell Canada et al. submitted that Group Telecom's insolvency did not justify a variation of the two costs orders. Bell Canada et al. argued that the creditworthiness of a respondent had never been identified by the Commission as a basis for selecting costs respondents. In Bell Canada et al.'s view, as creditworthiness was not a consideration in the original costs determinations, a change in Group Telecom's creditworthiness did not justify the subsequent variation requested by ARC et al.
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20.
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Bell Canada et al. argued that a respondent's inability to fully satisfy a monetary order is not, and cannot be, a basis for doubting the correctness of the Commission's determination and the effectiveness of the costs orders.
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21.
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Bell Canada et al. submitted that both costs orders were claims provable under the CCAA and the Bankruptcy and Insolvency Act. Bell Canada et al. noted that under the Plan, which had been approved by a vote of creditors and sanctioned by the courts, unsecured creditors, like ARC et al., would receive $1,500 and a pro rata share of any funds remaining in the Unsecured Creditor Distribution fund. Bell Canada et al. submitted that once Group Telecom made its payment to ARC et al. under the Plan, the costs orders would be fully satisfied as a matter of law. In Bell Canada et al.'s view, there would then be no remaining debt to be paid by the other respondents to the costs orders.
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22.
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Bell Canada et al. argued that varying the costs orders in the manner suggested by ARC et al. would be inconsistent with the legislative scheme of the CCAA. Bell Canada et al. submitted that the variance sought by ARC et al. would revive the costs debt extinguished under the CCAA, giving the debt a status that Parliament did not intend. Bell Canada et al. submitted that such a development would be particularly unfair to respondents such as Bell Canada that have already lost large sums as a result of wholesale accounts receivable compromised under the CCAA.
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RWI
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23.
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RWI submitted that it did not support ARC et al.'s application, insofar as the relief requested did not address the ongoing participation of companies under creditor protection in regulatory proceedings before the Commission.
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24.
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RWI noted that the amounts at issue in ARC et al.'s application, as they would impact RWI and the other respondents were not substantial. RWI submitted, however, that ARC et al.'s application raised an important issue regarding the fairness of the ongoing participation by companies like Group Telecom, in regulatory proceedings, where there was a serious question as to whether they could fully satisfy costs awards issued against them.
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25.
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RWI noted that Group Telecom continued to be an active participant in a number of proceedings underway before the Commission, in spite of the fact that it might not be able to pay its portion of any future costs awards. RWI submitted that there was a fundamental issue of fairness at stake where Group Telecom continued to participate and yet was not required to bear its fair share of the costs awarded to consumer groups.
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26.
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RWI submitted that in order to ensure that other parties were not required to subsidize Group Telecom's participation in Commission proceedings, Group Telecom should be prohibited from participating until such time as it paid the money owed to ARC et al. under the existing costs orders.
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Reply comments
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27.
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In their reply, ARC et al. did not dispute that their claim against Group Telecom under the costs orders would be extinguished by the Plan. ARC et al. submitted that this extinguishment of the debt under the costs orders was precisely why they were requesting a variation to those orders.
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28.
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ARC et al. stated that they accepted the terms of the court-imposed stay, and therefore were not proceeding against Group Telecom for further collection of the outstanding debt. ARC et al. submitted, however, that in applying to the Commission for a variation of the costs orders, they were not in violation of the stay, as suggested by TELUS. ARC et al. further submitted that the stay was designed to eliminate claims against Group Telecom, and did not foreclose creditors from seeking to recover monies from other parties.
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29.
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ARC et al. submitted that Bell Canada et al.'s arguments ignored the centrality of need on the part of the costs applicant to the Commission's costs award process. ARC et al. argued that the Commission had always considered the applicant's need as a critical element in the awarding of costs. According to ARC et al., except in exceptional circumstances, the Commission had limited the awarding of costs to applicants who had no other source of funding for their intervention.
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30.
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In ARC et al.'s view, a logical corollary of the "need" criterion was the expectation that costs respondents could fulfil that need by paying their share of the costs award. ARC et al. submitted that if this were not the case, a costs order would be ineffective in accomplishing its purpose of reimbursing applicants for their responsible and helpful participation in Commission proceedings.
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31.
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ARC et al. submitted that, had Group Telecom gone bankrupt prior to the conclusion of the proceedings in question, it would have been inappropriate for the Commission to name Group Telecom as a costs respondent. In ARC et al.'s view, the fact that Group Telecom's insolvency occurred after the issuance of the costs orders in question should not change the fundamental principle underlying costs awards, namely, that of reimbursement.
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Commission determinations
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32.
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The Commission notes that pursuant to the CCAA, a debtor company and its creditors can enter into an arrangement which has the effect of extinguishing the debtor company's financial obligations to its creditors.
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33.
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The Commission has reviewed the Plan approved by Group Telecom's creditors and sanctioned by the court. While the Plan extinguishes any claim that ARC et al. may have against Group Telecom, the Commission notes that it does not contain any provisions that would prevent ARC et al. from seeking to recover the remainder of their outstanding costs awards from other parties.
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34.
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The Commission, contrary to the assertions of TELUS, does not believe that the CCAA stay of proceedings order prohibits it from acting to allow ARC et al. to recover the full amount of their costs orders from the other respondents. The Commission considers that the intention and effect of the stay order is to prevent parties from taking legal action that could have the effect of preventing Group Telecom from successfully restructuring its debt under the CCAA. In the Commission's view, an application by ARC et al. to the Commission asking for recovery of the shortfall in its costs award from the other costs respondents has no impact on Group Telecom or its restructuring.
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35.
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The Commission notes that it has varied decisions based on a fundamental change in circumstances. For example, in Bell Canada and British Columbia Telephone Company - Distribution of Telephone Directories - Applications to Review Telecom Decision CRTC 82-14, Telecom Decision CRTC 84-8, 13 February 1984, the Commission considered applications by Bell Canada and British Columbia Telephone Company to review and vary the decision which established the terms and conditions governing the distribution of telephone directories by the regulated telephone companies under a liberalized terminal attachment regime. In this case, the applicants submitted that additional analysis and experience since the original proceeding had led them to conclude that implementation of the requirements set by the Commission in the original decision would have an adverse financial impact on the telephone companies and their subscribers. The Commission concluded that the applicants' submissions concerning the adverse financial impact on them and their subscribers were accurate. The Commission found that the applicants' analysis and experience after the issuance of the decision disclosed a fundamental change in circumstances since the decision.
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36.
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Similarly, in Aliant Telecom Inc., Bell Canada, MTS Communications Inc. and Saskatchewan Telecommunications - Application to review and vary Order 2001-772, Telecom Decision CRTC 2002-72, 4 December 2002, the Commission considered an application by carriers to review and vary a Commission order setting interim rates for the provision of Zero-dialed Emergency Call Routing Service. The carriers argued that there was substantial doubt as to the correctness of the Commission's decision as it was based on the assumption that usage-based billing was economically feasible because of a larger customer base. The carriers submitted that their experience in offering the service demonstrated that the number of customers for the service was far lower than had been anticipated at the time of the original decision. The Commission found, based on submissions by the applicants regarding their post-decision experience, that there had been a fundamental change in circumstances since the original decision.
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37.
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The Commission's intention in making an award of costs is that the applicant be compensated for the costs of its participation in a Commission proceeding. The Commission has, on a number of occasions, stated that in order to meet the objective of informed participation in public hearings, costs awards are to be made to responsible interveners who lack sufficient funds to properly prosecute their cases, particularly where such interveners represent the interests of a substantial number or class of subscribers. The Commission's objective would, obviously, be defeated if it selected costs respondents who were either bankrupt or under CCAA protection. It is therefore implicit in any Commission costs order, including the two at issue in this application, that the Commission selects costs respondents whom it believes will be able to pay the costs award.
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38.
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The Commission notes that, in this case, neither the applicant, ARC et al., nor any of the prospective costs respondents raised, during the process leading to the two costs orders, Group Telecom's financial position or its ability to pay any potential costs award. Group Telecom's need for protection under the CCAA was not publicly revealed until 26 June 2002, five days after the issuance of the second costs order.
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39.
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In the Commission's view, in the case of the two costs awards in question, events subsequent to the issuance of the two costs awards have demonstrated that the Commission's implicit belief that Group Telecom was able to pay its portion of the costs awards was wrong. The Commission would not have named Group Telecom as a respondent to the two costs orders if it had been aware at the time that Group Telecom would be unable to pay the amounts awarded due to the fact that it had to seek protection under the CCAA.
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40.
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In light of the above, the Commission finds that Group Telecom's inability to pay the costs awards in question due to the fact that it was under CCAA protection, is a fundamental change in circumstances since the costs orders were issued, which casts doubt on the original correctness of the Commission's decisions.
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41.
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Accordingly, the Commission approves ARC et al.'s application to review and vary Costs Orders 2002-2 and 2002-9. The Commission therefore, directs that, if pursuant to the Plan ARC et al. does not receive the full amount due to them under the two costs orders in question, Bell Canada (on behalf of Bell Canada et al.) and TELUS are to pay forthwith the remaining amount due to ARC et al. under the costs orders. Bell Canada shall be responsible for 60% of the outstanding amount and TELUS shall be responsible for 40% of the outstanding amount. The Commission finds that this division of the outstanding amounts between Bell Canada and TELUS is appropriate because of the small amounts of money involved, and because it is consistent with the Commission's approach in attempting to reduce the administrative burden on costs recipients of collecting costs awards.
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42.
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The Commission has considered the arguments submitted by RWI with respect to the participation of companies under CCAA and/or bankruptcy protection in Commission proceedings. In the Commission's view, it would not be in the public interest to disqualify companies from participating in its proceedings based on those companies' current financial position.
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Secretary General
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This document is available in alternative format upon request and may also be examined at the following Internet site: http://www.crtc.gc.ca
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Date Modified: 2003-05-30