ARCHIVED - Telecom Commission Letter Addressed to William Sandiford (Canadian Network Operators Consortium Inc.) and Natalie MacDonald (Eastlink)

Ottawa, 31 August 2015

Our reference: 8661-C182-201508417

BY EMAIL

Mr. William Sandiford
Chair of the Board and President
Canadian Network Operators Consortium Inc.
107-85 Curlew Drive
Toronto, ON, M3A 2P8
regulatory@cnoc.ca

Ms. Natalie MacDonald
Vice President, Regulatory Matters
Eastlink
8th Floor, 6080 Young Street
Halifax, Nova Scotia  B3K 5M3
Regulatory.Matters@corp.eastlink.ca

Re: Part 1 Application by CNOC - Request for relief with regard to the pricing and availability of Eastlink’s cable retail Internet access services for resale by ISPs - CNOC’s request for Interim Relief

The purpose of this letter is to communicate the Commission’s determination and reasons for granting the request for interim relief made by the Canadian Network Operators Consortium Inc. (CNOC) in the above-noted application filed pursuant to Part 1 of the Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure.

On 7 August 2015, the Commission received the above-noted application from CNOC, on behalf of its member, City Wide Communications Inc. (City Wide), in which CNOC requested that the Commission issue a final order with regard to the pricing and availability of the cable retail Internet access services (retail IS) provided by Bragg Communications Incorporated, operating as Eastlink (Eastlink) for resale by Internet service providers (ISPs).

At the same time, CNOC requested that the Commission grant interim relief by 1 September 2015 in the form of a directive prohibiting Eastlink from modifying the formula it presently uses to determine the rates that it charges ISPs for its retail IS (the retail IS formula correction).

In a letter dated 11 August 2015, Commission staff established an expedited process with respect to CNOC’s request for interim relief. On 18 August 2015, Eastlink filed comments pursuant to that expedited process, and on 20 August 2015, CNOC filed reply comments.

SHOULD THE COMMISSION GRANT CNOC’S REQUEST FOR INTERIM RELIEF?

The test for interim relief

To assess applications for interim relief, the Commission’s practice is to apply the criteria set out by the Supreme Court of Canada in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd. [1987] 1 S.C.R. 110, and modified in RJR-MacDonald Inc. v. Canada (Attorney General) [1994] 1 S.C.R. 311. These criteria (the RJR-MacDonald criteria) are that (i) there is a serious issue to be determined, (ii) the party seeking the interim relief will incur irreparable harm if the relief is not granted, and (iii) the balance of convenience, taking into account the public interest, favours granting the interim relief. To be successful, an applicant must establish that it meets all three criteria.

Positions of parties

CNOC considered that interim relief was required to prevent Eastlink from implementing the retail IS formula correction effective 1 September 2015. 

CNOC submitted that there was a serious issue to be determined, namely the proper interpretation of Commission decisions that concern the retail IS rate formula. CNOC submitted that the interpretation of these decisions could significantly affect rates for consumers and the state of competition in the provision of retail Internet services in the Atlantic Provinces. 

CNOC argued that its members, including City Wide, would incur irreparable harm if the relief were not granted. In its view, the increase in its costs as a result of the proposed retail IS formula correction would lead to further harmful consequences that could not be quantified or recovered. Specifically, competing ISPs would be forced to choose whether to pass at least some of the increased costs onto consumers, grow more slowly while there is uncertainty in the market, or do both in order to survive as viable businesses. CNOC argued that, as a result, competing ISPs would lose revenue and customers, ultimately harming the competitive state of the market in which the ISPs operate as competitors to Eastlink.

Finally, CNOC considered that the balance of convenience favoured granting interim relief. In this regard, CNOC argued that granting its request would maintain the status quo, which would be in the public interest and which would not harm Eastlink, particularly given that Eastlink had lived with the status quo for five and a half years.

Eastlink argued that CNOC’s request for interim relief should not be granted. While Eastlink did not dispute that there was a serious issue, it argued that CNOC had not established irreparable harm. Eastlink argued that it had given four months’ notice to ISPs, and that those ISPs could not now claim that they would be irreparably harmed by the retail IS formula correction simply because they had failed to prepare for it.

Eastlink was also of the view that, on the balance of convenience, more harm would be caused to Eastlink by granting CNOC’s interim relief than would be caused to competing ISPs by denying it. In particular, Eastlink considered that granting CNOC’s requested relief would impede Eastlink’s ability to offer attractive promotions, including deep, short-term discounts, to its broader customer base. This, in turn, would impair Eastlink’s ability to compete with its own larger competitors.

Commission’s analysis and determinations

As noted above, to succeed in an application for interim relief, the applicant must demonstrate that it meets all three of the RJR-MacDonald criteria.

The threshold for a finding that there is a serious issue to be tried is low. Generally, if an application is not clearly frivolous, it will meet this standard. In this case, the issue is the appropriate interpretation of Application concerning access by Internet service providers to incumbent cable carriers’ telecommunications facilities, Telecom Decision 99-11, 14 September 1999, and subsequent Commission determinations concerning the retail IS formula. This is clearly not a frivolous matter, and Eastlink did not dispute that this was a serious issue. Accordingly, the Commission considers that CNOC has satisfied the first criterion of the RJR-MacDonald criteria.

“Irreparable” harm requires an analysis of the nature of the harm, rather than the magnitude.  Harm is more likely to be irreparable where there is an unquantifiable loss or a loss that the applicant may not be able to recover. In this case, the proposed retail IS formula correction would result in an increase in the rate Eastlink bills for retail IS to competing ISPs. Those ISPs would likely have difficulty addressing this increase without negative consequences for their positions in the competitive Internet services market in which they operate. Further, it is likely that such consequences could not easily be undone in the event that CNOC were ultimately successful in its application for final relief. Accordingly, the Commission considers that CNOC has met the second criterion of the RJR-MacDonald criteria.

With regard to the balance of convenience, ISPs would be more inconvenienced than Eastlink by a change in the status quo. Eastlink has used the formula that it now seeks to change for at least five and a half years. Further, implementation of the proposed retail IS formula correction at this time could adversely affect competition, which would detract from the telecommunications policy objectives set out in section 7 of the Telecommunications Act. As such, the Commission is of the view that the public interest weighs in favour of the status quo as well. Accordingly, the Commission considers that CNOC has met the third criterion of the RJR-MacDonald criteria.

In light of the foregoing, the Commission grants CNOC’s request for interim relief. Accordingly, pending the Commission’s disposition of CNOC’s application for final relief, the Commission directs Eastlink not to charge ISPs based on its proposed modification to the formula it has applied to date with respect to its retail IS.

Sincerely,

Original signed by Luc Bégin for

John Traversy
Secretary General

c.c.:  Kevin Pickell, CRTC, 819-997-4580, kevin.pickell@crtc.gc.ca

Date modified:

2015-08-31