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Telecom Order CRTC 2017-165

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Ottawa, 19 May 2017                                                             

File numbers: 8663-C12-201503186 and 4754-537

Determination of costs award with respect to the participation of the Forum for Research and Policy in Communications in the proceeding leading to Telecom Regulatory Policy 2016-496

Application

  1. By letter dated 25 July 2016, the Forum for Research and Policy in Communications (FRPC) applied for costs with respect to its participation in the proceeding leading to Telecom Regulatory Policy 2016-496, in which the Commission reviewed its policies regarding basic telecommunications services in Canada (the proceeding).
  2. The Commission received answers from TELUS Communications Company (TCC) dated 3 August 2016, and from Bell CanadaFootnote 1 dated 4 August 2016. The FRPC filed a reply dated 11 August 2016.
  3. The FRPC submitted that it had met the criteria for an award of costs set out in section 68 of the Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure (the Rules of Procedure) because it represented a group or class of subscribers that had an interest in the outcome of the proceeding, it had assisted the Commission in developing a better understanding of the matters that were considered, and it had participated in a responsible way.
  4. In particular, the FRPC submitted that it assisted the Commission in developing a better understanding of the matters that were considered by providing recommendations that were carefully considered with respect to their legality, practicality, and reasonableness. The FRPC also submitted that its recommendations were based on evidence obtained about users of telecommunications services, comprising Canadians in different age groups and income groups, and from various geographic locations.
  5. With respect to the group or class of subscribers the FRPC has submitted that it represents, the FRPC submitted that it intervened on behalf of users of telecommunications services and the public interest at large. The FRPC added that it made recommendations to support access to and the affordability of Canada’s wireless, wireline, and Internet telecommunications services by Canadians who have low incomes, who are seniors, and/or who had lost access to wireless services due to emergencies. Regarding the specific methods by which the FRPC submitted that it represents this group or class, the FRPC explained that it undertook extensive fact-based research, including reliance on statistical data on Canadians’ economic status and use of telecommunications services. 
  6. The FRPC requested that the Commission fix its costs at $31,786.08, consisting of $22,505.95 for external legal fees and $9,280.13 for external consultant fees. The FRPC’s claim included the Ontario Harmonized Sales Tax (HST). The FRPC filed a bill of costs with its application.
  7. The FRPC claimed 96.68 hours at the external rate of $206 per hour for legal counsel in practice for 6 to 10 years, and 36.50 hours at the external rate of $225 per hour for its external consultant.
  8. The FRPC submitted that all the telecommunications service providers that participated in the proceeding are the appropriate parties to be required to pay any costs awarded by the Commission (the costs respondents).

Answer

  1. TCC submitted that the FRPC is ineligible for costs because it does not represent a specific group or class of subscribers. In particular, TCC argued that the FRPC’s blanket statement that it represents all telecommunications service users and the public interest at large is not consistent with the guidelines stipulated in Telecom Information Bulletin 2016-188. TCC submitted that the FRPC did not canvas its members and made no attempt to demonstrate how its positions reflect the group it purports to represent.
  2. TCC argued that if the Commission finds that the FRPC meets the representation criterion, it should assess whether the amount claimed by the FRPC should be reduced to reflect the in-house legal counsel rate set out in the Commission’s Guidelines for the Assessment of Costs (the Guidelines), given that the FRPC’s legal counsel is also its Executive Director.
  3. Bell Canada also argued that the FRPC did not demonstrate that it represents a specific group or class of subscribers. Bell Canada submitted that, consistent with Telecom Information Bulletin 2016-188, the FRPC must provide evidence that its positions in the proceeding reflected those of the group it purports to represent. Bell Canada submitted that the FRPC’s research consisted almost exclusively of general demographics of the Canadian population. Bell Canada argued that the FRPC’s proposals represented its own views, which it attributed to the views of telecommunications service subscribers. Bell Canada submitted that as such, the FRPC’s costs should be modified to remove compensation for time spent preparing for and appearing at the hearing.
  4. Bell Canada added that if the Commission finds that the FRPC did represent a specific group or class of subscribers, it should modify the FRPC’s costs to allow the recovery only of costs that were necessarily and reasonably incurred. Bell Canada claimed that the FRPC’s legal counsel and consultant should be treated as having provided in-house services and that the FRPC’s costs should be adjusted accordingly.
  5. Bell Canada argued that as the Vice-Chair of the FRPC’s Board of Directors, the FRPC’s consultant holds a strong degree of control over its operations and decisions. The company submitted that while it may be permissible for the FRPC to claim costs for its legal counsel based on how she reports to the law society, her costs were unnecessarily high. Bell Canada indicated that only 18.96 of her claimed hours related to legal research and that the remaining 77.72 hours were in her capacity as the FRPC’s Executive Director. Bell Canada stated that therefore, the costs for these hours should be calculated based on the in-house legal counsel rate.
  6. Further, Bell Canada stated that the FRPC did not claim a sales tax rebate and asked for clarification on its rebate entitlement.

Reply

  1. In relation to Telecom Information Bulletin 2016-188, the FRPC submitted that those guidelines were published after it began to implement its approach to the proceeding. The FRPC submitted that applying those guidelines retroactively to work that it largely completed before they were published would be procedurally unfair and would introduce uncertainty into the Commission’s regulatory proceedings.
  2. The FRPC stated that it did not make its submissions on its own behalf but on behalf of the general public interest. The FRPC argued that as a federally incorporated non-profit organization, it is required to work in the public interest.
  3. Regarding its legal and consultant fees, the FRPC submitted that neither its external consultant nor its external legal counsel control the FRPC. Its consultant has one out of seven votes regarding the management of the FRPC’s affairs and is employed full-time outside the FRPC. The FRPC further submitted that its legal counsel is not a member of its Board of Directors and is in private practice, in which she takes on other clients when time permits. The FRPC stated that it does not employ its legal counsel full time, and that it does not pay her law society or insurance fees, her overhead, or the Goods and Services Tax (GST) / Harmonized Sales Tax (HST) on her services.
  4. In response to Bell Canada’s submission that only the FRPC’s legal research hours should be claimed at the external rate, the FRPC indicated that the Commission’s forms do not distinguish between legal research and other work undertaken by legal counsel.
  5. Accordingly, the FRPC submitted that the legal and consultant fees it claimed are appropriate. The FRPC confirmed that it does not receive any tax rebates since it does not qualify as a non-profit organization entitled to such rebates.

Subsequent process

  1. On 15 December 2016, Commission staff sent a letter requesting that the FRPC (i) elaborate on the role of its Board of Directors, (ii) provide any evidence demonstrating that the persons for whom it claimed costs were not also acting as an officer or director of the organization during the time for which the costs were claimed, and (iii) provide evidence to support the claim that the FRPC’s consultant is independent, using the criteria set out in Telecom Order 2014-351.
  2. The FRPC responded on 9 January 2017. With respect to the role of its Board of Directors, the FRPC explained that the Board can consist of up to nine directors who are elected by the FRPC’s members. The FRPC submitted that its legal counsel, the Executive Director, is a member of the FRPC, but that she is not on the Board of Directors, and that she is responsible for the organization’s daily operations, including the requirement to notify the Board of upcoming Commission proceedings. The FRPC stated that responsibility for deciding whether it should participate in a Commission proceeding rests with the Board. If the Board decides that the FRPC will participate, the Executive Director is required to prepare for the hearing, including deciding whether to hire consultants, analysts, or legal counsel where necessary.
  3. The FPRC stated that it does not have any permanent staff, and that it does not employ any of its Board members on a permanent or part-time basis. However, the FRPC employs its Executive Director part time.
  4. Regarding the costs claimed for the FRPC’s legal counsel, the FRPC submitted that she acted in her role as Executive Director by reviewing the scope of the proceeding and submitting a recommendation to the Board concerning the FRPC’s participation. She then acted as external legal counsel in preparing for the proceeding. Regarding the costs claimed for the FRPC’s consultant, the FRPC submitted that one of the directors on the Board, after considering and voting on the Executive Director’s recommendations, was hired as an external consultant to analyze the issues and evidence in the proceeding.
  5. With respect to the criteria set out in Telecom Order 2014-351, the FRPC submitted that its consultant owns Rocket Stable Consulting Inc., provides consulting services to a number of clients other than the FRPC, and uses equipment and material that he has acquired and owns. The FRPC submitted that this consultant has merely one of eleven votes at the FRPC’s annual general meetings, and one of seven votes as a member of the FRPC’s Board of Directors. Therefore, he does not solely control the FRPC; it is controlled by the seven members via a majority vote.
  6. The FRPC indicated that it does not provide its legal counsel or consultant with a salary or a retainer, an office, research material and equipment, or training, and that it does not cover their overhead expenses or the GST/HST payable on the services they provide.

Commission’s analysis and determinations

Eligibility

  1. The criteria for an award of costs are set out in section 68 of the Rules of Procedure, which reads as follows:

    68. The Commission must determine whether to award final costs and the maximum percentage of costs that is to be awarded on the basis of the following criteria:

    (a) whether the applicant had, or was the representative of a group or a class of subscribers that had, an interest in the outcome of the proceeding;

    (b) the extent to which the applicant assisted the Commission in developing a better understanding of the matters that were considered; and

    (c) whether the applicant participated in the proceeding in a responsible way.

  2. In Telecom Information Bulletin 2016-188, the Commission provided guidance regarding how an applicant may demonstrate that it satisfies the first criterion with respect to its representation of interested subscribers. In the present case, both Bell Canada and TCC argued that the FRPC is ineligible for costs because it did not consult its members sufficiently to demonstrate that its positions reflected those of the group it purports to represent.
  3. The consultation of members is but one example outlined in Telecom Information Bulletin 2016-188 that costs applicants can use to demonstrate that the positions they put forward reflect the group they purport to represent. In addition, those guidelines were published after much of the proceeding was completed, namely the written intervention period and oral appearances before the Commission. Therefore, the weight to be given to those guidelines with respect to the first criterion is necessarily attenuated given that the FRPC was unaware of them when it participated in the proceeding.
  4. Further, the Commission disagrees with Bell Canada that the FRPC represented itself and participated in the proceeding solely on its own behalf. While the FRPC made a blanket statement that it represented all telecommunications service users and the public interest at large, it argued that (i) as a federally incorporated, non-profit organization, it is required to work in the public interest, and (ii) it made its recommendations to support access to services by Canadians who have low incomes, who are seniors, and/or who had lost access to wireless services due to emergencies. Accordingly, the FRPC has met the first eligibility criterion related to representation.
  5. The FRPC has also satisfied the remaining criteria through its participation in the proceeding. In particular, the FRPC’s submissions on target speeds with respect to fixed broadband Internet access service and the importance of universal access to this service assisted the Commission in developing a better understanding of the matters that were considered.
  6. Accordingly, the FRPC meets the criteria for an award of costs set out under section 68 of the Rules of Procedure.

Legal fees

  1. Both Bell Canada and TCC took issue with the FRPC’s costs for its external legal counsel. However, the Commission is satisfied that the FRPC’s legal counsel was acting in her role as legal counsel reporting to her provincial law society as “in private practice”,Footnote 2 rather than as Executive Director of the FRPC, with respect to her contributions to the FRPC’s participation in the proceeding. In addition, the FRPC’s legal counsel is involved in a private law firm through which she takes on clients other than the FRPC and pays for her own law society fees and insurance. 
  2. Accordingly, the FRPC appropriately claimed costs for its legal counsel at the external rate.

Consultant fees

  1. The Commission recognizes the important contribution that non-profit organizations with volunteer Boards of Directors make to its ability to better understand the issues in a proceeding and to help the Canadians represented by the organization. In these organizations, it is common for Board of Director members to take on two roles: (i) providing oversight as a director regarding the organization’s governance and operations, and (ii) conducting work traditionally undertaken by paid staff or consultants, including researching and drafting the organization’s submissions to the Commission. It would not be in the public interest to prevent these organizations from recovering costs simply because the work was completed by a volunteer Board member, since it is unlikely that the organization would be able to participate in Commission proceedings without this cost recovery.
  2. However, it remains important for the Commission to ensure that such directors acting in their consultant roles are properly categorized as in-house or external consultants based on the principles set out in Telecom Order 2014-351, adapted to the circumstances. The costs that can be reasonably claimed for external consultants are higher than those for in-house consultants. This is because it is presumed that in-house consultants are part of the organization and providing services as part of their regular duties, the costs for which are covered by the organization’s regular operating costs. However, external consultants are presumed to be charging the organization industry rates for specific expertise.
  3. In Telecom Order 2014-351, the Commission provided a number of factors to consider in assessing consultants’ independence from costs applicants, including whether the consultant has other clients in the communications field and whether they used their own resources and equipment to complete their work.
  4. The FRPC does not employ any of its Board of Director members on a permanent or part-time basis. In addition, the FRPC’s consultant acted in his role as Vice-Chair only by voting on the Executive Director’s recommendation to participate in the proceeding.
  5. The record indicates that the FRPC’s consultant owns his own consulting firm that provides services to a number of clients other than the FRPC, and that he uses his own equipment and materials to provide services. The FRPC does not provide its consultant with a salary or an office, nor does it cover his overhead expenses or the GST/HST payable on his services.
  6. Accordingly, the FRPC appropriately claimed costs for its consultant at the external rate.

Conclusion

  1. In light of the above, the total amount claimed by the FRPC was necessarily and reasonably incurred and should be allowed.
  2. This is an appropriate case in which to fix the costs and dispense with taxation, in accordance with the streamlined procedure set out in Telecom Public Notice 2002-5.

Costs respondents and allocation

  1. The Commission has generally determined that the appropriate costs respondents to an award of costs are the parties that have a significant interest in the outcome of the proceeding in question and have participated actively in that proceeding. Given the scope of the proceeding, a large number of parties both had a significant interest in the outcome of the proceeding and participated actively in the proceeding.
  2. It is the Commission’s general practice to allocate the responsibility for payment of costs among costs respondents based on their telecommunications operating revenues (TORs)Footnote 3 as an indicator of the relative size and interest of the parties involved in the proceeding. No party disputed the appropriateness of using TORs in the present case.
  3. However, as set out in Telecom Order 2015-160, the Commission considers $1,000 to be the minimum amount that a party should be required to pay due to the administrative burden that small costs awards impose on both the applicant and costs respondents.
  4. Accordingly, Bell Canada; MTS Inc. (MTS); Quebecor Media Inc., on behalf of Videotron G.P. (Videotron); Rogers Communications Canada Inc. (RCCI);Footnote 4 and TCC are the appropriate costs respondents in the circumstances.
  5. The responsibility for payment of costs should be allocated as follows:
    Company Percentage Amount
    Bell Canada    40% $12,621.71
    TCC 27% $8,637.82
    RCCI 25% $7,858.34
    Videotron 5% $1,531.99
    MTS 4% $1,136.22
  6. Consistent with its general approach articulated in Telecom Costs Order 2002-4, the Commission makes Bell Canada responsible for payment on behalf of the Bell companies. The Commission leaves it to the members of the Bell companies to determine the appropriate allocation of the costs among themselves.

Directions regarding costs

  1. The Commission approves the application by the FRPC for costs with respect to its participation in the proceeding.
  2. Pursuant to subsection 56(1) of the Telecommunications Act, the Commission fixes the costs to be paid to the FRPC at $31,786.08.
  3. The Commission directs that the award of costs to the FRPC be paid forthwith by Bell Canada, TCC, RCCI, Videotron, and MTS according to the proportions set out in paragraph 46.

Secretary General

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