Telecom Notice of Consultation CRTC 2018-5

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Ottawa, 8 January 2018

Public record: 1011-NOC2018-0005

Show cause proceeding and call for comments

Telecommunications service providers that have failed to become participants in the Commission for Complaints for Telecom-television Services Inc.

Deadline for submission of interventions: 22 February 2018

The Commission requires all telecommunications service providers (TSPs) that offer services within the scope of the Commission for Complaints for Telecom-television Services Inc.’s (CCTS) mandate to be participants in the CCTS (the CCTS participation requirement). As of the date of this notice, it appears that the following six TSPs have not become participants as required: BV Communications, Connexio Inc., ICA Microsystems Inc., Mazagan Telecommunications, Toronto Telecom, and VerseTEL Communications Inc. 

The Commission therefore initiates a proceeding in which it requires

• each of these TSPs to show cause why it should not be found in violation of the Telecommunications Act for contravening the CCTS participation requirement, and
• Directors of each TSP to show cause why they should not be considered liable for any violation by the company that they direct.

Further, in the case of any TSP found to have committed a violation,

• the TSP is to show cause why an administrative monetary penalty (AMP) in the amount of $50,000 should not be imposed against it;
• the Director(s) of the TSP are to show cause why an AMP in the amount of $15,000 should not be imposed against them; and
• the TSP and the Director(s) are to show cause why a Mandatory Order requiring the TSP and its Director(s) to take the necessary steps for the TSP to become a participant in the CCTS should not be issued.

The CCTS provides a valuable service to Canadians, helping consumers resolve disputes with their TSPs. Given the important role played by the CCTS, the Commission considers non-compliance with the CCTS participation requirement to be a very serious matter.

In the event that TSP violations of the CCTS participation requirement are found, the Commission intends to pursue compliance with the CCTS participation requirement by all available means, including registering any AMP-related debts and Mandatory Orders in the Federal Court and initiating proceedings to enforce them. Should other measures prove ineffective, the Commission may take steps to disconnect the telecommunications services of non-compliant resellers of telecommunications services.

Background

1. The Commission exercises its powers and duties under the Telecommunications Act (the Act) with a view to implementing the Canadian telecommunications policy objectives set out by Parliament in section 7 of the Act. As a result, the Commission takes non-compliance with the regulatory obligations it imposes on telecommunications service providers (TSPs) very seriously and uses the measures at its disposal that are most appropriate in the circumstances to promote compliance.
2. The Commission for Complaints for Telecom-television Services Inc. (CCTS)^{Footnote 1} is an independent body that assists Canadians who have been unable to resolve disputes regarding forborne telecommunications services with their service providers. The CCTS is an integral component of a deregulated telecommunications market, and it provides a valuable service to Canadian consumers.^{Footnote 2}
3. To ensure that Canadian consumers have recourse when they are unable to resolve complaints with their TSP, the Commission has required, as of 2011, that all TSPs that provide services within the scope of the CCTS’s mandate be participants in the CCTS (the CCTS participation requirement).
4. In Broadcasting and Telecom Regulatory Policy 2016-102, the Commission reiterated the CCTS participation requirement, which states that, pursuant to sections 24 (regarding carriers) and 24.1 (regarding non-carriers) of the Act, as a condition of offering or providing telecommunication services, every person who is not a participant in the CCTS as of 17 March 2016 and continues to offer services within the scope of the CCTS’s mandate must be a participant in the CCTS commencing 30 calendar days after the date on which the CCTS informs the person that the CCTS has received a complaint related to telecommunications services provided by it falling within the scope of the CCTS’s mandate.^{Footnote 3}
5. To become a participant in the CCTS, a TSP signs the CCTS Participation Agreement, a contract in which the participant agrees, among other things, to abide by the Participation Agreement and the CCTS’s By-laws, to be bound by and observe the CCTS’s Procedural Code, to submit to and honour remedies levied by the CCTS, and to co-operate in good faith with any investigation conducted by the CCTS.

Administrative monetary penalties regime

6. Since 2014, the Act has included a general administrative monetary penalties (AMPs) regime,^{Footnote 4} under which the Commission is empowered to impose AMPs on persons who contravene the Act or regulations or decisions made by the Commission under the Act. The purpose of a penalty imposed under this regime is to promote compliance with the Act, regulations, and Commission decisions, not to punish.
7. The Commission has set out its general approach under the general AMPs regime in Compliance and Enforcement and Telecom Information Bulletin 2015-111.

Show cause proceeding

8. Between October 2016 and June 2017, the CCTS referred to the Commission the names of various TSPs (all of which are non-carrier resellers of telecommunications services) that had failed to become participants after being notified by the CCTS of an in-scope complaint. As of the date of this notice, the following six of these TSPs have still not become participants: BV Communications,^{Footnote 5} Connexio Inc.,^{Footnote 6} ICA Microsystems Inc., Mazagan Telecommunications,^{Footnote 7} Toronto Telecom,^{Footnote 8} and VerseTEL Communications Inc. (collectively, the six TSPs).
9. The Commission hereby launches a show cause proceeding to determine whether the six TSPs have committed violations of the Act and, if so, to determine the appropriate enforcement measures in the circumstances.
10. The CCTS has provided the Commission with documentary evidence detailing its attempts to notify the six TSPs of their obligations and to secure their participation. In these materials, the CCTS has identified certain directors and officers of the six TSPs and detailed its efforts to communicate with these individuals. Upon the CCTS’s referral to the Commission, Commission staff proceeded to undertake further activities in support of verifying and promoting compliance with the CCTS participation requirement. These activities included searching publicly accessible databases, such as federal and provincial corporate records databases, for information regarding the corporations that operate the six TSPs and their directors and officers. Further, these efforts included communicating with the six TSPs and certain directors and officers to explain their obligations.   
11. The Commission will take steps to serve the evidence upon which it intends to rely in determining the matters set out in this notice (including the evidence received from the CCTS and collected by Commission staff) on the six TSPs and the directors and officers listed in Appendix 1 to this notice (the Directors). The six TSPs and the Directors are to file any evidence that supports their respective positions with regard to the issues discussed below, which will also be considered by the Commission in making its determinations. A summary of the evidence already in the Commission’s possession is provided in Appendix 2 to this notice.
12. The public record of the proceeding can be found on the Commission’s website at www.crtc.gc.ca or by using the public record number provided above. Where the CCTS has designated information as confidential, an abridged version of the document containing the confidential information has been added to the public record of the file.

Has a violation been committed?

13. It appears that the CCTS received an in-scope complaint regarding each of the six TSPs in question and that the CCTS subsequently notified the six TSPs and the Directors. As set out in Appendix 2, the necessary time frame by which each TSP was required to join the CCTS has expired. By failing to join the CCTS within 30 days of receiving notification from the CCTS, it appears that each TSP has been in non-compliance with the CCTS participation requirement from that date to the date of the present notice (the relevant time period).
14. Further, it appears that the six TSPs continue to offer services within the scope of the CCTS’s mandate, and there is no evidence presently before the Commission demonstrating that they have ceased offering in-scope telecommunications services in the interim. As of today’s date, their respective websites promote in-scope telecommunications services.
15. In light of the above, the Commission directs each of the six TSPs to show cause why the Commission should not find that it committed a violation under section 72.001 of the Act^{Footnote 9} during the relevant time period by contravening the CCTS participation requirement. The requirement states that every person that offers services within the scope of the CCTS’s mandate be a participant in the CCTS commencing 30 calendar days after the date on which the CCTS informs the person that the CCTS has received a complaint related to telecommunications services provided by the person falling within the scope of the CCTS’s mandate.

If a violation is found, should the Directors be held liable?

16. Section 72.008 of the Act provides that an officer or director of a corporation that commits a violation is liable for the violation if he or she directed, authorized, assented to, acquiesced in, or participated in the violation.
17. Information obtained from corporate records searches, including from publicly accessible databases appears to demonstrate that the majority of the six TSPs are companies with only a single director, whereas two of the TSPs have multiple directors.
18. Both the CCTS and Commission staff have contacted the Directors to explain the CCTS participation requirement and the potential consequences of non-participation in the CCTS.
19. Accordingly, there is apparent evidence that the Directors are aware of the CCTS participation requirement and have failed to ensure the compliance of the corporations they direct. Further, despite the correspondence between the CCTS and the Directors and, later, between Commission staff and the Directors, there is no indication that the Directors would be unable, in their capacity as directors, to ensure the compliance of their corporations with the CCTS participation requirement.
20. In light of the above, the Commission directs each of the individuals listed in Appendix 1 to show cause why they should not be liable for any violation found to have been committed by the company that they direct. If no such information is filed, the Commission may draw an adverse inference.

If a violation is found, what are the appropriate enforcement measures?

Imposition of AMPs

21. Given the value of the CCTS to consumers, the importance of TSPs’ participation in the CCTS, and the necessity that consumers receive the recourse to which they are entitled, an AMP may be an appropriate enforcement measure if violations of the Act are found in this case.
22. Section 72.002 of the Act sets out the factors that the Commission must take into account in determining the appropriate amount of an AMP:
    • the nature and scope of the violation;
    • the person’s history of compliance;
    • any benefit the person obtained from the commission of the violation;
    • the person’s ability to pay;
    • factors established by any regulations; and
    • any other relevant factor.
23. In the present case, the Commission considers that, if a violation is found, an AMP in the amount of $50,000 for each TSP found to have committed a violation by contravening the CCTS participation requirement would properly reflect the purpose of the penalty and the factors set out in the Act.^{Footnote 10}
24. Further, the Commission considers that an additional AMP in the amount of $15,000 for each Director found to be liable for the violation of the corporation they direct would also properly reflect the purpose of the penalty and the factors set out in the Act.
25. These proposed AMPs are based on an analysis of the above-noted factors, taking into account the information already on the record of the proceeding.
26. The six TSPs and the Directors have the opportunity to demonstrate why the analysis that follows may not be appropriate in the circumstances and to file any evidence that supports their positions. In particular, the Commission directs
    • each of the six TSPs to show cause why, if it is found to have committed a violation of the Act related to the CCTS participation requirement, the Commission should not impose an AMP against it in the amount of $50,000; and
    • each of the individuals listed in Appendix 1 to show cause why, if they are found liable for a violation of the Act related to the CCTS in respect of the company that they direct, the Commission should not impose an AMP against that individual in the amount of $15,000.

Nature and scope of the apparent violations

27. The six TSPs do not appear to be participating in the CCTS, despite these companies, and the Directors, having been (i) informed of the CCTS participation requirement, and (ii) given instructions regarding how to respect it. As a result, their customers are being deprived of a Commission-sanctioned, binding complaint resolution process. As noted above, the requirement to be a participant in the CCTS reflects the importance of the CCTS and its value to consumers.
28. In terms of the scope of the apparent violation, the length of time a company has been in apparent non-compliance may be a relevant consideration. The length of time that has passed from these companies apparently being subject to the CCTS participation requirement is between approximately 10 months (Mazagan Telecommunications) and approximately 18 months (ICA Microsystems).^{Footnote 11}
29. Another consideration that may be relevant to the scope of the apparent violation is the number of subscribers who do not have access to the CCTS as a result of a failure to join the CCTS.
30. Accordingly, the Commission directs each of the six TSPs, as well as each of the individuals listed in Appendix 1, to submit information in this regard, as set out in Appendix 3 to this notice. They may designate certain information as confidential in accordance with the Act and with the Canadian Radio-television and Telecommunications Commission Rules of Practice and Procedure (the Rules of Procedure).^{Footnote 12}
31. Failure to provide this information may result in a contravention of subsection 37(2) of the Act that may constitute a violation under section 72.001 of the Act. In such an event, the Commission may initiate further process to address whether additional enforcement measures are necessary.
32. Accordingly, based on the evidence on the record at this time, it appears that there is a serious and ongoing violation. While there is some variation among the six TSPs in terms of the length of time that has passed since the CCTS participation requirement was triggered, the Commission considers that significant AMPs may nonetheless be appropriate in all cases.

History of compliance

33. There is no evidence that any of the six TSPs, or their Directors, have committed any previous violations of the Act, regulations, or Commission decisions.

Benefit obtained from the violation

34. If the six TSPs have improperly shielded themselves from the dispute resolution mechanisms of the CCTS, which can require TSPs to, for example, pay monetary compensation to customers, they would have received a benefit as a result of their apparent non-compliance. This factor suggests that significant AMPs may be appropriate. Given that all six TSPs appear to be relatively small companies, it may be reasonable to consider that the Directors of these companies have indirectly benefitted as well.

Ability to pay

35. The Commission does not have any current information about the six TSPs’ or the Directors’ ability to pay.
36. Accordingly, the Commission directs the six TSPs to file certain financial information, as set out in Appendix 3. They may designate financial information as confidential in accordance with the Act and with the Rules of Procedure.
37. In addition, pursuant to section 241 of the Income Tax Act,^{Footnote 13}the Commission intends to request from the Canada Revenue Agency financial information related to the six TSPs’ ability to pay. The Commission intends to use any such information to supplement or corroborate the information filed by the six TSPs in this regard.
38. The Directors also have the opportunity to file information relating to their personal ability to pay; if they seek to demonstrate that they do not have the ability to pay the proposed AMP amount, they are to file evidence supporting this position.

Factors established by any regulations

39. At this time, no such factors have been established.

Other relevant factors

40. The six TSPs and the Directors have demonstrated a lack of cooperation by failing to respond to letters from Commission staff, including from the Chief Consumer Officer, and to requests for information, which were sent on 5 June and 9 August 2017, respectively. Commission staff also spoke to, or left voice messages for, the Directors via telephone. Nonetheless, it still appears that none of the companies have become participants in the CCTS.
41. The Commission considers that taking into account this lack of cooperation with the CCTS and with Commission staff would be consistent with the purpose of a penalty under the general AMPs regime, which is to promote compliance with the Act, regulations, and Commission decisions made under the Act. The apparent contraventions of the CCTS participation requirement could negatively impact the reputation and perceived effectiveness of the CCTS in helping resolve consumer complaints. Accordingly, this consideration suggests that significant AMPs may be appropriate.
42. The Commission also considers that general deterrence should be taken into account in determining the proposed AMP amount. The apparent contraventions could encourage non-compliance with the CCTS participation requirement more generally. In Telecom Decision 2017-115, a $15,000 AMP was imposed on the TSP VOIS Inc. for a violation related to the CCTS participation requirement. While the CCTS participation requirement for the six TSPs was triggered before that AMP was imposed, the Commission nonetheless considers that that amount does not appear to have been an effective deterrent, given that there is no indication that VOIS Inc. has since come into compliance. Accordingly, this consideration suggests that significant AMPs may be appropriate.
43. The Commission is of the view that, taken together, a consideration of the prescribed factors on the basis of the evidence currently on the record indicates that the proposed AMPs would promote compliance with the Act without punishing the six TSPs or the Directors.

Mandatory Order

44. The imposition of AMPs represents only one enforcement measure that the Commission may take to promote compliance with the Act. In the present circumstances, the Commission considers that, if it finds that a violation has been committed, given the serious and longstanding nature of the apparent violations, it would be necessary to consider whether additional enforcement measures would help to ensure that the six TSPs achieve compliance.
45. Accordingly, the Commission directs each of the six TSPs to show cause why, if they are found to have committed the violations, the Commission should not impose Mandatory Orders requiring each of them to take all steps necessary to participate in the CCTS within 60 days of the date of the respective order.
46. Further, the Commission directs each of the individuals listed in Appendix 1 to show cause why, if they are found liable for any violations committed by any of the six TSPs, they should not be named in the Mandatory Orders, which would hold them further accountable for ensuring that the companies they direct take the necessary steps to participate in the CCTS.
47. If Mandatory Orders are imposed, failure to abide by their terms could form the basis for subsequent violations of the Act.

Other potential enforcement measures

48. The Commission intends to pursue compliance with the CCTS participation requirement by all available means. In general, this could include registering any AMP-related debts and Mandatory Orders in the Federal Court and initiating proceedings to enforce them. Should other measures prove ineffective, these means may also include taking steps to disconnect the telecommunications services of non-compliant resellers.

Procedure

49. The Rules of Procedure apply to this proceeding. The Rules of Procedure set out, among other things, the rules for the content, format, filing, and service of interventions, answers, replies, and requests for information; the procedure for filing confidential information and requesting its disclosure; and the conduct of public hearings. Accordingly, the procedure set out below must be read in conjunction with the Rules of Procedure and related documents, which can be found on the Commission’s website at www.crtc.gc.ca, under “Statutes and Regulations.” The guidelines set out in Broadcasting and Telecom Information Bulletin 2010-959 provide information to help interested persons and parties understand the Rules of Procedure so that they can more effectively participate in Commission proceedings.
50. The six TSPs and the Directors set out in Appendix 1 to this notice are made parties to this proceeding. They are to file their submissions, and the information required by the Commission, as set out in Appendix 3 to this notice, with the Commission by 22 February 2018.
51. Interested persons may also file interventions on these matters. Interested persons who wish to become parties to this proceeding must file an intervention with the Commission regarding the above-noted issues by 22 February 2018. The intervention must be filed in accordance with section 26 of the Rules of Procedure.
52. Parties are permitted to coordinate, organize, and file, in a single submission, interventions by other interested persons who share their position. Information on how to file this type of submission, known as a joint supporting intervention, as well as a template for the accompanying cover letter to be filed by parties, can be found in Telecom Information Bulletin 2011-693.
53. All parties may file replies to interventions with the Commission by 9 March 2018. Parties are to consult the Commission’s website to determine who has filed interventions for the purpose of exercising their right of reply.
54. The Commission encourages interested persons and parties to monitor the record of this proceeding, available on the Commission’s website at www.crtc.gc.ca, for additional information that they may find useful when preparing their submissions.
55. Submissions longer than five pages should include a summary. Each paragraph of all submissions should be numbered, and the line ***End of document*** should follow the last paragraph. This will help the Commission verify that the document has not been damaged during electronic transmission.
56. Pursuant to Broadcasting and Telecom Information Bulletin 2015-242, the Commission expects incorporated entities and associations, and encourages all Canadians, to file submissions for Commission proceedings in accessible formats (for example, text-based file formats that enable text to be enlarged or modified, or read by screen readers). To provide assistance in this regard, the Commission has posted on its website guidelines for preparing documents in accessible formats.
57. Submissions must be filed by sending them to the Secretary General of the Commission using only one of the following means:

58. Parties who send documents electronically must ensure that they will be able to prove, upon Commission request, that filing of a particular document was completed. Accordingly, parties must keep proof of the sending and receipt of each document for 180 days after the date on which the document is filed. The Commission advises parties who file documents by electronic means to exercise caution when using email for the service of documents, as it may be difficult to establish that service has occurred.
59. In accordance with the Rules of Procedure, a document must be received by the Commission and all relevant parties by 5 p.m. Vancouver time (8 p.m. Ottawa time) on the date it is due. Parties are responsible for ensuring the timely delivery of their submissions and will not be notified if their submissions are received after the deadline. Late submissions, including those due to postal delays, will not be considered by the Commission and will not be made part of the public record.
60. The Commission will not formally acknowledge submissions. It will, however, fully consider all submissions, which will form part of the public record of the proceeding, provided that the procedure for filing set out above has been followed.

Important notice

61. All information that parties provide as part of this public process, except information designated confidential, whether sent by postal mail, facsimile, email, or through the Commission’s website at www.crtc.gc.ca, becomes part of a publicly accessible file and will be posted on the Commission’s website. This includes all personal information, such as full names, email addresses, postal/street addresses, and telephone and facsimile numbers.
62. The personal information that parties provide will be used and may be disclosed for the purpose for which the information was obtained or compiled by the Commission, or for a use consistent with that purpose.
63. Documents received electronically or otherwise will be posted on the Commission’s website in their entirety exactly as received, including any personal information contained therein, in the official language and format in which they are received. Documents not received electronically will be available in PDF format.
64. The information that parties provide to the Commission as part of this public process is entered into an unsearchable database dedicated to this specific public process. This database is accessible only from the web page of this particular public process. As a result, a general search of the Commission’s website with the help of either its search engine or a third-party search engine will not provide access to the information that was provided as part of this public process.

Availability of documents

65. Electronic versions of the interventions and other documents referred to in this notice are available on the Commission’s website at www.crtc.gc.ca by using the public record number provided at the beginning of this notice or by visiting the “Have your say!” section of the Commission’s website,  then selecting “our open processes.” Documents can then be accessed by clicking on the links in the “Subject” and “Related Documents” columns associated with this particular notice.
66. Documents are also available at the following address, upon request, during normal business hours.

Secretary General

Related documents

• VOIS Inc. – Non-compliance with the requirement to participate in the Commissioner for Complaints for Telecommunications Services Inc. and violation under section 72.001 of the Telecommunications Act, Telecom Decision CRTC 2017-115 and Telecom Order CRTC 2017-116, 27 April 2017
• Review of the structure and mandate of the Commissioner for Complaints for Telecommunications Services Inc., Broadcasting and Telecom Regulatory Policy CRTC 2016-102, 17 March 2016
• Filing submissions for Commission proceedings in accessible formats, Broadcasting and Telecom Information Bulletin CRTC 2015-242, 8 June 2015
• Guidelines regarding the general administrative monetary penalties regime under the Telecommunications Act, Compliance and Enforcement and Telecom Information Bulletin CRTC 2015-111, 27 March 2015
• Filing of joint supporting interventions, Telecom Information Bulletin CRTC 2011-693, 8 November 2011
• Procedures for filing confidential information and requesting its disclosure in Commission proceedings, Broadcasting and Telecom Information Bulletin CRTC 2010-961, 23 December 2010, as amended by Broadcasting and Telecom Information Bulletin CRTC 2010-961-1, 26 October 2012
• Guidelines on the CRTC Rules of Practice and Procedure, Broadcasting and Telecom Information Bulletin CRTC 2010-959, 23 December 2010

Directors made party to this proceeding^{Footnote 14}

• John Vamvakas   (BV Communications)
• Dino Silla   (Connexio Inc.)
• Vesna Sedlasek   (ICA Microsystems Inc.)
• Salah Eddine el Kassbaoui   (Mazagan Telecommunications)
• Alex Likhterman   (Toronto Telecom)
• Caleb Kalenuik   (VerseTEL Communications Inc.)

Summary of the evidence filed by the CCTS

Before referring a TSP to the Commission, the CCTS makes multiple attempts to sign up the TSP, including sending a Participation Package at least two times, which includes, among other things, a cover letter that sets out the date by which the company is to become a participant.

If the TSP has not become a participant in the CCTS within the time frame specified in the second package, the CCTS sends a letter to the Commission’s Chief Consumer Officer to inform them that the specific TSP failed to become a participant in the CCTS as required. The letter includes the relevant dates, the name of the individual within the TSP that the CCTS attempted to contact, evidence that the CCTS sent the Participation Package to the TSP on two occasions, the steps that the CCTS took to reach the TSP, and a copy of the complaint that triggered the requirement. The referral documentation has been placed on the record of proceeding. Below is the timeline of the events of each of the six TSP with regard to the CCTS participation requirement, as submitted by the CCTS.

Commission staff used, among other things, corporate records searches to validate the legal name of the six TSPs and their Directors. This information is also placed on the record of proceeding. The following table sets out the timelines of Commission staff interactions with the six TSPs.

Pursuant to subsection 37(2) of the Act, the TSPs set out in paragraph 8 of the present notice and the Directors set out in Appendix 1 are each separately required to file the following information on the record of this proceeding by no later than22 February 2018.

• Audited financial statements for their TSP for the past three fiscal years.
• The number of subscribers to telecommunications services provided by their TSP that fall within the scope of the CCTS’s mandate; and
• A list of all underlying Canadian carrier and non-carrier TSPs from which their TSP receives telecommunications services on a wholesale basis in order to provide service to end-customers.

Failure to file this information may result in a contravention of the Act that would constitute a violation under section 72.001 of the Act.

Each of the six TSPs and the Directors may designate information filed as confidential in accordance with the Act and the Rules of Procedure.

Date modified:

2018-01-08