Judgments

[1993] 1 F.C. 669

A-900-92

Bell Canada (Appellant)

v.

Unitel Communications Inc., B.C. Rail Telecommunications and Lightel Inc. (Respondents)

Indexed as: Bell Canada v. Unitel Communications Inc. (C.A.)

Court of Appeal, Isaac C.J., Pratte and Heald, JJ.A.—Ottawa, October 13, 14, 15, 16 and December 23, 1992.

Telecommunications — Within jurisdiction of CRTC to order telephone companies to interconnect telecommunications networks with competitors, without compensation for costs involved — Within jurisdiction of CRTC to order competitors of telephone companies be granted contribution discount — CRTC decisions justified as in public interest.

Unitel and other telephone companies (interexchange carriers or IXCs) applied to the CRTC seeking connection with the telecommunications networks of Bell and other telephone companies (the appellants) to provide to their customers, in competition with the telephone companies, public long distance voice services, public switched and dedicated voice and data telephone service, message toll service and wide area telephone service. The CRTC ordered the appellant telephone companies to interconnect their telecommunications networks with the IXCs without compensation for the start-up costs, estimated at $240 million, which they would incur in making changes to their networks, systems and procedures to allow for the interconnections. The CRTC determined that the IXCs would pay 30% of the start-up costs through tariffed charges and that the remaining 70% would be allocated to the appellants. The IXCs were given a ten-year amortization period with respect to the start-up costs. It also ordered that the IXCs be granted a contribution discount to offset the competitive disadvantages facing competitors in the early years, the discount to be phased out as the competitive disadvantages are reduced. The issue in this appeal, brought pursuant to section 68 of the National Telecommunications Powers and Procedures Act and submitting two questions to the Court, was whether, with respect to each of these two orders—interconnection without compensation and the granting of a contribution discount—the CRTC erred in law or exceeded its jurisdiction.

Held, the appeal and cross-appeals* should be dismissed; both questions of law and jurisdiction should be answered in the negative.

Section 336 of the Railway Act provides that the CRTC may make orders concerning telephone use, connection or communication “on such terms, including compensation if any, as the Commission deems just and expedient”. The words “if any” were added following the decision of the Supreme Court of Canada in Ingersoll Telephone Co. v. Bell Telephone Co. (1916), 53 S.C.R. 583. Parliament’s concern, following that decision, was that the Railway Act, as it then read, required the Board to grant compensation for loss of business to Bell, in all cases where interconnection was ordered, regardless of whether or not the interconnecting company was a competitor of Bell. In this case, however, the appellants do not complain of any deprivation of their monopoly control of the interprovincial long distance telephone market or loss of business, but of an expropriation without compensation by requiring them to absorb 70% of the start-up costs. It is fundamentally erroneous to characterize as an “expropriation” an order of a regulatory tribunal requiring the construction of facilities by a regulated company. Even if the condition respecting the start-up costs could be said to amount to an expropriation, that fact alone is insufficient to call into question the authority of the CRTC to make the order which it did. There is not, in every case where a person’s property is expropriated, an absolute right to full (or any) compensation.

Section 336 of the Railway Act empowers the CRTC not only to order the appellant companies to permit interconnection to and use of their networks, but also to decide whether or not, as one of the terms of its order, to award any compensation at all. It is of no consequence that section 275 of the Railway Act requires a company to afford all reasonable and proper facilities to allow access to their system, whereas section 336 requires only that a telephone company provide for or make available the connection, communication or use. Nor is subsection 336(3)—which requires the Commission to make an initial inquiry to determine whether the interconnection can be made without undue or unreasonable injury to or interference with the telephone business of the appellant companies or, at the very least, to take this into consideration in determining what is “just and expedient”—to be considered as creating a condition precedent or threshold test for the exercise of the discretion conferred on the CRTC by subsection 336(1).

The discretion vested in the CRTC by section 336 is sufficiently broad that it did not need to resort to the powers bestowed upon it under the National Telecommunications Powers and Procedures Act.

It was argued that the CRTC was precluded from ordering as it did with respect to contribution because of the provisions of section 340 of the Railway Act. That section is essentially a remedial provision, available to the CRTC in assessing tolls charged by a telephone company. In a case such as the present one, where the CRTC itself orders by whom and to what extent contribution should be made, as one of the terms and conditions of interconnection under section 336 which it considers just and expedient under that section, section 340 of the Railway Act has no application.

There is no doubt that the CRTC, in deciding whether and on what terms to grant the interconnection order, acted exactly as it should: in the public interest.

Since the National Telecommunications Powers and Procedures Act is silent on the matter of costs in an appeal of this nature, Rule 1312 of the Federal Court Rules applied. Since no special reasons were shown for an award of costs in this appeal, none was made.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Canadian Radio-television and Telecommucications Commission Act, R.S.C., 1985, c. C-22.

Competition Act, R.S.C., 1985, c. C-34 (as am. by R.S.C., 1985 (2nd Supp.), c. 19, s. 19).

Federal Court Rules, C.R.C., c. 663, R. 1312.

National Telecommunications Powers and Procedures Act, R.S.C., 1985, c. N-20, ss. 68 (as am. by R.S.C., 1985 (3rd Supp.), c. 28, s. 301), 54.

Railway Act, R.S.C., 1985, c. R-3, ss. 2, 275, 335(2), 336(1),(3), 340.

Railway Act, S.C. 1919, c. 68, s. 375(7).

CASES JUDICIALLY CONSIDERED

APPLIED:

Attorney-General v. De Keyser’s Royal Hotel, [1920] A.C. 508 (H.L.).

DISTINGUISHED:

Ingersoll Telephone Co. v. Bell Telephone Co. (1916), 53 S.C.R. 583; 31 D.L.R. 49; 22 C.R.C. 135; Bell Canada v. Challenge Communications Limited, [1979] 1 F.C. 857; (1978), 86 D.L.R. (3d) 351; 22 N.R. 1 (C.A.).

APPEAL and cross-appeals from a decision of the Canadian Radio-television and Telecommunications Commission (CRTC 92-12) ordering the appellant companies to interconnect their telecommunications network with proposed competitors, without compensation, and ordering that the proposed competitors be granted a contribution discount. Appeal and cross-appeals dismissed.

COUNSEL:

J. Vincent O’Donnell, Q.C., David C. Kidd and P. Andrée Wylie for appellant Bell Canada.

Daniel M. Campbell, Q.C., for Maritime Telephone & Telegraph Co. Ltd. and The Island Telephone Co. Ltd.

Peter W. Butler, Q.C. and Judy Jansen for British Columbia Telephone Co.

James R. Chalker, Q.C. and Evan J. Kipnis for Newfoundland Telephone Co. Ltd.

Robert G. Kennedy and W. A. Grieve for Government of Saskatchewan.

T. G. Heintzman, Q.C., Michael H. Ryan and Susan Clain for respondent Unitel Communications Inc.

John F. Rook, Q.C., D. K. Wilson and Christian S. Tacit for respondents B.C. Rail Telecommunications and Lightel Inc.

Allan Rosenzveig and Lorne H. Abugov for Canadian Radio-television and Telecommunications Commission.

J. F. Blakney for Director of Investigation and Research, Competition Act.

No one appearing for Competitive Telecommunications Association.

No one appearing for Consumers’ Association of Canada.

SOLICITORS:

Law Department, Bell Canada, Hull, Quebec, for Bell Canada.

Cox, Downie, Halifax, for Maritime Telephone & Telegraph Co. Ltd. and The Island Telephone Co. Ltd.

Farris, Vaughan, Wills & Murphy, Vancouver for British Columbia Telephone Co.

Chalker, Green & Rowe, St. John’s, Newfoundland, for Newfoundland Telephone Co. Ltd.

Law Department, Sasktel, Regina, Saskatchewan, for Government of Saskatchewan.

Law Department, Unitel Communications Inc., Toronto, for respondent Unitel Communications Inc.

Osler, Hoskin & Harcourt, Ottawa, for respondents B.C. Rail Telecommunications and Lightel Inc.

Legal Branch, Canadian Radio-television and Telecommunications Commission, Hull, Quebec, for Canadian Radio-television and Telecommunications Commission.

Legal Services, Consumer and Corporate Affairs Canada, Hull, Quebec, for Director of Investigation and Research, Competition Act.

Stikeman, Elliot, Ottawa, for Competitive Telecommunications Association.

Law Department, Consumers’ Association of Canada, Ottawa, for Consumers’ Association of Canada.

The following are the reasons for judgment rendered in English by

The Court: This appeal from a decision of the Canadian Radio-television and Telecommunications Commission (the Commission or the CRTC) [Telecom Decision CRTC 92-12], brought pursuant to section 68 of the National Telecommunications Powers and Procedures Act, R.S.C., 1985, c. N-20 [as am. by R.S.C., 1985 (3rd Supp.), c. 28, s. 301] (NTPPA), comes here by leave granted on July 22, 1992, on the following two questions:

(1) Did the Commission err in law or exceed its jurisdiction by ordering the appellant companies to interconnect their telecommunications networks with Unitel and other proposed competitors of the appellants without ordering that the appellants be compensated for the costs they are required to incur?

(2) Did the Commission err in law or exceed its jurisdiction by ordering that Unitel and other proposed competitors of the appellant companies be granted a contribution discount?

FACTUAL BACKGROUND

The Applications

On May 16, 1990, Unitel Communications Inc. (“Unitel”) brought an application before the Commission for an order permitting it to connect its telecommunications network to the telephone networks of Bell Canada (Bell), British Columbia Telephone Company (B.C. Tel), Maritime Telegraph and Telephone Company, Limited (Maritime Tel & Tel), The Island Telephone Company Limited (Island Tel), Newfoundland Telephone Company Limited (Newfoundland Tel) and The New Brunswick Telephone Company, Limited (N.B. Tel) (collectively the telephone companies).

Unitel sought connection with the telecommunications networks of the telephone companies (interconnection) in order that it might provide public long distance voice services to its customers, in competition with the telephone companies.

On July 30, 1990, the Commission received an application from B.C. Rail Telecommunications (B.C. Rail) and Lightel Inc. (Lightel) (collectively, BCRL) for an order requiring Bell, B.C. Tel and Unitel to allow BCRL to interconnect with their public switched telephone networks. Such an interconnection would allow BCRL to provide public switched and dedicated voice and data telephone service, message toll service (MTS) and wide area telephone service (WATS). BCRL requested that its application be considered simultaneously with the application brought by Unitel.

In a decision dated August 3, 1990 and entitled, Unitel Communications Inc. and B.C. Rail Telecommunications/Lightel Inc.-Applications to Provide Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues: Scope and Procedure (CRTC Telecom Public Notice 1990-73), the Commission decided that, given the substantial similarity between the issues raised by the applications brought by Unitel and BCRL, it would consider BCRL’s application in the proceeding initiated in response to Unitel’s application.

In Public Notice 1990-73, the Commission indicated that the focus of the proceeding should be the impact of market entry by Unitel or BCRL or both; and it expressed the view “that consideration of Unitel’s application would provide an appropriate context for a focused and detailed examination of the social, technical and economic issues associated with various entry scenarios” (Telecom Decision CRTC 92-12 at pages 2 and 3).

The Parties

Each of the telephone companies provides public switched and dedicated voice and data telephone service. All of those companies were, at all material times, subject to the regulatory authority of the Commission.

Unitel is a telecommunications carrier which provides a wide variety of data, message, facsimile and other services in competition with similar services provided by the telephone companies. Unitel’s services are provided over its own network facilities, which extend across Canada. Unitel has historically, as a result of regulatory policy, been effectively precluded from providing public long distance telephone service in Canada.

BCRL is a joint venture of B.C. Rail and Lightel. B.C. Rail provides dedicated voice and data telephone service in the province of British Columbia, while Lightel provides dedicated and switched voice and data telephone service.

The Commission is a regulatory body established pursuant to the Canadian Radio-television and Telecommunications Commission Act, R.S.C., 1985, c. C-22, to exercise those powers relating to federally regulated telephone companies as are set out in the Railway Act, R.S.C., 1985, c. R-3 (the “Railway Act”), and in the NTPPA.

THE COMMISSION’S DECISION

In a decision, dated June 12, 1992 and entitled Competition in the Provision of Public Long Distance Voice Telephone Services and Related Resale and Sharing Issues (Decision 92-12), the Commission approved Unitel’s application subject to certain terms and conditions. The Commission also expressed its willingness to grant BCRL’s application, so long as BCRL were prepared to accept terms and conditions comparable to those approved for Unitel.

In its order, the Commission directed the telephone companies to do a number of things (e.g., to issue tariff pages incorporating certain charges determined by the Commission, to file proposed availability intervals by switch type for the implementation of 1+ and 1+950 access) within a certain interval of time following the date of its decision. The Commission further ordered Unitel to meet certain tariff requirements. All of the things ordered to be done by the Commission were steps towards the implementation of its decision, namely, that “The facilities and services of Unitel may be interconnected to the [appellants’][1] facilities and services.” (Decision 92-12 at page 178).

All the telephone companies except N.B. Tel sought leave from this Court to appeal only two of the terms and conditions of the Commission’s order. The terms and conditions with which the appellant companies take issue relate to the “Recovery of Start-Up Costs” and “Contribution Charges” (and are set out in Appendix I to Decision 92-12 at page 181).

The term “start-up costs” refers to the one-time costs associated with the changes to the appellants’ networks, systems and procedures which would be required in order to enable Unitel, BCRL and other facilities-based interexchange carriers (IXCs) to connect to those networks (i.e., the costs of modifying the appellant companies’ switches and of changing their billing systems and other operating systems and procedures).[2] The Commission found $240 million to be a reasonable estimate of the start-up costs associated with allowing Unitel and the other IXCs access to the appellants’ networks (Decision 92-12 at page 89).

The term “contribution” refers to the degree to which the costs of granting customers access to the network of a telephone company are “subsidized” by the surplus revenues generated by the other services (e.g., local telephone service, long distance telephone service, facsimile service) offered by a telephone company. The surplus revenues which each service generates constitute the contribution of that service to the recovery of total “access costs”. While all of the telephone services offered by a telephone company make some contribution to access costs, it is generally accepted that “ordinary” long distance service (i.e., “Direct Distance Dialling”) provides the highest level of contribution of all of the telephone services offered by the telephone companies.[3]

Having found $240 million to be a reasonable estimate of the start-up costs to be incurred by the telephone companies, the Commission then proceeded to determine from whom and to what extent these costs should be recovered. The Commission stated its conclusions in this regard as follows:

The Commission considers that the fundamental restructuring of the Canadian long distance market contemplated by this Decision will result in benefits such as increased choice. Respondents will also be more responsive and will increase efforts to minimize costs. Accordingly, the Commission is of the view that the public interest would be best served if the start-up costs were shared by the IXCs and the respondents.

The Commission considers that it is appropriate to allocate the start-up costs based on an approximation of the long-run market share of all competitors, including the respondents. Accordingly, the Commission has determined that the IXCs will pay 30% of the start-up costs through tariffed charges and that the remaining 70% will be allocated to the respondents. (Decision 92-12 at page 91).

In an attempt to avoid “handicapping” the IXCs in the early years of competition, the Commission determined that a “fair and reasonable” period for amortization of the start-up costs would be ten years (Decision 92-12 at page 92).

With respect to the level of contribution to be paid by the new entrants, the Commission considered the proposals put forward by Unitel, BCRL and each of the appellant companies and determined, as a matter of principle, that such contribution must be adequate to replace the contribution foregone by the appellant companies as a result of the loss of a portion of their market share. The Commission rejected the appellants’ position, which would have required equal payments from all long distance service providers, and accepted Unitel’s submissions respecting the level of contribution to be paid by the IXCs:

The Commission has examined Unitel’s proposal to pay contribution based on the amount of foregone contribution that arises as a result of its entry. In particular, the Commission has reviewed the likely impact of such a proposal on local rates. The Commission finds that, under this proposal, IXCs would pay sufficient contribution to ensure that the principle of maintaining local rates at affordable prices is not jeopardized in any of the respondents’ territories. In the case of BCRL’s proposal, the Commission finds that the proposed level of contribution would not provide adequate compensation for foregone contribution. The Commission therefore finds Unitel’s approach reasonable for contribution by IXCs and has incorporated it into its calculation of contribution. (Decision 92-12 at page 71).

Having accepted Unitel’s position with respect to the principle which should govern the assessment of contribution to be paid by each of the IXCs, the Commission also accepted Unitel and BCRL’s assertion that they should be granted a discount from the level of contribution which would otherwise be payable by them. The Commission stated:

The Commission considers that the respondents currently hold a market advantage over all competitors in the long distance voice market, both as a result of their control of the local networks and as a result of their historically dominant positions. The Commission is of the view that a contribution discount of limited duration is appropriate in these circumstances.

The Commission notes that unequal ease of access and market coverage will further limit competitors, particularly in the initial years. The Commission considered ways in which the obvious competitive disadvantages facing competitors might be offset to some degree, particularly in the crucial early years of entry. It accepts the discount schedule proposed by Unitel as reasonable. Under this proposal, the discount is phased out as the competitive disadvantages are reduced and competitors have an opportunity to capture greater market share. Therefore, the potential for contribution erosion is minimized because the greater discounts only apply in the early years when competitors are expected to have relatively small market shares. The annual discount schedule, set out above, will take effect for the geographic area encompassing all respondents’ territories from the first day of 1993, and will apply to all competitors, regardless of the date of their entry. (Decision 92-12 at page 84).[4]

THE POSITION OF THE PARTIES

The Appellants

The main submission of all the appellant companies is that in imposing the conditions which it did respecting “start-up costs” and “contribution discount”, the Commission, to the extent that it acted with a view to “managing”, “manipulating” or “controlling” competition, exceeded its jurisdiction. The Commission being a creature of statute, the appellants argued that it was constrained in the exercise of its statutory discretion by the terms of its enabling statute. They argued further that the enabling statute, the Railway Act, and particularly section 336 thereof, was bereft of any language that authorized the Commission to “manage”, “manipulate” or “control” competition.

The appellants characterized the Commission’s decision as being tantamount to an order of expropriation without compensation, which they claim it was beyond the power of the Commission to make. The appellants contend that the power conferred upon the Commission by section 336 of the Railway Act must be subject to the interpretative principle that, unless a statute either expressly or by necessary implication so provides, it must not be construed as authorizing the taking of a person’s property without compensation. It is the appellants’ view that no such clear intention is expressed by the words of section 336 or appears by necessary implication.

Bell took the position, both in its memorandum of fact and law and in oral argument before us, that the amendment of the Railway Act in 1919 [S.C. 1919, c. 68, s. 375(7)] by the addition of the words “if any” to what is now section 336 of the Railway Act was intended simply to make it perfectly clear that the Commission could order compensation where it was appropriate, i.e., where actual, quantifiable loss would be suffered as a result of its order. The amendment did not empower the Commission to expropriate Bell, or any of the appellant companies, without ordering that compensation be paid, since, in this case, the loss to them was quantifiable. In Bell’s view, the amendment was aimed at what Parliament perceived as a possible misconception arising out of the decision in Ingersoll Telephone Co. v. Bell Telephone Co. (1916), 53 S.C.R. 583 (“Ingersoll”), that compensation must be ordered paid to Bell in all cases in which an interconnection order was made. The Ingersoll decision and the 1919 amendments to the Railway Act will be given further consideration below.

The appellants also challenge the authority of the Commission to make the order which it did with respect to contribution, especially the Commission’s power to grant a “contribution discount” to the new market entrants. The appellants’ position is essentially that section 340 of the Railway Act, which is intended to prevent telephone companies from discriminating against others in the charging of tolls, precludes the Commission from ordering as it did with respect to contribution.

While the appellants concede that section 336 of the Railway Act authorizes the Commission to order the “terms and conditions” of the connection to and use of their telephone networks, they assert that those terms and conditions must comply with the strictures of section 340, must not have the effect of discriminating against them and that, to the extent that the various companies are ordered to pay different levels of contribution, those differences must be based on “traffic considerations” and not on the particular characteristics of each of the competing companies.

The appellants rely on the decision of this Court in Bell Canada v. Challenge Communications Limited, [1979] 1 F.C. 857 (C.A.), to support the proposition that section 340 of the Railway Act is not strictly “customer-oriented”, but applies equally as between them and their competitors as it does between them and their customers.

The appellants thus contend that the Commission erred in favouring their competitors by ordering that the toll which they were to be charged for contribution comprises a discount, even after any difference in the quality of connection disappears. This discount, they contend, was based on a consideration of factors (e.g., the parties’ relative market positions, market advantage and economic viability) which went beyond the language and intent of section 340 of the Railway Act.

The Intervenor—The Government of Saskatchewan

The Government of Saskatchewan (Saskatchewan), both as representative of the residents of Saskatchewan and as owner of Saskatchewan Telecommunications (Sask Tel), intervened in this appeal in support of the appellant telephone companies. It is our view that the intervenor raises certain novel arguments which deserve some consideration.

Saskatchewan relies on section 275 of the Railway Act in support of its view that the Commission erred in ordering the connection sought by the respondents in this case without providing that the appellants be fully compensated for the costs of the modifications incurred by them. Saskatchewan draws a distinction between section 275 of the Railway Act, which expressly requires a company to afford all reasonable and proper facilities to allow access to their system, and section 336 of the same Act which contains no such requirement. All that is required of telephone companies under section 336, in Saskatchewan’s view, is that they “provide for or make available the connection, communication or use”.

Saskatchewan contended, in the alternative, that if the Commission could compel the appellant companies to make the necessary modifications to their systems in order to facilitate interconnection, then subsection 336(3) of the Railway Act should be construed as creating either a condition precedent to the exercise by the Commission of its authority under subsection (1) or imposing a limitation upon the exercise of that authority. Saskatchewan takes the position that subsection 336(3) of the Railway Act requires the Commission to make an initial inquiry as to whether or not the two telephone systems are sufficiently compatible to allow interconnection “without undue or unreasonable injury to or interference with the telephone business” of the appellant companies, before it can make an interconnection order or, at the very least, to take this into consideration in determining what is “just and expedient”. Saskatchewan relies on the decision in Ingersoll, supra, in support of the view that subsection 336(3) creates such a “condition precedent” or “threshold test”. In Saskatchewan’s submission, the order made by the Commission in this case is neither “just and expedient” within the meaning of subsection 336(1), nor “just and reasonable” within the meaning of subsection 336(3).

Saskatchewan’s argument with respect to the contribution discount aspect of the Commission’s decision is essentially the same as the argument made by the appellants.

The Respondents

The respondents take the position that section 336 of the Railway Act and section 54 of the NTPPA vest in the Commission a broad discretion as to the nature of the matters the Commission may consider in determining whether or not an interconnection should be granted, and in fixing the terms and conditions of such interconnection. The further submission is that these statutory provisions must be interpreted in light of the judicial pronouncements emphasizing the broad nature of the regulatory powers bestowed on the CRTC and the legislative character of the function which it performs in setting rates. The Commission is given the authority to determine what compensation, if any, should be ordered paid as a result of an interconnection order, based on what it considers “just and expedient”.

In response to the appellants’ expropriation argument, Unitel takes the position that, “[i]t is fundamentally erroneous to characterize as an ‘expropriation an order of a regulatory tribunal requiring the construction’ of facilities by a regulated company”.[5] In Unitel’s view, there has been no deprivation of property or an interest therein, resulting from the Commission’s decision, such as would amount to an expropriation.

Alternatively, assuming that the Commission’s order does constitute an expropriation, Unitel takes the position that the appellants had not demonstrated any compensable loss.

With respect to the meaning of the words “if any” in section 336 of the Railway Act, both Unitel and BCRL take the position that the plain and clear meaning of these words leads to the conclusion that Parliament intended to give the Commission the discretion, where it determined that it was in the public interest that an interconnection order be made, to decide whether or not to award any compensation as a result of that order. The respondents agree that the amendment to the Railway Act was prompted by the decision of the Supreme Court of Canada in Ingersoll but argue that an analysis of the particular facts of that case and of the Parliamentary debates leading up to the amendment, does not support the appellants’ view as to the meaning of the words “if any”.

In addition to section 336 of the Railway Act, the respondents rely on section 54 of the NTPPA as a source of complementary authority for the order made by the Commission in this case. The respondents contend that section 54 of the NTPPA authorizes the Commission to order by whom, in what proportion and when the costs and expenses arising out of an interconnection order, including both start-up costs and contribution, are to be paid. The only two limitations on this power, namely, that the parties ordered to pay be “interested or affected by” the order and that the order which the Commission seeks to make not be contrary to what Parliament may have expressly provided elsewhere, have, in the respondents’ submission, been satisfied in this case.

As for the appellants’ attempts to challenge the contribution aspect of the Commission’s decision pursuant to section 340 of the Railway Act, the respondents take the position that section 340 is simply not applicable on the facts of this case. Not only is the “notional contribution” paid by the appellants not a “toll” within the meaning of section 2 of the Railway Act, as it is not quantifiable in advance and is therefore not an amount “to be charged” to the appellant companies, but no tariff has been filed with the Commission in respect of this “toll” as is required under subsection 335(2) of the Railway Act.

In further support of their position that the Commission’s order may not be challenged under section 340 of the Railway Act, the respondents point to subsection (3) of section 340 which prescribes that:

340. ...

(3) The Commission* may determine, as questions of fact, whether or not traffic is or has been carried under substantially similar circumstances and conditions, and whether there has, in any case, been unjust discrimination, undue or unreasonable preference or advantage, or prejudice or disadvantage, within the meaning of this section, or whether in any case the company has or has not complied with the provisions of this section or sections 335 to 339.

Unitel submits that the Commission, by its decision, has found that the “circumstances and conditions” under which the respondents’ traffic is to be carried are different from the circumstances and conditions under which the appellants’ traffic is carried and, in imposing the charges which it did in relation to contribution, has “implicitly found that these tolls do not grant an undue preference or advantage to any person” within the meaning of section 340. Therefore, in Unitel’s submission, the “equality” requirement of subsection 340(1) has no application to this case.

Finally, both respondents argue that there is nothing in section 340 of the Railway Act which narrows the range of factors which the Commission may properly take into account in its determinations under that section to “traffic considerations”, as suggested by the appellants, but that the section in fact authorizes the Commission to consider all of the “circumstances and conditions” of the case. Thus, in the respondents’ submission, the Commission was entitled, in determining the level of contribution to be paid by them, to take into consideration such things as unequal ease of access, limited geographic coverage and other competitive factors.

BCRL takes this argument one step further by asserting that, given the Commission’s implicit finding that the long distance traffic of the appellants and the new entrants would not be carried under the same circumstances and conditions, the Commission was precluded from setting equal contribution rates since to do so would have resulted in an undue preference or advantage in favour of the appellants (as, in BCRL’s submission, it would have effectively shut the new entrants out of the marketplace).

The Intervenor—The Director of Investigation and Research

The Director of Investigation and Research, appointed pursuant to the Competition Act, R.S.C., 1985, c. C-34 [as am. by R.S.C., 1985 (2nd Supp.), c. 19, s. 19] (the Director), intervenes in this appeal in support of the respondents. The Director makes essentially the same arguments as the respondents, with a few minor variations.

The Director agrees with the respondents that the Commission was authorized by its enabling legislation to make the order which it did, whether or not the same can be said to amount to expropriation. Furthermore, the Director also contends that if the appellant companies expect that their corporate profitability would decline as a result of the Commission’s decision, then they are free to apply to the Commission for rate increases to provide for satisfactory financial performance, either now or at any time throughout the network conversion period. The Director contends further that any rate adjustments authorized by the Commission on this basis would not offend the principle against retroactive rate-making.

With respect to the contribution discount issue, the Director asserts that it was open to the Commission to take into account, in determining the level of contribution to be paid by the respondents, such factors as the advantages enjoyed by the appellants as a result of their dominant market position and the fact that the IXCs will initially be unable to provide equivalent long distance service. In the words of the Director:

Section 336 forms one element of a well established body of federal competition and regulatory law designed to prevent firms with monopoly or market power from refusing to supply services to competitors to foreclose competition where such action is not in the public interest.[6]

In any event, the Director contends that the Commission’s decision does not disclose an intention on the part of the Commission to equalize competition or to make the appellants and the IXCs equally effective competitors. In the Director’s submission, the contribution discount awarded by the Commission was simply one of a number of measures which the Commission established in an effort to offset the market power and incumbency advantages of the appellant companies, which measures the Commission considered to be in the public interest.

ANALYSIS

This appeal is brought pursuant to section 68 of the NTPPA which reads:

68. (1) An appeal lies from the Commission to the Federal Court of Appeal on a question of law or a question of jurisdiction on leave therefor being obtained from that Court on application made within one month after the making of the order, decision, rule or regulation sought to be appealed from or within such further time as a judge of that Court under special circumstances allows, and on notice to the parties and the Commission, and on hearing such of them as appear and desire to be heard.

...

(5) On the hearing of any appeal, the Court may draw all such inferences as are not inconsistent with the facts expressly found by the Commission, and are necessary for determining the question of jurisdiction or law, as the case may be, and shall certify its opinion to the Commission, which shall make an order in accordance with that opinion.

As mentioned at the outset, there are two questions raised in this appeal, both of which are alleged to go to the jurisdiction of the Commission to make the order which it did in this case. The logical place to begin, then, is with a consideration of those statutory provisions which confer upon the Commission the power to act in a case such as this.

The single most important jurisdiction-conferring provision, for the purposes of this appeal, is section 336 of the Railway Act, the relevant parts of which read:

336. (1) Whenever any company, province, municipality or corporation, having authority to construct and operate, or to operate, a telephone system or line and to charge telephone tolls, whether that authority is derived from Parliament or otherwise,

(a) is desirous of using any telephone system or line owned, controlled or operated by the company, in order to connect that telephone system or line with the telephone system or line operated or to be operated by the first mentioned company, or by the province, municipality or corporation for the purpose of obtaining direct communication, whenever required, between any telephone or telephone exchange on the one telephone system or line and any telephone or telephone exchange on the other telephone system or line, and

(b) cannot agree with the company with respect to obtaining that use, connection or communication,

the first mentioned company or province, municipality or corporation may apply to the Commission for relief, and the Commission may order the company to provide for that use, connection or communication, on such terms, including compensation if any, as the Commission deems just and expedient, and may order and direct how, when where, by whom, and on what terms and conditions that use, connection or communication shall be had, constructed, installed, operated and maintained. [Our emphasis.]

...

(3) On an application made under subsection (1), the Commission shall, in addition to any other consideration affecting the case, take into consideration the standards as to efficiency and otherwise of the apparatus and appliances of the telephone systems or lines, and shall only grant the leave applied for in case and in so far as, in view of the standards, the use, connection or communication applied for can, in the opinion of the Commission, be made or exercised satisfactorily and without undue or unreasonable injury to or interference with the telephone business of the company, and where in all the circumstances it seems just and reasonable to grant the same.

The scope of the discretion which this section confers upon the Commission was a point of much contention between the parties.

Much of the dispute between the parties, both in their written submissions and in oral argument before us, centers around the meaning of the words “if any”, as they appear in section 336. In oral argument, a great deal of time was spent taking us through the legislative history of what is now section 336 of the Railway Act in the hopes of revealing to us the “mischief” that the amendment was intended to address. All parties seemed to agree that the addition of the words “if any” was prompted by the decision in Ingersoll, supra, but they disagreed on the meaning to be given to those words.

In Ingersoll, several independent telephone companies had applied to the Board of Railway Commissioners for Canada (the Board), the predecessor to the Commission, for permission to connect with and use the long distance lines of Bell. The Board initially allowed the application but, upon a subsequent motion brought by Bell, rescinded its first order. The Board substituted an order requiring Bell to allow the independent companies to interconnect and providing that each of the companies so connected shall reimburse Bell “for any and all outlay and expense incurred by it in making” such connections. In addition, the Board provided that the independent companies must pay to Bell: (1) an annual charge based on the number of subscribers which such companies had; and, in the case of competing companies, (2) Bell’s regular long distance charge from the point of connection to the point of destination; and (3) a surcharge of 10 cents on all communications interchanged each way (of which Bell was to receive 7 cents and the independent companies 3 cents).

As a result of dissent by the Chief Commissioner, the Board referred three questions to the Supreme Court of Canada. A majority of the Court upheld the Board’s decision. While each of the five judges who heard the reference gave his own reasons, the words of the Chief Justice seem to best capture the Court’s thinking:

I am of opinion, as I have already said, that the evident intention of Parliament was to give the Board, in the public interest, absolute power to regulate this public utility, which has grown to be almost an essential factor in the every-day life of the whole community, and for that purpose has conferred the widest discretion upon the Board.

...

I, therefore, construe the Act to mean that power is given the Board to expropriate the Company, to a limited extent, for the benefit of those independent companies, provided it can be done consistently with an efficient service and upon payment of compensation. And largely discretionary powers are given with regard to compensation to be paid by the use of the words, “just and expedient.” That is to say, it is left to the commissioners to decide what compensation is, in all the circumstances, “just and expedient” for the use of the connection or communication. If an additional toll or charge, outside of the established rates of the Company, is, in the opinion of the commissioners, necessary to compensate that company for the use of its long distance line, then the statute authorizes the Board to make that charge.

I have no doubt also that the statute authorizes the Board to give compensation with respect to the loss of business of the Company occasioned by giving to local companies long distance connection, and also to make a distinction between the local companies which are called competing companies and those known as non-competing companies.[7] [Our emphasis.]

In 1919, following the decision of the Supreme Court of Canada in Ingersoll, Parliament amended section 375 of the Railway Act (the predecessor to section 336) by adding the words “if any” immediately following the word “compensation”. The parliamentary debates and the Minutes of the Special Committee of the House of Commons on the Bill which contained the proposed amendment are of assistance to us only to the extent that they help us to understand the mischief that Parliament intended to address by adding the words “if any” to the statute.

It is our view that the debates and the minutes of the Special Committee are of little assistance to us in this respect, as it was a given in Ingersoll, and accepted as a given by the Special Committee of the House of Commons, that the interconnecting companies would pay the actual costs of interconnection, the first point in issue in this appeal. In our opinion, Parliament’s concern, following the Supreme Court of Canada’s decision in Ingersoll, was that the Railway Act as it then read, required the Board to grant compensation for loss of business to Bell, in all cases where interconnection was ordered, regardless of whether or not the interconnecting company was a competitor of Bell.

We should observe that, in this case, the appellants do not complain that the effect of the Commission’s order is to deprive them of their monopoly control of the interprovincial long distance telephone market. Nor do they seek any compensation for this or any other “business” loss. Their complaint is that the effect of the Commission’s order is to require them to incur expenditures which total $240 million, and to absorb 70% of these costs, or approximately $168 million, themselves. The appellants contend that in this respect the Commission’s order is tantamount to an expropriation without compensation.

Despite the use by the Supreme Court of Canada of the term “expropriation” to describe the effect of the order of the Board of Railway Commissioners in Ingersoll, we are not persuaded that the Commission’s order in this case is properly characterized as an expropriation order. In this respect, we agree with the submission by Unitel that, “[i]t is fundamentally erroneous to characterize as an ‘expropriation’ an order of a regulatory tribunal requiring the construction of facilities by a regulated company”.

But even if the condition respecting start-up costs which the Commission imposed in this case could be said to amount to expropriation, it is our view that that fact alone is insufficient to call into question the authority of the Commission to make the order which it did.

Contrary to the position urged upon us by the appellants, there is not, in every case where a person’s property is expropriated, an absolute right to full (or any) compensation. The general principle in this regard was laid down by the House of Lords in Attorney-General v. De Keyser’s Royal Hotel, [1920] A.C. 508, at page 542 in the following terms:

The recognized rule for the construction of statutes is that, unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation. [Our emphasis.]

The answer to the appellants’ assertion, therefore, lies exclusively in the interpretation of those sections which confer jurisdiction upon the Commission, and depend on whether the order of the Commission is properly characterized as an “expropriation” order.

The appellants have conceded that section 336 of the Railway Act empowers the Commission to order them to permit interconnection to and use of their networks. It is our view that the section also allows the Commission, in making such an order, to decide whether or not, as one of the terms of its order, to award any compensation at all. We do not accept Saskatchewan’s assertion that section 275 is a necessary tool in interpreting the provisions of section 336, or that the discretion conferred upon the Commission by the latter section is constrained by subsection 336(3) in the manner for which Saskatchewan contends.

The respondents sought to rely on section 54 of the NTPPA as a statutory provision which conferred upon the Commission complementary authority to make the order which it did in this case. Section 54 of the NTPPA is found under the heading “Powers of the Commission with respect to Works” and reads as follows:

54. (1) When the Commission, in the exercise of any power vested in it, in and by any order directs or permits any structure, appliances, equipment, works, renewals or repairs to be provided, constructed, reconstructed, altered, installed, operated, used or maintained, it may, except as otherwise expressly provided, order by what company, municipality or person, interested or affected by the order, as the case may be, and when or within what time and on what terms and conditions as to payment of compensation or otherwise, and under what supervision, they shall be provided, constructed, reconstructed, altered, installed, operated, used and maintained.

(2) The Commission may, except as otherwise expressly provided, order by whom, in what proportion and when the cost and expenses of providing, constructing, reconstructing, altering, installing and executing structures, appliances, equipment, works, renewals or repairs, or of the supervision, if any, or of the continued operation, use or maintenance thereof, or of otherwise complying with the order, shall be paid.

In its reply, B.C. Tel contended that section 54 of the NTPPA has no application in this case as section 336 of the Railway Act is an exhaustive code which deals specifically with interconnection orders, while section 54 comes under the heading of “Public Works” and only relates to the facts of this case in a most general way.

In view of our conclusion respecting the breadth of the discretion vested in the Commission by virtue of section 336 of the Railway Act, we do not consider it necessary to make a determination with respect to the applicability of section 54 of the NTPPA. In our view, the Commission had jurisdiction to make the order which it did under section 336 of the Railway Act, and did not need to resort to the powers bestowed upon it under the NTPPA.

The only issue which remains to be considered is the “contribution” issue and the question of whether or not the Commission was precluded from ordering as it did with respect to contribution because of the provisions of section 340 of the Railway Act.

While section 340 of the Railway Act may well be applicable as between a company and its competitors, as this Court has held in Bell Canada v. Challenge Communications Limited, it is our view that it is not applicable on the particular facts of this case. Section 340 is essentially a remedial provision, available to the Commission in assessing tolls charged by a telephone company. In a case such as this, where the Commission itself orders by whom and to what extent contribution should be made, as one of the terms and conditions of interconnection under section 336 which it considers just and expedient under that section, then it is our view that section 340 of the Railway Act has no application.

CONCLUSION

No one has challenged the authority of the Commission to order a telephone company to allow for the interconnection with and use of its network by another company, even where the interconnecting company intended to compete with the first mentioned company.

Having thoroughly considered all of the evidence before it, the Commission in this case determined that competition in the long distance telephone market was in the public interest and would result in a number of benefits to the Canadian public. There can be no doubt that the prime consideration for the Commission, when deciding whether and on what terms to grant an interconnection order, is and must be the public interest.

Having determined that the interconnection order being sought in this case, and the resultant opening up of the Canadian long distance market, was in the public interest, the Commission proceeded to impose terms and conditions aimed at ensuring that competition, and the benefits which would flow from it, became a reality. There is, in our view, nothing in the Commission’s order to suggest that it acted for any purpose other than the promotion of the public interest.

For all of these reasons, we will dismiss the appeal and all of the cross-appeals. We will answer both questions of law and jurisdiction at issue in the appeal and the cross-appeals in the negative. Pursuant to subsection 68(5) of the NTPPA, we will certify the opinion of the Court to the Commission accordingly.

With respect to the costs of the appeal, the NTPPA is silent on the question in an appeal of this nature. It is therefore our view that the provisions of Rule 1312 of the Federal Court Rules [C.R.C., c. 663] apply. Since no special reasons have been shown for an award of costs in this appeal, we will make none.

---