COMMENTS
CHRONIQUE DE JURISPRUDENCE
Jurisdiction Over Telecommunications: Alberta Government
Telephones v. CRTC
Peter W. Hogg*
Radio-television
In Alberta Government Telephones v.
Canadian
and
Telecommunications Commission,
the
Supreme Court of Canada held that AGT was
a federal undertaking, but that as an agent of
the provincial Crown, it was not bound by reg-
ulations of the CRTC, made under the author-
ity of the federal Railway Act. AGT is there-
fore presently unregulated.
The author proposes that AGT was character-
ized as a federal undertaking on the basis of its
membership within Telecom Canada and its
border connections with neighbouring tele-
phone companies, which allow it to provide
interprovincial and international service. The
AGT decision leaves open, however, the issue
of the constitutional status of regional and
municipal telephone companies which also
provide interprovincial and international ser-
vice, through cooperative arrangements with
larger interprovincial companies.
The author considers that the AGT decision is
likely to bring about important changes in the
telecommunications industry. Following the
decision, the federal government introduced a
bill declaring that the Railway Act is binding
on agents of the provincial Crown, thus abol-
ishing AGT’s immunity as a provincial Crown
agent and subjecting AGT to CRTC regula-
tion. The author predicts that the bill, if pas-
sed, will lead to competition in the provision
of long-distance telephone services.
Dans Alberta Government Telephones c.
Conseil canadien de la radiodiffitsion et des
t06communications canadiennes, la Cour
supreme 6tablit qu’AGT est une entreprise
frddrale. Toutefois, en tant qu’agent de la
Couronne provinciale, AGT n’est pas soumis
aux r~glements du CRTC 6tablis sous la juri-
diction de la Loi sur les chemins defer (fdd&
rale). A l’heure actuelle, AGT n’est donc sou-
mis I aucune rglementation.
AGT est membre de T6lcom Canada et ses
connections avec des compagnies de tdlhphone
situres dans des juridictions voisines lui per-
mettent d’offrir un service de port~e interpro-
vinciale et internationale. L’auteur soumet que
ces donndes ont amen6 la Cour A considrer
AGT comme entreprise fdddrale. Toutefois,
cette decision ne rdsoud pas ]a question du sta-
tut constitutionnel des compagnies rgionales
et municipales qui, de pair avec des compa-
gnies interprovinciales, offrent aussi un ser-
vice international et interprovincial.
L’auteur croit que cette decision apportera
d’importants changements h l’industrie des
trlcommunications au Canada. Suite At ]a
decision de la Cour supreme, le gouvemement
frdrral proposa un projet de loi visant a abolir
l’immunitd d’AGT en tant qu’agent provincial
et h soumettre AGT aux rtglements du CRTC.
L’auteur prdvoit que cette loi augmentera Ia
concurrence dans le domaine des services tdld-
phoniques interurbains.
*Q.C., of the Osgoode Hall Law School of York University. I disclose that I was one of the coun-
sel representing AGT in the case that is the subject of this note. An earlier version of this comment
was delivered at The Canadian Institute conference on “Canadian Telecommunications into the
1990s and Beyond” in Toronto on October 19, 1989.
McGill Law Journal 1990
Revue de droit de McGill
1990]
CHRONIQUE DE JURISPRUDENCE
The Decision
In Alberta Government Telephones v. Canadian Radio-television and
Telecommunications Commission,’ the Supreme Court of Canada held that the
existing pattern of provincial regulation of most telephone systems is unconsti-
tutional. The case concerned jurisdiction over Alberta Government Telephones
(AGT), which is an Alberta Crown corporation that operates a telephone system
within the province of Alberta. AGT has until now been regulated by the Public
Utilities Board of Alberta, exercising powers conferred by provincial law. The
Court, in a judgment delivered by Dickson C.J.,2 held unanimously that AGT
was a federal undertaking, subject to the exclusive legislative power of the fed-
eral Parliament. However, the Court held by a majority that the federal Railway
Act, which is the source of the regulatory power over telecommunications of the
Canadian Radio-television and Telecommunications Commission (CRTC), did
not bind AGT, because AGT was an agent of the provincial Crown. Therefore,
AGT was not subject to any form of regulation. In a companion case,3 the Court
held that the same “regulatory vacuum” prevailed with respect to labour rela-
tions: AGT as a federal undertaking was outside provincial labour relations
jurisdiction, but as an agent of the provincial Crown was not covered by the
Canada Labour Code.
The Proceedings
The proceedings were essentially a battle over competition in the telecom-
munications industry. Generally speaking, one could say that provincial regula-
tors are likely to be protective of a local, provincially-regulated monopoly,
while federal regulators are more likely to favour competition by national firms.
Certainly, a premise of this kind seemed to underlie the positions taken by the
parties in this case.
The case started when CNCP Telecommunications (CNCP) applied to the
CRTC for an order compelling AGT to provide a connection with CNCP’s sys-
tem, so that CNCP’s telecommunications traffic could be carried on the AGT
system. AGT, which had always been regulated by the province, did not
acknowledge the regulatory authority of the CRTC, a federal agency, and
applied to the Federal Court, Trial Division, for an order of prohibition to stop
1[1989] 2 S.C.R. 225 [hereinafter AGT].
2Dickson C.J.’s opinion was agreed to by McIntyre, Lamer, La Forest and L’Heureux-Dub6 JJ.
Wilson J. wrote a dissenting opinion, in which she agreed with Dickson C.J. on the constitutional
issue, but disagreed with Dickson C.J. on the Crown immunity issue, which caused her to dissent.
Only six judges participated in the decision, three judges having retired during the 21-month inter-
val between oral argument (on November 12 and 13, 1987) and judgment (on August 14, 1989).
31BEW v. Alberta Government Telephones [1989] 2 S.C.R. 318 [hereinafter IBEW].
REVUE DE DROIT DE McGILL
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the CRTC application. In the Federal Court, Trial Division,4 Reed J. accepted
CNCP’s argument that AGT was within federal jurisdiction; however, she
granted the order of prohibition on the ground that AGT as an agent of the pro-
vincial Crown was immune from the federal Railway Act and therefore outside
the authority of the CRTC. In the Federal Court of Appeal,5 Reed J.’s decision
was reversed; the Court agreed with Reed J. on the constitutional issue, but
reversed her ruling on the Crown immunity issue.
The Supreme Court of Canada restored Reed J.’s order of prohibition, and
essentially agreed with her reasons. As noted above, on the constitutional issue,
the Court held unanimously that AGT was within federal jurisdiction. On the
Crown immunity issue, the Court held by a majority of five to one that AGT
was immune from the federal Railway Act.
The Constitutional Background
Legislative authority over telecommunications depends upon s. 92(10) of
the Constitution Act, 1867 (U.K.).6 Section 92(10) confers authority on the pro-
vincial Legislatures to make laws in relation to:
Local Works and Undertakings other than such as are of the following Classes: –
(a) Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works
and Undertakings connecting the Province with any other or others of the
Provinces, or extending beyond the Limits of the Province;
(b) Lines of Steam Ships between the Province and any British or Foreign
Country;
(c) Such Works as, although wholly situate within the Province, are before or after
their Execution declared by the Parliament of Canada to be for the general
Advantage of Canada or for the Advantage of Two or more of the Provinces.
The three classes of undertaking excepted by paragraphs (a), (b) and (c)
come within the legislative authority of the federal Parliament by virtue of s.
91(29) of the Constitution Act, 1867 (U.K.).7
The basic scheme of distribution of power established by s. 92(10) is this.
Communications undertakings that remain within the boundaries of a single
province are “local”, and therefore within provincial authority under the open-
ing words of s. 92(10). Communications undertakings that connect the province
with other provinces or extend beyond the limits of the province are within fed-
eral authority under paragraph (a) of s. 92(10). An exception to this dichotomy
is created by paragraph (c) of s. 92(10), which brings into federal jurisdiction
4[1985] 2 F.C. 472, 17 Admin. L.R. 149, 15 D.L.R. (4th) 515 (T.D.).
1[1986] 2 F.C. 179, 24 D.L.R. (4th) 608, 63 N.R. 374 (C.A.).
630 & 31 Vict., c. 3.
71bid.
1990]
COMMENTS
local works that have been declared by the Parliament of Canada to be “for the
general advantage of Canada”.
Where a single telephone company provides service in more than one
province, it comes within federal jurisdiction under s. 92(10)(a). In Toronto
(City of) v. Bell Telephone Co. of Canada,8 the Privy Council held that the Bell
Telephone Company was within federal jurisdiction on this ground. At that
time, Bell was operating only in Ontario, but it was planning to extend its sys-
tem into Quebec, and their lordships took the wish for the deed.
In the Bell Telephone case, it was argued that jurisdiction over the compa-
ny’s undertaking could be divided between the two levels of government: the
province would have regulatory power over the company’s local (intraprovin-
cial) business, and the federal Parliament would have regulatory power over the
company’s long-distance (interprovincial) business. The Privy Council refused
to divide jurisdiction in this way. This established an important rule, which has
been consistently applied to other kinds of communications and transportation
undertakings as well,9 that an undertaking is subject to the regulation of only
one level of government. Once an undertaking is characterized as interprovin-
cial, all of its activity, intraprovincial as well as interprovincial, is subject to fed-
eral regulation. And, by the same token, once an undertaking is classified as
local, all of its business, including any casual or irregular interprovincial busi-
ness,’ o is subject to provincial regulation. In this way, the courts have avoided
the complications of divided jurisdiction over a single undertaking. On the other
hand, the one-undertaking-one-regulator rule loads enormous freight on the ini-
tial question of characterization: everything turns on whether the undertaking is
interprovincial or local. As Dickson C.J. commented in the AGT case, the ques-
tion of jurisdiction is “an all or nothing affair”.”
The Regulatory Background
The Bell Telephone case settled the regulatory jurisdiction over the Bell
Telephone Company. Bell did in fact extend its service into Quebec as well as
Ontario, and later added service in the eastern Northwest Territories. Bell is
accordingly regulated by the CRTC, acting under powers conferred by the fed-
eral Railway Act.
Also within federal jurisdiction is the British Columbia Telephone
Company, which provides service in British Columbia. It has been brought
within federal jurisdiction by a declaration under s. 92(10)(c) that it is a work
811905] A.C. 52 (P.C.).
9See P.W. Hogg, Constitutional Law of Canada, 2d ed. (Toronto: Carswell, 1985) at 486-89.
101f the interprovincial business was continuous and regular; the undertaking would be classified
as federal, ibid. at 488.
“Supra, note 1 at 257.
McGILL LAW JOURNAL
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for the general advantage of Canada. B.C. Telephone is therefore also regulated
by the CRTC.
Also within federal jurisdiction is Telesat Canada, a company which pro-
vides satellite facilities to the other telephone companies as well as to some
other businesses.
At the time of the AGT case, Bell, B.C. Telephone and Telesat Canada were
the only telephone companies that were federally regulated. In each of the three
prairie provinces, there is a provincially-owned telephone company that was
provincially regulated: AGT in Alberta, Saskatchewan Telecommunications in
Saskatchewan, and Manitoba Telephone System in Manitoba. In each of the
four Atlantic provinces, there is a privately-owned telephone company that was
provincially regulated: the New Brunswick Telephone Company in New
Brunswick, Maritime Telegraph and Telephone Company in Nova Scotia, Island
Telephone Company in Prince Edward Island and Newfoundland Telephone
Company in Newfoundland.
In addition to the nine major terrestrial carriers, there are about fifty “inde-
pendent” telephone companies, most of which are very small. There are thirty
in Ontario and sixteen in Quebec, for example, existing alongside Bell’s
federally-regulated presence. These independent companies are mostly pri-
vately owned, although a few are municipally owned, including two of the larg-
est – Edmonton Tel and Thunder Bay Tel. They are all provincially regulated.
The Facts
AGT is a provincial Crown corporation that operates a telephone undertak-
ing within the province of Alberta. AGT’s physical works and its customers are
all located within the province of Alberta. 2 AGT is, however, organized to offer
interprovincial and international service to its customers. The AGT system con-
nects at the borders with the telephone companies of British Columbia,
Saskatchewan, the Northwest Territories and Montana, partly by cable, but
mainly by microwave signals that are transmitted between towers located on
each side of each border. As well, the AGT system has access to satellites
through cable links to earth stations in Alberta operated by Telesat Canada.
These physical connections are operated under the terms of agreements entered
into between AGT and the neighbouring carriers.
‘2There is one exception to this proposition, and that is the case of Lloydminster, a small town
straddling the Alberta-Saskatchewan border. AGT supplied service to all the residents of
Lloydminster, including those on the Saskatchewan side of the border. The Supreme Court of
Canada agreed with the courts below that “the situation in Lloydminster is not constitutionally sig-
nificant”, supra, note 1 at 258.
1990]
CHRONIQUE DE JURISPRUDENCE
In addition to the bilateral agreements with neighbouring carriers, AGT is
a member of Telecom Canada, which is an unincorporated organization, origi-
nally created in 1931 under the name Trans-Canada Telephone System (TCTS),
which is made up of the nine major telephone companies and Telesat Canada.
Telecom Canada is managed by committees of representatives of the member
companies, under multilateral agreements entered into by the members.
Telecom Canada is the vehicle by which the various telephone companies coop-
erate to create a national telecommunications network; it also makes arrange-
ments for connections to carriers in the United States; and it also collects and
shares the revenues from long-distance calls that extend beyond the neigh-
bouring provinces that have bilateral connecting agreements.
Interprovincial Undertaking
Dickson C.J. (for the entire Court on the constitutional issue) held that
AGT’s connections with telephone systems outside Alberta were sufficient to
constitute AGT an interprovincial undertaking. “AGT’s telecommunications
system, taken as a whole, connects Alberta with the rest of Canada and with the
United States, and other parts of the world. It undoubtedly extends beyond the
province of Alberta”. 3 While a mere physical connection would not convert a
local undertaking into an interprovincial one, in this case “the facts demonstrate
much more than mere physical interconnection of AGT’s system at provincial
borders”. 4 AGT, through various bilateral and multilateral agreements, is “orga-
nized in a manner which enables it to play a crucial role in the national telecom-
munications system”. 5 AGT “is the mechanism through which the residents of
Alberta send and receive interprovincial and international telecommunications
services”. 6 These statements, which are rather abstract and conclusory, do not
make clear exactly what were the elements that located AGT in the federal
jurisdiction.
There are two alternative grounds upon which a communications or trans-
portation undertaking will be classified as federal (interprovincial or interna-
tional). One is if the undertaking itself is interprovincial, meaning that it con-
nects the province with another province or extends beyond the limits of the
province. The other is if the undertaking is an integral part of another undertak-
ing that is interprovincial.
It is clear that the Court’s decision in the AGT case was not based on the
second ground: the Court was not saying that AGT was an integral part of
another interprovincial undertaking. The Court did not identify a larger under-
131bid. at 260.
4Ibid. at 262.
‘5lbid. at 262.
161bid. at 264.
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taking of which AGT was a part. Telecom Canada could perhaps have been
characterized in that way, despite its unincorporated form, but the Court said
that “the Court is not here called upon to assess the constitutional character of
Telecom Canada”. 7 The Court said that “AGT’s role and relationship with
Telecom Canada is relevant to the decision on AGT’s own constitutional char-
acter”. 8 The Court did emphasize the cooperative arrangements that AGT had
made with the telephone companies of neighbouring jurisdictions, and, through
Telecom Canada, with telephone companies elsewhere in Canada. But no case
has ever decided that cooperative arrangements between two, separately man-
aged, local undertakings could convert the local undertakings into a single inter-
provincial undertaking. Indeed, even when one of the enterprises is interprovin-
cial, the railway cases hold that a physical connection, even combined with
cooperation to facilitate through traffic, does not sweep a local undertaking into
federal jurisdiction. 9
It seems clear therefore that it was the nature of the service provided by
AGT itself, and not its relationship to a larger entity, that led to its classification
as an interprovincial undertaking. The relationships with other telephone com-
panies were relevant only to cast light on the nature of AGT’s own business.
Thus, the Court referred to “the involvement of AGT in the transmission and
reception of electronic signals at the border”,20 to the fact that AGT was “orga-
nized in a manner which enables it to play a crucial role in the national telecom-
munications system”, 2′ and to the fact that “AGT is the mechanism through
which the residents of Alberta send and receive interprovincial and international
telecommunications services”.’ And yet, these statements do not explain why
Dickson C.J. said that there was “no merit in the argument that AGT’s involve-
ment in the interprovincial flow of signals begins and ends at Alberta’s bor-
ders”.’ It is literally true that AGT carried telephone messages only within the
province of Alberta, and its participation in interprovincial traffic was confined
to delivering outgoing messages and receiving incoming messages at the border.
On the other hand, the company’s ability to provide interprovincial and interna-
tional service did depend upon the company’s participation in a host of bilateral
and multilateral arrangements. It seems to be the scope and complexity of these
171bid. at 263.
181bid. at 264 (emphasis added).
19Montreal (City of) v. Montreal St. Rny, [1912] A.C. 333, 1 D.L.R. 681 (P.C.); B.C. Elec. Rwy
Co. Ltd v. C.N.R., [1932] S.C.R. 161, 2 D.L.R. 728. In Luscar Collieries, Ltd v. A.G. Can. and
Que., [1927] A.C. 925, 3 W.W.R. 454, the branch line was held to be within federal jurisdiction,
but it was managed by Canadian National, the operator of the federal line. See also note 22, infra.
2 0Supra, note 1 at 260.
21lbid. at 262.
221bid. at 264.
23Ibid. at 267.
1990]
COMMENTS
bilateral and multilateral arrangements that led the Court to characterize AGT
as an interprovincial undertaking.
The AGT case determines the constitutional jurisdiction of those telephone
companies that possess the same basic interconnections as AGT, that is: (1) bor-
der connections with the telephone companies of neighbouring jurisdictions,
and (2) membership of Telecom Canada. Such companies are now within fed-
eral jurisdiction. This means that the three publicly-owned companies in the
prairie provinces, and the four privately-owned companies in the Atlantic prov-
inces, have been swept into federal jurisdiction. Like AGT, these companies are
parties to various bilateral cross-border interconnection agreements, and they
are all members of Telecom Canada. This is also true of the British Columbia
Telephone Company and Bell Canada, but, as explained above, these two car-
riers are already federally regulated.
While the AGT case settles the constitutional status of Canada’s nine major
telephone companies, it does not settle the constitutional status of the “inde-
pendent” regional, local and municipal telephone companies. These lack cross-
border connections, and they are not members of Telecom Canada. Each com-
pany is, however, able to provide to its customers full long-distance service to
and from anywhere in Canada, the United States and overseas. The company is
able to provide this service by cooperative arrangements with the major tele-
phone company (the Telecom member) within the same province. Lacking any
direct interprovincial connections, the independent company is probably still
local, and therefore within provincial jurisdiction. It should not be overlooked,
however, that a close operational relationship with a larger company that is
interprovincial could lead to the small company being classified as an integral
part of the interprovincial enterprise.’
Crown Immunity
The Court’s ruling on the constitutional status of AGT as a federal under-
taking established that the company’s telecommunications business was within
the exclusive regulatory power of the federal Parliament. However, the question
whether the CRTC could order AGT to interconnect with CNCP (or exercise
other regulatory power) depended upon whether the federal Railway Act, which
was the source of the CRTC’s regulatory power over telecommunications, was
24Such a result would probably require common management of the two companies: supra, note
17 and accompanying text. But lesser degrees of integration have occasionally sufficed: Reference
Re Validity of Industrial Relations and Disputes Investigation Act, [1955) S.C.R. 529, 3 D.L.R. 721
(independently managed stevedoring company an integral part of shipping); R. v. Bd of Transport
Commrs, [1968] S.C.R. 118, 65 D.L.R. (2d) 425 (commuter rail service using part of interprovin-
cial line an integral part of the interprovincial system); Kootenay and ElkRwy v. C.P.R. Co. (1972),
[1974] S.C.R. 955 at 980, 982, 28 D.L.R. (3d) 385 (obiter dicta implying that something less than
common management would suffice).
McGILL LAW JOURNAL
[Vol. 35
binding on AGT. There was no doubt that the Railway Act applied to a private
individual or corporation operating an interprovincial telecommunications
undertaking. But AGT was a provincially-owned corporation that was expressly
designated by provincial statute to be “an agent of the Crown in right of
Alberta”. As an agent of the Crown, AGT argued that it was immune from the
Railway Act. As explained earlier, this argument was accepted by a majority of
the Court. This aspect of the case is also interesting, and attracted a long and
elaborate discussion by Dickson C.J., and a dissent by Wilson J., who would
have held that the Railway Act was binding on AGT. However, this part of the
Court’s reasoning is outside the scope of this note.
The result of the case is that AGT is unregulated. The provincial regime
of regulation, administered by the Public Utilities Board of Alberta, cannot con-
stitutionally apply to AGT, because AGT’s telecommunications business comes
within exclusive federal jurisdiction. The federal regime of regulation adminis-
tered by the CRTC does not apply to AGT because AGT is a provincial Crown
agent. The same regulatory vacuum exists with respect to labour relations.
Provincial labour law cannot apply to AGT’s labour relations, because AGT is
an undertaking within federal jurisdiction.’ But, in a companion case decided
at the same time as the AGT case, the Court held that the Canada Labour Code
did not apply to AGT, because the Code did not extend to a provincial Crown
agent.26 This regulatory vacuum undoubtedly applies not only to AGT, but also
to the two Crown-owned telephone companies of Saskatchewan and Manitoba,
which must be in the same position as AGT. Like AGT, they have a constitu-
tional immunity from provincial laws respecting telecommunications and labour
relations, and they have a statutory immunity from the federal laws.
The Court was at pains to point out that the doctrine of Crown immunity,
which exempted AGT from the Railway Act and the Canada Labour Code, was
not a constitutional doctrine. The immunity, originally a matter of common law,
now flowed from s. 17 of the federal Interpretation Act,27 which provides that
no Act is binding on the Crown “except only as therein mentioned or referred
to”. This immunity could be abolished in general or for particular statutes, such
as the Railway Act or the Canada Labour Code.’ There is no doubt, therefore,
that the regulatory vacuum can, in principle, be filled.
(2d) 145.
25Commission du Salaire Minimum v. Bell Telephone Co. of Can., [1966] S.C.R. 767,59 D.L.R.
261.B.E.W., supra, note 3.
27R.S.C. 1985, c. 1-21. Section 17 was s. 16 in the previous consolidation, R.S.C. 1970, c. 1-23,
which was the provision in force when the facts of the AGT case arose.
Supra, note 1 at 301.
1990]
CHRONIQUE DE JURISPRUDENCE
Sequel to Decision
The reasoning in the AGT case left no doubt that the four Atlantic tele-
phone companies and the three prairie telephone companies were within exclu-
sive federal jurisdiction. The four Atlantic companies are privately owned and
can claim no Crown immunity from the regulatory provisions of the federal
Railway Act, which are administered by the CRTC. These four companies must
now join B.C. Telephone and Bell Canada in the regulatory stable of the CRTC.
The three prairie companies remain outside the jurisdiction of the CRTC
only because of their Crown immunity from the Railway Act. This situation is
unlikely to continue for long. On October 19, 1989, the federal government
introduced into Parliament a brief amendment to the Railway Act, declaring that
the provisions of the Act respecting telephone systems are binding on the
Crown in right of a province.29 This bill, if enacted, will fill the regulatory vac-
uum by subjecting the three prairie telephone companies to the jurisdiction of
the CRTC.
When the Railway Act amendment is enacted, the CRTC will regulate all
the major carriers and most of the telephones in Canada. (The fifty or so inde-
pendent telephone companies service only three per cent of the nation’s tele-
phones.) It seems inevitable that the regulatory policies of the CRTC will
diverge from those of the former provincial regulators. The introduction of com-
petition in the provision of long-distance services is one likely outcome. Closely
related to the issue of competition, is the issue of long-distance and local rates:
in some provinces high long-distance rates subsidize low local rates. Such a
cross-subsidy would be difficult to maintain if long-distance services could be
supplied by carriers that had no obligation to supply the local services. It seems
obvious therefore that the AGT case may be the beginning of important changes
in the telecommunications industry, which is one of the few industries with a
direct impact on virtually everyone.
29BiIl C-41, An Act to Amend the Railway Act (Telecommunications), 2d Sess., 34th Parl., 1989
(1st reading, October 19 1989). No similar amendment to the Canada Labour Code was
introduced.
