McGill Law Journal ~ Revue de droit de McGill
TELECOMMUNICATIONS CARRIERS AND THE
DUTY TO SERVE
Michael H. Ryan*
Telephone companies share with other
public utilities a common law duty to provide
their services on demand, at a reasonable price,
and without unreasonable discrimination. In
Canada, this common law duty exists alongside
statutory service obligations imposed on tele-
communications carriers and regulatory policies
promoting universal access to basic telecommu-
nications services. Some argue that in the mod-
ern environment, where a wide range of tele-
communications services is available on a near-
universal basis from a profusion of suppliers,
the duty to serve has become an anachronism
and that carriers should now be relieved of such
obligations. There are others, however, who
caution that the elimination of the duty to serve
might jeopardize the continuation of service to
geographically remote areas and should there-
fore be retained. Still others advocate expand-
ing the duty to include broadband in order to fa-
cilitate wider access to high-speed Internet ser-
vices. The debates surrounding these issues re-
veal that there is no consensus about the scope
of the duty to serve. This article seeks to clarify
the parameters of the common law duty to serve
and discusses how that duty interrelates with
carriers statutory service obligations and regu-
latory policies promoting universal service.
Les compagnies de tlphone, comme
dautres entreprises de services publics, ont une
obligation en common law de fournir leurs ser-
vices sur demande, un prix raisonnable et
sans discrimination draisonnable. Au Canada,
cette obligation en common law coexiste avec les
obligations de service prvues par la loi impo-
ses aux entreprises de tlcommunication et
les politiques rglementaires faisant la promo-
tion dun accs universel aux services de tl-
communication de base. Certains soutiennent
que dans un environnement moderne, o de fa-
on quasi universelle une profusion de fournis-
seurs rend disponible une vaste gamme de ser-
vices de tlcommunication, lobligation de ser-
vice est devenue anachronique et que les four-
nisseurs devraient tre librs de cette obliga-
tion. Dautres soutiennent cependant que
llimination de lobligation de service menace-
rait laccs aux services dans les rgions isoles
et quil faut donc la maintenir. Dautres encore
rclament dtendre cette obligation pour in-
clure les services large bande, qui facilite-
raient laccs Internet haute vitesse. Les dbats
qui entourent ces enjeux rvlent quil ny a pas
de consensus sur la porte de lobligation de
service. Cet article vise dabord clarifier les
paramtres de lobligation de service en com-
mon law. Ensuite, nous analyserons quels sont
les liens entre cette obligation et les obligations
prvues par la loi pour les fournisseurs de ser-
vice, ainsi quavec les politiques rglementaires
faisant la promotion dun accs universel.
* Member of the Ontario Bar; Partner, Arnold & Porter (UK) LLP, Solicitors, London,
UK. The author filed evidence on behalf of Bell Canada on the subject of telecommuni-
cations carriers duty to serve in the Canadian Radio-television and Telecommunica-
tions Commissions proceeding on the Obligation to Serve and Other Matters referred to
below. The author expresses his gratitude to two anonymous reviewers for their very
helpful comments on an earlier draft of this article.
Citation: (2012) 57:3 McGill LJ 519 ~ Rfrence : (2012) 57 : 3 RD McGill 519
Michael H. Ryan 2012
520 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
Introduction
I.
The Origins of the Common Law Duty
II. The Scope of the Common Law Duty
A. To Which Services Does the Duty Attach?
B. Is There a Duty to Extend Service?
C. Is There a Duty to Serve Where There Are
Multiple Suppliers?
III. The Common Law Duty to Serve and Regulation
A. The Regulatory Framework
B. Universal Service
C. The Impact of Competition
Conclusions
521
522
534
534
534
537
538
538
542
546
550
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 521
Introduction
Telephone companies share with other public utilities a common law
duty to provide their services on demand, at a reasonable price, and with-
out unreasonable discrimination. This duty to serve places public utilities
on a different footing than other commercial enterprises, which are for the
most part free to contract with whom they choose on terms that are freely
negotiated. In the case of telecommunications carriers, the common law
duty to serve exists alongside statutory service obligations imposed on
carriers by the Telecommunications Act1 and regulatory policies promot-
ing universal access to basic telecommunications services articulated by
the Canadian Radio-television and Telecommunications Commission
(CRTC or Commission).
In Canada, basic telecommunications services are now available on a
near-universal basis,2 through a range of technologies (wireline, wireless,
broadband, satellite, and cable) and from a large number of suppliers.3 In
light of the ubiquity of service and the profusion of suppliers, some now
argue that the duty to servewhich evolved in an age when telecommu-
nications was limited to basic telephone and telegraph services that were
generally available only from a single supplieris now an anachronism
and should be abolished, or at least confined to situations where competi-
tion does not provide alternative sources of supply. Others, concerned that
the elimination of the duty to serve might jeopardize the continuation of
service to geographically remote areas, have argued that the duty should
be preserved. A third group has advocated that the CRTC should expand
the scope of the duty by requiring telecommunications carriers to extend
their broadband networks to unserved areas to facilitate wider public ac-
cess to high-speed Internet services.
The CRTC recently conducted a comprehensive review of the issues
surrounding the duty to serve and the obligations telecommunications
carriers bear, or should bear, to address these issues of anachronistic obli-
gations, remote areas, and access to high-speed Internet.4 The debate that
1 SC 1993, c 38 [Telecommunications Act].
2 In 2009, 89.3% of Canadian households had a wireline telephone, 77.2% had a wireless
telephone, and 99.3% had one or the other or both. Approximately 98% of Canadian
households have access to broadband at a speed of 1.5 Mbps or more. See CRTC, Com-
munications Monitoring Report 2011 at 117, online: CRTC
3 There are over 1,000 registered telecommunications service providers in Canada, alt-
hough ten large companies and their affiliates collectively account for 95% of Canadian
telecommunications revenues: ibid at 111; CRTC, Communications Monitoring Report
2010 at 111, online: CRTC
4 CRTC, Proceeding to Review Access to Basic Telecommunications Services and Oth-
er Matters (25 October 2010), Telecom Notice of Consultation CRTC 2010-43 at para 17,
522 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
took place among parties to that review made it apparent that there is no
consensus about the scope of the common law duty to serve, or how com-
mon law requirements interrelate with the service obligations imposed by
the Telecommunications Act and CRTC-mandated policies promoting uni-
versal service. Does the duty apply outside of the monopoly paradigm in
which it arose and therefore continue to impose an obligation to provide
service where there are multiple competing suppliers? If so, does the duty
apply equally to all suppliers, or only to the traditional incumbent? Does
the duty, which originally attached to basic telephone services, also em-
brace advanced services such as Internet access? Does it require a carrier
to build facilities in locations it does not serve? The CRTCs decision did
little to clarify these issues. Answers to these questions are important to
an understanding of carriers service obligations and the evolution of poli-
cy in this domain.
The purpose of this article is to consider the parameters of the duty to
serve. This will involve an appraisal of the common law, statutory re-
quirements, and the policies and decisions of the CRTC. I begin by dis-
cussing the origins of the common law duty to serve in Canadian law in
Part I. This is followed by a consideration of issues related to the scope of
the duty in Part II. I then review the impact of regulation in Part III, be-
fore concluding with a summary of the points that emerge from the pre-
ceding analysis.
I. The Origins of the Common Law Duty
Canadian common law has imposed a duty to serve on suppliers of wa-
ter, gas, and other public-utility services from the earliest days, and, de-
spite the paucity of case law relating to telephone services, the same duty
undoubtedly extends to telephone companies.5 The term public utility is
online: CRTC
ceeding is discussed below: CRTC, Obligation to Serve and Other Matters (3 May 2011),
Telecom Regulatory Policy CRTC 2011-291, online: CRTC
Decision].
5 Telephone companies are referred to as public utilities in Ingersoll Telephone v Bell
Telephone Co of Canada (1916), 53 SCR 583 at 589, 31 DLR 49; Bell Telephone Co of
Canada v Harding Communications (1978), [1979] 1 SCR 395 at 398, 92 DLR (3d) 213;
Canada (AG) v Inuit Tapirisat of Canada, [1980] 2 SCR 735 at 754, 115 DLR (3d) 1.
While some Canadian statutes deem telephone companies to be public utilities
see e.g. Public Utilities Act, RSNS 1989, c 380, s 2(e)(iii)the Telecommunications Act
uses the term telecommunications common carrier in preference to public utility
(supra note 1, s 2(1)). The use of this nomenclature creates potential for confusion
where the understanding of the common law duty of telephone companies to serve is
concerned because common carriers are also subject to a duty to serve; but the latters
duty to serve does not appear to depend upon the presence of monopoly, which, as I ar-
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 523
not easily defined, but the enterprises that traditionally bear this label
have certain features in common: they hold themselves out to the public
as suppliers of a service or commodity that is essential and that is typical-
ly provided on a monopoly or quasi-monopoly basis.6 Another distinguish-
ing feature is the right public utilities normally enjoy to construct their
facilities along, under, or above public streets.7
There have been notable scholarly attempts to find the source of the
public utilitys duty to serve in the ancient laws of England governing
common callings, such as common carriers and innkeepers,8 which bear
similar common law service obligations. The concept of the public utility
is, however, a North American invention, and the term itself dates back
no more than a century.9 In the United States and Canada, the emergence
of the public utility is very closely associated with the rise of regulation.
The function of controlling utilities was first exercised by the common law
courts, which intervened to prevent abuses of monopoly power such as
denial of access to essential public services and excessive pricing. But in
the case of telecommunications services, this responsibility was trans-
gue in this section, is the case for public utilities. The notion that telephone and tele-
graph companies can be regarded as common carriers of messages in the same way
that, e.g., railways companies are common carriers of goods and persons was rejected in
Baxter v Dominion Telegraph (1875), 37 UCQB 470 (available on WL Can) (concerning
liability for non-delivery of a telegram). For English and American authorities to the
same effect, see Playford v United Kingdom Electric Telegraph Co, Limited (1869), 4 LR
706 (available on Justis) (UK QB); and Primrose v Western Union Tel (1894), 14 US
1098 at 1100-1101 (available on WL). See also Telephone and Telegraph Companies as
Common Carriers, Note, (1901) 15:4 Harv L Rev 309.
6 Whether a public utility providing service in a competitive market retains the duty to
serve is addressed later in this article.
7 Telecommunications common carriers, for example, have the right to enter and break
up any highway or other public place for the purpose of constructing, maintaining, or
operating their transmission lines, subject to compliance with certain procedures. See
Telecommunications Act, supra note 1, s 43(2).
8 See in particular Charles K Burdick, The Origin of the Peculiar Duties of Public Ser-
vice Companies (1911) 11:6 Colum L Rev 514, (1911) 11:7 Colum L Rev 616 & (1911)
11:8 Colum L Rev 743; Edwin C Goddard, The Evolution and Devolution of Public Util-
ity Law (1934) 32:5 Mich L Rev 577; Sallyanne Payton, The Duty of a Public Utility to
Serve in the Presence of New Competition in Werner Sichel and Thomas G Gies, eds,
Applications of Economic Principles in Public Utility Industries (University of Michigan,
1981); Michael Taggart, Public Utilities and Public Law in Philip Joseph, ed, Essays
on the Constitution (Wellington, NZ: Brookers, 1995) 214. See also the opinion filed by
Barbara Cherry on behalf of consumer advocacy groups in the proceeding leading to
OTS Decision (supra note 4), which takes a different view than the authors on issues
related to the scope of the common law duty to serve. The opinion was filed as an at-
tachment to Response to Interrogatory PIAC(TELUS) 20 May10-3, online: CRTC
9 Goddard, supra note 8 at 577-78.
524 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
ferred in the early nineteen hundreds to specialized regulatory agencies
invested with broad public interest mandates, such as the Interstate
Commerce Commission in the United States and the Board of Railway
Commissioners of Canada.10 The issues addressed in North America
through regulation were addressed differently in the United Kingdom.
For example, in the United Kingdom many of the services in question
were taken into public ownership. This was the case for telecommunica-
tions, which became a post office monopoly in 1911.11 As a consequence,
while a coherent body of public-utility law had begun to emerge in the
United States and Canada12 by the end of the nineteenth century, Eng-
land did not go through the same evolution, and there is no distinctive
body of English law applicable to public utilities. The duty of public utili-
ties to serve that has become entrenched in American and Canadian law
is unknown in English law.13
The divergent approaches of the English common law and the Canadi-
an common law to public utilities and their duty to serve is well illustrat-
ed by a pair of cases decided on opposite sides of the Atlantic 150 years
ago. Hoddesdon Gas and Coke Co (Limited) v. Haselwood 14 was decided
by the Court of Queens Bench in England in 1859. Haselwood was a pro-
10 Both agencies, originally established to regulate railways, later had authority over tele-
phone and telegraph services added to their mandates. The Interstate Commerce
Commission was established by the Interstate Commerce Act of 1887, ch 104, 24 Stat
379, 11 (codified as amended in scattered sections of 49 USC), and was given authori-
ty over telephone and telegraph rates by the Mann-Elkins Act of 1910, c 309, 15, 36
Stat 552 (1910). The Board of Railway Commissioners was established by the Railway
Act (SC 1903, c 58, s 8 [Railway Act]) and assumed authority over telephone and tele-
graph rates in 1906 and 1908 respectively: see An Act to amend the Railway Act, 1903,
SC 1906, c 42, s 30; An Act to amend the Railway Act with respect to Telegraphs and
Telephones and the jurisdiction of the Board of Railway Commissioners, SC 1908, c 61, s
4. This was the first legislation of general application aimed at the regulation of tele-
communications rates. Prior to 1906, however, the Governor-in-Council had authority
to control the rates charged by Bell Canada: see An Act respecting the Bell Telephone
Company of Canada, SC 1892, c 67, s 3; An Act respecting the Bell Telephone Company
of Canada, SC 1902, c 41, s 3 [Act Respecting Bell 1902] (both repealed by An Act re-
specting The Bell Telephone Company of Canada, SC 1967-68, c 48, s 14).
11 For a brief history of the period leading up to the nationalization of the telephone ser-
vices in the United Kingdom, see Eli Noam, Telecommunications in Europe (New York:
Oxford University Press, 1992) at 19-22.
12 As to American law, see Goddard, supra note 8 at 577-78; Payton, supra note 8 at 138-
39. As to Canadian law, see the discussion below.
13 English law imposes a duty to serve in some instances, but that duty does not depend
on whether or not a supplier is a public utility. See e.g. Allnutt v Inglis (1810), 12 East
527 at 538, 104 ER 206 [Allnutt]. The English cases turn instead on whether the sup-
plier is a monopoly or benefits from some form of special privilege. See the discussion
later in this Part and in Part II.C.
14 (1859), 6 CB (NS) 239, 144 ER 447 [Hoddesdon cited to CB (NS)].
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 525
prietor of a school that was supplied with gas by Hoddesdon. Haselwood
fell into arrears in the payment of its account, and after giving notice,
Hoddesdon cut off supply to the school. Haselwood sued for damages sus-
tained by reason of the disconnection. A jury returned a verdict in favour
of the school. The gas company appealed. On appeal, counsel for the gas
company took the position that the matter was governed entirely by con-
tract and, not having received payment for its services, there was not any
duty or obligation of any kind upon the company to continue the supply.
Counsel for the school admitted that there was no express contract to
supply but argued that Hoddesdon had a monopoly in the neighbourhood
of the school and that [t]he relative position of the parties and the sur-
rounding circumstances indicated there was an implied contract to con-
tinue the supply of gas, at least for a reasonable time. Lord Cockburn
questioned whether the position of the gas company was in any way dif-
ferent from that of any other tradesmana butcher or a baker, for in-
stancewho is at liberty at any moment to discontinue supply to a cus-
tomer.15 Lord Cockburn said:
I am fully alive to the arguments of inconvenience which have been
suggested by [counsel for the school]: but the same sort of argument
would equally be applicable to an infinite variety of articles besides
gas, which the comfort and convenience of life render necessary to
the consumer. It is altogether a question of degree. We cannot imply
a contract from the accidental circumstance of this company having
a monopoly of the supply of gas to this neighbourhood. I see nothing
whatever to bind either the one party to take or the other to furnish
the supply any longer than their convenience, or their caprice, if you
will, may induce them to take or to supply.16
The court found for the gas company and entered a judgment of nonsuit
against the school.
Hoddesdon has been referred to in later gas cases, including a decision
of the House of Lords.17 Each of these later cases turns on whether the
suppliers statutory duty to supply gas applied, as a matter of construc-
tion, in the circumstances. None of the decisions casts any doubt on the
proposition that the gas company had no duty to serve apart from contract
or statute.
The result in Hoddesdon and the reasoning that led to it are to be con-
trasted with the almost contemporaneous decision of the Upper Canada
15 Ibid at 246.
16 Ibid at 248-49.
17 Clegg, Parkinson & Co v Earby Gas, [1896] 1 QB 592 at 594 (available on Justis); Can-
non Brewery Co, Limited v Gas Light and Coke, [1904] AC 331 at 332, [1903-04] 20 TLR
543 (HL), revg [1903] 1 KB 593 (CA).
526 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
Court of Queens Bench in Commercial Bank of Canada v. London Gas
Co.18 In that case, the bank had employed the gas company to illuminate
its building on the occasion of the visit of the Prince of Wales to London.
When the bank received the gas companys charges, it objected to the
amount and refused to pay. The gas company consequently cut off the
banks gas supply. The bank brought an application for mandamus to
have the supply of gas restored. Chief Justice Robinson said that, whether
its charges were justified or not, the gas company was not free to withhold
the supply of gas until the account was settled:
They [i.e., the gas company] stand in that respect on the same
ground as a railway company would that should refuse to carry
goods for a particular party, or to carry a particular passenger. In
both cases the party whom the company refuses to serve may have a
clear right to sue for damages; but that would be, not for refusing to
do any thing that the statute directly prescribes, for the statute may
be silent on the subject, but for wrongfully refusing to discharge a
duty incumbent upon them upon common law principles.19
The court did not refer to the Hoddesdon case or any other authority, and
it is not clear whether the Canadian court was aware of the judgment.
The proposition that public utilities owe the public a common law duty
to provide service was endorsed by the Supreme Court of Canada in 1893
in Canada (A.G.) v. Toronto (City of).20 The central issue in that case was
the validity of a municipal bylaw that fixed a higher rate for the supply of
water to nontaxpayers than to taxpayers. The city, which did not have the
power to impose a tax on federal government lands under the provisions
of the British North America Act, 1867, was clearly attempting to com-
pensate for the lack of tax revenue from federal government property by
imposing higher charges on nontaxpayers who used its water. The federal
government took the position that the water charge amounted to an im-
permissible tax. Chief Justice Strong, who delivered the majority judg-
ment, said that the water companys statutory duty to supply meant that
it was not a mere commercial vendor of a commodity but … a public body
entrusted with the management of the water for the benefit of the whole
body of inhabitants, a status which compell[ed] them as such to supply
this element, necessary not merely for the private purposes and uses of
individuals but indispensable for the preservation of the public health and
the general salubrity of the city. He went on to say that the city … is in a
sense a trustee of the water-works, not for the body of rate-payers exclu-
sively but for the benefit of the general public, or at least of that portion of
18 (1860), 20 UCQB 233 (available on WL Can).
19 Ibid at 235.
20 (1893), [1895] 23 SCR 514 (available on WL Can) [Toronto 1893].
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 527
it resident in the city. He found that it would be an evasion of this duty to
charge higher rates in particular cases, and that the city was bound to
dispense the water for the benefit of all, charging only such rates as are
uniform, fair and reasonable.21
Toronto 1893 was applied by the Ontario Court of Appeal in 1899 in
Scottish Ontario and Manitoba Land Co. v. Toronto (City of).22 The plain-
tiff, an operator of hydraulic elevators, alleged that water supplied by the
city was not of the required quality (because it contained sand, which was
damaging to its hydraulic equipment) and sued for breach of contract. The
trial judge dismissed the case on the ground that the action was not main-
tainable as a claim for breach of contract. The case came before the court
of appeal on that issue. Justice Osler delivered the majority judgment. Re-
ferring to the judgment of Chief Justice Strong in Toronto 1893, he con-
cluded that the supplying of water was a municipal function or duty and
not a matter of contract. He therefore dismissed the appeal.23
In St. Lawrence Rendering Co. Ltd. v. Cornwall (City of),24 Justice
Spence, citing the two preceding cases, stated that at common law public
utilities are compelled to treat all consumers alike, to charge one consum-
er no more than another, and to supply the utility as a duty rather than
as a result of contract. He therefore restrained the City of Cornwall from
interrupting the flow of water to an industrial establishment that the city
apparently regarded as a nuisance and whose activities it wanted to cur-
tail. He noted that the Public Utilities Act imposed a duty on the city to
provide the service of public utilities upon request. In these circumstanc-
es, he concluded, the relationship between the city and consumers is not
a matter of contract but of duty and the common law, and the city was
under a duty both at common law and under the Public Utilities Act to
continue to supply water.25 In Chastain v. British Columbia Hydro and
Power Authority,26 Justice McIntyre granted a declaration that a public
utility (in this case, an electricity and gas company) was not entitled to
demand that the plaintiffs provide a security deposit as a precondition for
obtaining access to its services. The plaintiffs claimed that this require-
21 Ibid at 520. The issue returned to the Supreme Court of Canada in Hamilton Distillery
Co v Hamilton (City of) (1907), 38 SCR 239 (available on WL Can) (concerning discrim-
ination in water rates). The Supreme Court of Canada applied its judgment in Toronto
1893 (supra note 20).
22 (1899), 26 OAR 345 at 346 (available on WL Can) [Toronto 1899].
23 Ibid at 350, Lister JA concurring. Burton CJO dealt with the issue as a matter of con-
tract and statutory duty and also dismissed the appeal.
24 [1951] OR 669, 4 DLR 790 [Cornwall cited to OR].
25 Ibid at 683-84.
26 [1973] 2 WWR 481 (BC), 32 DLR (3d) 443 [Chastain cited to WWR].
528 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
ment was not imposed on all customers and thus violated the obligation of
the company, as a public utility, to furnish service on equal terms to all.
Justice McIntyre noted that, although the company was not a public utili-
ty subject to the provisions of the Public Utilities Act, [i]t partakes so
much of the nature of a public utility that it must be amenable to the law
governing public utilities. He continued:
The obligation of a public utility or other body having a practical
monopoly on the supply of a particular commodity or service of fun-
damental importance to the public has long been clear. It is to sup-
ply its product to all who seek it for a reasonable price and without
unreasonable discrimination between those who are similarly situ-
ated or who fall into one class of consumers. The great utility sys-
tems supplying power, telephone and transportation services now so
familiar may be of relatively recent origin, but special obligations to
supply service have been imposed from the very earliest days of the
common law upon bodies in like case, such as carriers, innkeepers,
wharfingers and ferry operators. This has been true in England and
in the common-law jurisdictions throughout the world.27
Cornwall and Chastain have been cited repeatedly as authority for the
proposition that public utilities have a common law duty to serve.28
In Chastain, Justice McIntyre referred to the 1877 judgment of the
United States Supreme Court in Munn v. Illinois,29 where, he said, the
historical roots of the principle he had described were examined. Munn
concerned the constitutionality of a state law regulating grain-elevator
charges, over which a small number of companies had what the court de-
scribed as a virtual monopoly. The majority concluded that such regula-
tion did not violate the Fourteenth Amendment protection against depri-
vation of property without due process. In his judgment, Chief Justice
Waite quoted at length from Lord Hales seventeenth century treatise De
Portibus Maris, including the following key passage:
A man, for his own private advantage, may, in a port or town, set up
a wharf or crane, and may take what rates he and his customers can
27 Ibid at 491.
28 See Herman Brothers Ltd v Regina (City of) (1977), 81 DLR (3d) 693 at 699, [1978] 1
WWR 97(Sask CA); Syncap Credit Corp v Consumers Gas (1978), 18 OR (2d) 633 at
635, 83 DLR (3d) 444; Clarkson Co Ltd v Greater Winnipeg Gas (1987), 37 DLR (4th)
344 at 353, (sub nom K-Tel International Ltd (Receivership) v Greater Winnipeg Gas) 46
Man R (2d) 181 (CA); Montreal Trust Co of Canada v Nova Scotia Power (1994), 136
NSR (2d) 212 at para 6 (CA); Perimeter Transportation Ltd v Vancouver International
Airport Authority, 2008 BCSC 1515, 91 BCLR (4th) 143 at para 149 [Perimeter]; Re Al-
berta Electric System Operator (2010), [2011] AWLD 1184 at paras 191, 243 (Alta Utili-
ties Commission) (available on WL Can); Re Toronto Hydro-Electric System Ltd, 2010
LNONOEB 120 at para 37 (Ont Energy Board) (available on QL).
29 94 US 113, 24 L Ed 77 (1876) [Munn].
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 529
agree for cranage, wharfage, housellage, pesage; for he doth no more
than is lawful for any man to do, viz., makes the most of his own. …
If the king or subject have a public wharf, unto which all persons
that come to that port must come and unlade or lade their goods as
for the purpose, because they are the wharfs only licensed by the
queen … or because there is no other wharf in that port, as it may
fall out where a port is newly erected; in that case there cannot be
taken arbitrary and excessive duties for cranage, wharfage, pesage,
&c., neither can they be inhanced to an immoderate rate, but the du-
ties must be reasonable and moderate, though settled by the king’s
license or charter. For now the wharf and crane and other conven-
iences are affected with a publick interest, and they cease to be juris
privati only; as if a man set out a street in new building on his own
land, it is now no longer bare private interest, but is affected by a
publick interest.30
Chief Justice Waite derived from this passage the principle that business-
es affected by a public interest … cease to be juris privati only and may
therefore be regulated by the state. This proposition laid the foundation
for modern American public-utility regulation for decades to follow, and
despite Canadas fundamentally different approach to property rights, the
case has been received here too as an important affirmation of the states
authority to regulate private business.31
To the authorities I have already considered, we must now add the
1918 judgment of the Judicial Committee of the Privy Council in Minister
of Justice for the Dominion of Canada v. City of Lvis.32 In Lvis, the Privy
Council affirmed that suppliers of prime necessities, such as water, have
a duty to provide their services to the public that derives from the circum-
stances and the nature of the relationship between the parties and that
exists independent of both statute and contract. The facts of the case are
straightforward. The federal government had signed a contract with the
city for the supply of water to one of its buildings. The city claimed that
the contract covered the supply of water to the post office in that building
but not to the customs and excise office in the same building and accord-
ingly demanded a higher charge than that provided for in the contract.
30 Lord Chief-Justice Hale, A Treatise Relative to the Maritime Law of England, Pars
Secunda: De Portibus Maris (London, 1787) at 77-78, cited in Munn, supra note 29 at
127.
31 Perimeter, supra note 28 at para 172; Videotron Telecom Ltd v OPGI Management Ltd
Partnership (2003), 2003 CanLII 38983 at para 8 (Ont Sup Ct J) (available on QL). See
also Transvision (Magog) Inc v Bell Canada, [1975] CTC 463 at 485, where the charac-
terization of the public utilitys duty to serve adopted in Munn is endorsed by the Cana-
dian Transport Commission.
32 (1918), [1919] AC 505, 45 DLR 180 (PC) [Lvis] revg (sub nom Doherty s qual c Lvis
(La Cit de)) (1916), 51 CS 267 [Doherty].
530 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
The federal government refused to pay the higher charge, arguing that
the charges for water amounted to the imposition of a tax on federal gov-
ernment property, which contravened the British North America Act,
1867. The government said that, in the absence of an agreement between
the parties, its only obligation was to pay whatever sum as to the gov-
ernment appeared proper. The city took the position that there was no ob-
ligation to supply water under the relevant municipal law except to per-
sons prepared to pay the relevant charge. The federal government applied
for a writ of mandamus to require the city to supply water.
At first instance, the Quebec Superior Court held that the federal gov-
ernment was liable to pay for the service rendered on a quantum meruit
basis, and that the sum proposed by the city was a fair one. It therefore
dismissed the application for mandamus. On appeal, it was held that the
charge for water was a water rate, as well as a tax, and the government
could be compelled to pay that rate without violating the prohibition
against taxation of federal government property. The court therefore dis-
missed the appeal by the federal government with a recommendation that
the federal government pay the rate demanded by the city.
The federal government appealed to the Privy Council. Lord Parmoor,
who delivered the judgment of the Privy Council, observed that the city
was under a statutory obligation to supply water only to taxpayers and,
since the federal government was not liable to taxation, it could claim no
right to service under the statute. But that did not end the matter. Lord
Parmoor said:
It must be recognized, however, that water is a matter of prime ne-
cessity, and that, where waterworks have been established to give a
supply of water within a given area for domestic and sanitary pur-
poses, it would be highly inconvenient to exclude from the ad-
vantages of such supply Government buildings, on the ground that
these buildings are not liable to water taxation. The respondents are
dealers in water on whom there has been conferred by statute a po-
sition of great and special advantage, and they may well be held in
consequence to come under an obligation towards parties, who are
none the less members of the public and counted among their con-
templated customers, though they do not fall within that class who
are liable to taxation, and who being in the immense majority are
expressly legislated for and made subject to taxation.
In a frequently quoted passage, Lord Parmoor continued as follows:
Their Lordships are therefore of opinion that there is an implied ob-
ligation on the respondents to give a water supply to the Govern-
ment building provided that, and so long as, the Government of
Canada is willing, in consideration of the supply, to make a fair and
reasonable payment. The case stands outside of the express provi-
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 531
sions of the statute, and the rights and obligations of the appellant
are derived from the circumstances and from the relative positions of
the parties.33
The judgment is a remarkable one. First, the Privy Council disposed of
the case on a point that was apparently not argued before it or in the
courts below (where argument revolved around the citys taxing powers).
Second, it did so without reference to a single authority. The decision also
represents a rare instance of a case where the Privy Council has taken a
different view than the English courts on a fundamental point of law. As
we saw in our review of Hoddesdon, the English courts had declined to
impose a duty to serve on a gas company despite the fact that it had a de
facto monopoly on the supply of the commodity. As Simpson v. Attorney-
General34 illustrates, the only situations where the English courts were
prepared to impose such a duty was where the supplier had a legal mo-
nopoly or benefitted from some other special privilege. In Simpson, which
was decided some fourteen years before Lvis, the House of Lords ruled
that the public had a right to pass through certain locks that the respond-
ent had constructed on his own land upon payment of a reasonable
charge. It was of central importance to the judgment in that case that the
locks had been constructed pursuant to letters patent that conferred upon
the respondent the right to make cuts or diversions in a public waterway
as part of the project. The effect of sanctioning the cuts, Lord McNaugh-
ton said, was to confer on the patentee a virtual monopoly in regard to
navigation on the river. Referring to the doctrine of Lord Hale, he said
that the locks, although private property, had as a result become af-
fected with a public interest and ceased to be juris privati only. He con-
cluded, so long as the private owner kept the locks open and took toll all
members of the public belonging to the class for which they were made
were entitled to free passage on paying the regular charges.35
Lord McNaughton also made reference to Allnutt v. Inglis. In that
case, customers of a warehouse brought suit against its owners over the
level of charges they imposed for the storage of goods. The warehouse op-
erated pursuant to a certificate of the Lords of the Treasury that con-
ferred upon the owners the right to hold goods in bond. No other ware-
house in the port of London had been similarly authorized. Chief Justice
Ellenborough said that if, for a particular purpose, the public have a
right to resort to [an individuals] premises and make use of them, and he
have a monopoly of them for that purpose, if he will take the benefit of
that monopoly, he must as an equivalent perform the duty attached to it
33 Lvis, supra note 32 at 513.
34 [1904] AC 476, 20 TLR 761 (HL).
35 Ibid at 482-83.
532 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
on reasonable terms.36 It was held that the owners of the warehouse
could charge only a reasonable price for the use of their facility.
In Lvis, as the Privy Council made clear, the city had no similar legal
monopoly over the supply of water.37 By recognizing that a right of public
access to essential services (prime necessities) may exist outside of situ-
ations where a supplier has a legal monopoly or privilege, and that a duty
to supply may arise whenever a supplier enjoys a special advantage in
relation to the provision of such a service, Lvis represents a clear break
with English precedent. The Privy Councils assertion that a duty to sup-
ply may arise from the circumstances and from the relative positions of
the parties echoesperhaps consciouslythe words used in the argu-
ment unsuccessfully made by counsel for the school in Hoddesdon.38
Lvis has never been referred to in a reported English case and recent
English case law continues to limit the duty to serve to situations where
the supplier has a legal monopoly or privilege.39 The decision of the Privy
Council has had a mixed reception elsewhere: while Lvis and the doc-
trine of prime necessity that it articulates form part of the common law
of New Zealand,40 the reasoning underpinning the judgment has been re-
jected in Australia.41 But Lvis has been accepted in Canada without res-
ervation. Lvis is in effect an endorsement of the principles adopted by the
Supreme Court of Canada in Toronto 1893.42
Tsawwassen Indian Band v. Delta43is an interesting application of L-
vis. In two separate proceedings, Indian bands had sought declarations in
the Supreme Court of British Columbia that the municipalities within
which their respective lands lay (the city of Delta and the district of Salm-
36 Allnutt, supra note 13 at 538.
37 Lvis, supra note 32 at 512.
38 Ibid at 513. See also Hoddesdon, supra note 14 at 246 and accompanying text.
39 See Iveagh v Martin (1960), [1961] 1 QB 232 at 276-77, [1960] 2 All ER 668 (QBD).
40 See Vector Ltd v Transpower New Zealand Ltd, [1999] 3 NZLR 646 at para 51, NZCA
167 [Vector]. The case has been relied upon to secure access to essential facilities and to
control monopoly pricing. See also the cases cited infra note 57.
41 See Bennett and Fisher Ltd v Electricity Trust of South Australia, [1962] HCA 11, 106
CLR 492 [Bennett and Fisher].
42 Toronto 1893 (supra note 20) was cited in the decision of the Canadian appellate court
in Doherty (supra note 32 at 269)albeit for the rather narrow proposition that one
who has the use of a municipal water supply is liable to pay thereforbut we can as-
sume that, although the Privy Council did not refer to the decision, it was cognizant of
it.
43 (1997), 149 DLR (4th) 672, 37 BCLR (3d) 276 (CA) revg in part (1996), 139 DLR (4th)
739 (BC SC) and (sub nom Adams Lake Indian Band v District of Salmon Arm), 1997
CanLII 2781 (BC SC), leave to appeal to SCC refused, [1998] 2 CNLR iv [Tsawwassen].
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 533
on Arm) had a common law duty to continue to supply certain municipal
services to residents on the bands lands (fire protection services in the
case of Delta; water, sewer, and fire protection services in the case of
Salmon Arm). Negotiations to secure the provision of the services had
failed in both cases. In the Salmon Arm case, the trial judge distinguished
Lvis on the basis that Lvis concerned supply to one building rather than
supply to several acres. The court said that the difference in size between
a small parcel of land and a reserve comprising several acres brought with
it the potential for alternative methods of supply, and found that the band
was capable of providing its own services. The court concluded that the
municipality could terminate provision of the relevant services on reason-
able notice, which it fixed at fourteen months, referencing the length of
time that might be required for the band to establish its own fire service.
In the Delta case, the trial judge followed Salmon Arm and fixed a notice
period terminating on the same date fixed in the Salmon Arm case.
The court of appeal, reversing the lower court decisions, affirmed that
the relationship between the municipality and the bands gave rise to a
duty to serve under the principles enunciated in Lvis. The municipalities
did not have a legal monopoly on the supply of water, sewer, and fire pro-
tection services, but one can deduce from the facts that they were the only
available suppliers. The relationship between the parties, the court said,
determined not just the nature but also the extent of the common law
obligation the municipalities owed the Indian bands.44 The factors the
court found relevant to its analysis were the municipalities experience in
providing public services, controlling the existing infrastructure necessary
to provide the services, and collecting taxes to pay for the services. While
the circumstances gave rise to a duty on the part of the municipalities to
supply the relevant services, the court was also of the opinion that, given
the size of the bands in question and the fact that both bands had become
independent taxing authorities, the duty was terminable upon reasonable
notice. The matters were remitted to the lower courts so that reasonable
notice could be determined, taking into account, inter alia, the time that
would be necessary for the bands to put their own systems into place.45
In Long Lake Cottage Owners Assn. v. Thorhild (County) No. 7, the
Alberta Court of Queens Bench, citing Lvis and Tsawwassen, recently
held that residents of a hamlet have a right to continue receiving water
44 Ibid at para 48.
45 Ibid at para 105.
534 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
from a municipal well faced with closure by the local municipality until a
viable alternative supply could be arranged.46
II. The Scope of the Common Law Duty
At the beginning of this article, I posed a series of questions about the
scope of the duty to serve. I will now address these from the perspective of
the common law.
A. To Which Services Does the Duty Attach?
Chastain says that the duty to serve attaches to services of funda-
mental importance to the public and specifically identifies telephone
services as within that category.47 Other decisions use phrases such as
prime necessities, essential services, and necessities of modern life48
to describe the type of services that attract the duty to serve. No case
identifies, however, any other type of telecommunications service (for in-
stance, mobile telephone service, Internet access service, or data services)
as subject to the duty.49
B. Is There a Duty to Extend Service?
There appears to be no foundation for imposing a common law duty on
a public utility to extend service beyond its existing lines of supply. Amer-
ican authority on the point seems clear.50 The duty to serve is limited by
the utilitys capacity to serve.51
46 2011 ABQB 337, 46 Alta LR (5th) 194. In Chastain, McIntyre J said that the public util-
itys duty to serve arises wherever there is a practical monopoly on the supply of an
essential commodity, implicitly negating the idea that the duty obtains only where
there is a legal monopoly (supra note 26 at 491). McIntyre J referred to Lvis (supra
note 32) but not on this point.
47 Supra note 26 at 491.
48 Lvis, supra note 32 at 513; Vector, supra note 40 at para 51; Perimeter, supra note 28
at para 147.
49 Although, public telegram service, now discontinued, once fell in the same category as
telephone service: see CNCP Telecommunications, Interconnection with Bell Canada
(17 May 1979), Telecom Decision CRTC 79-11 (Ottawa: CRTC, 1979) at 81-83 [Decision
79-11]. The fact that a telecommunications carrier provides telephone service as a pub-
lic utility does not render all of its services public-utility services: see Perimeter, supra
note 28 at para 148.
50 See e.g. Corpus Juris Secundum, vol 73B (Danvers, Mass: Thompson West, 2004) Pub-
lic Utilities, 6: While a public utility may be required to serve every applicant within
the territory it professes to serve, it cannot be required to extend service outside such
territory. See also Jim Rossi, The Common Law Duty to Serve and Protection of Con-
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 535
The issue arose in Holmberg v. Public Utilities Commission of Sault
Ste. Marie,52 but the case was decided on the basis of the applicable stat-
ute without reference to the common law. A resident of a new subdivision
successfully applied to the Ontario courts for mandamus to compel a pub-
lic utilities commission (the PUC) to provide water and electrical ser-
vice. The PUC had refused to do so because the developer of the lands had
failed to complete installation of a water main and to install a secondary
line and transformer necessary to supply the houses with electricity, in
contravention of an agreement with the municipality for the development
of the lands. An order directing the PUC to supply the services had been
granted at first instance without written reasons. On appeal, the PUC
acknowledged that it had a duty to provide service under section 55 of the
Public Utilities Act, but argued that that did not include a duty to extend
its lines of supply. Section 55 provides as follows:
55. (1) Where there is a sufficient supply of the public utility, the
corporation shall supply all buildings within the municipality situate
upon land lying along the line of any supply pipe, wire or rod, upon
the request in writing of the owner, occupant or other person in
charge of any such building.53
The PUC said that, until the water main was tested (which involved
digging down to test for possible leaks) and the secondary line and trans-
former were installed, no service could be demanded as of right. The court
of appeal had no difficulty in concluding that the applicants property lay
along an existing water supply line and that section 55 imposed a statuto-
ry duty to supply that service. The situation relating to electricity was dif-
ferent, however, because the facilities required to supply power were not
in place. The court concluded that the installation of the secondary line
and transformer was not a prerequisite to the creation of a statutory duty
to serve. That duty applied unless there was no supply line at all from
which service could be provided.54 Since there was a supply line, the court
held that the failure of the developer to perform its agreement with the
municipality to install those facilities did not defeat the PUCs statutory
duty to provide service.
sumers in an Age of Competitive Retail Public Utility Restructuring (1998) 51:5 Vand
L Rev 1233 at 1252-53: Although the states differ in the details, the basic modern rule
for the extension of service generally accepted by all fifty states is that a utility can be
required by a regulatory authority to make all reasonable additions within the area to
which it has dedicated its services, but that no extensions can be mandated outside of
that area.
51 Payton, supra note 8 at 144.
52 [1966] 2 OR 675, 58 DLR (2d) 125 (CA) [Holmberg].
53 RSO 1960, c 335, s 55.
54 Holmberg, supra note 52 at 682.
536 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
Some authorities suggest that a duty to extend service may be implied
from a franchise arrangement conferring an exclusive right to provide a
service.55 The franchise model, though familiar in other public-utility set-
tings,56 has not been widely adopted in Canada for telecommunications
services. Canadian telecommunications carriers are generally free to de-
fine for themselves the limits of their operating territories, and none en-
joys a legal monopoly within its territory. As a result, there is rarely a
foundation for the implication of a duty to provide telephone service based
on the exclusivity conferred by a franchise. Where exclusivity has been
expressly granted by statute, a duty to serve is often linked to that exclu-
sive right, but both right and obligation are usually for a limited term. For
example, the 1888 act of the New Brunswick legislature incorporating the
New Brunswick Telephone Company (now a constituent part of Bell Ali-
ant) gave the company the exclusive right to maintain telephone commu-
nication between St. John and Fredericton, and between several other
places, on the condition that the said Company shall within two years of
the passing of this Act construct, erect and equip Telephone communica-
tion between these several points or places between the same. The exclu-
sivity was limited, however, to a period of ten years.57 The Island Tele-
phone Company Limited, which was incorporated by the legislature of
Prince Edward Island in 1929 (also now a constituent part of Bell Aliant),
enjoyed a similar period of exclusivity subject to an obligation (of indefi-
nite duration) to establish new exchanges wherever good telephone prac-
tice shall require.58
55 See ATCO Gas and Pipelines Ltd v Alberta (Energy and Utilities Board), 2006 SCC 4 at
para 63, [2006] 1 SCR 140. According to Burdick, the duty to serve probably owes its
origin principally to the public franchises granted to the vast majority of modern public
service companies, and has its logical basis in such grants (supra note 8 at 529). See
also Payton, supra note 8 at 138. Contrast Bennett and Fisher, supra note 41 at 501,
Dixon CJ: The American doctrine, which is a deduction from what is implied in the
grant of an exclusive right to a public utility, has not been established in English law.
56 See e.g. The Municipal Franchises Act, SO 1912, c 42, s 2(c) (formerly applying to water,
gas, electric and steam heating works, as well as distributing works of every kind);
Municipal Franchises Act, RSO 1990, c M.55, s 1, as amended by Municipal Act, 2001,
SO 2001, c 25, s 480(1) (currently applying only to gas). The decision of the Privy Coun-
cil in Toronto v. Bell Telephone Canada effectively blocked any prospect of municipal
regulation of the activities of federally incorporated telephone companies ([1905] AC 52,
21 TLR 45). See Cobalt (Town of) v Temiskaming Telephone Company, [1919] 59 SCR
62, 47 DLR 301 (discussing the statutory power of an Ontario municipality to grant a
provincially incorporated telephone company a franchise to install facilities on its
streets).
57 An Act to incorporate the New Brunswick Telephone Company (Limited), SNB 1888, c
78, s 9.
58 An Act to Incorporate The Island Telephone Company Limited, SPEI 1929, c 30, ss 3, 23.
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 537
C. Is There a Duty to Serve Where There Are Multiple Suppliers?
Public-utility services have historically been provided on a monopoly
(or near-monopoly) basis and it seems fair to say that the existence of a
monopoly has been one of the defining features of the public utility.59 A le-
gal or practical monopoly is present in Cornwall, Chastain, and the oth-
er Canadian public-utility cases cited above in which a duty to serve has
been held to arise. This is equally true of the Lvis line of cases, although
they do not all mention the point. In Lvis, the supplier did not have a le-
gal monopoly, but was found to have a position of great and special ad-
vantage deriving from the fact that it was the only convenient source of
supply. Tsawwassen and Long Lake are also cases in which the suppliers
had, in effect, a practical monopoly of the sort that the supplier of gas
and electricity was found to have in Chastain.60 In Commercial Alcohols
Inc. v. Bruce Power, L.P.,61 the Ontario Superior Court supports the view
that the duty to serve arises only where there is a monopoly in the supply
of the relevant commodity. That case concerned the interpretation of a
contract for the supply of steam energy by Bruce Power. The court said
that, as Bruce Power did not have a monopoly over provision of steam en-
ergy, the obligation of a public utility or other body having a practical mo-
nopoly on the supply of a particular commodity or service of fundamental
importance to the public referred to in Chastain did not apply.
Many of the markets previously dominated by monopolies, including
telecommunications, electricity, and gas, have now become, in whole or in
part, competitive. How is the traditional duty to serve imposed by the
common law on the former monopolies affected by this change? This is one
59 See James C Bonbright, Principles of Public Utility Rates (New York: Columbia Univer-
sity Press, 1966) at 8 (identifying special public importance or necessity and the pos-
session by utility plants of … characteristics leading almost inevitably to monopoly or at
least to ineffective forms of competition as the two essential attributes of the public
utility).
60 The long line of New Zealand cases which have applied Lvis (supra note 32) and the
doctrine of prime necessity to regulate access to and pricing of utility services general-
ly cite the existence of monopoly as the justification for judicial intervention. See State
Advances Superintendent v Auckland City Corp, [1932] NZLR 1709 at 1715 (CA)
([W]here a water-supply authority has a practical monopoly there lies upon it an obli-
gation (implied where not expressed) to supply water to all those requiring it and who
are prepared to pay a fair and reasonable charge.); Auckland Electric Power Board v
Electricity Corp of New Zealand Ltd, [1994] 1 NZLR 551 at 557 (CA) (the doctrine of
prime necessity imposes upon monopoly suppliers of essential services a common law
duty to supply at a reasonable price); Vector, supra note 40 at para 51 (the doctrine
embodies a principle that monopoly suppliers of essential services must charge no more
than a reasonable price); Pacifica Shipping Ltd v Centreport Ltd (2002), [2003] 1 NZLR
433 at para 17 (the doctrine of prime necessity is designed to control the prices which
qualifying monopolists may impose on their customers).
61 2006 CanLII 2183 at para 152, [2006] OTC 85, affd 215 OAC 190, 2006 CanLII 31445.
538 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
of the issues I will examine in the next section. Where the common law is
concerned, however, the situation seems clear: the existence of a monopo-
ly or near-monopoly is critical to the existence of a duty to serve and once
that condition no longer obtains the common law duty to serve no longer
arises.
III. The Common Law Duty to Serve and Regulation
In Canada, the common law duty to serve exists alongside statutory
service obligations imposed on telecommunications carriers by the Tele-
communications Act and regulatory policies promoting universal access to
basic telecommunications services promulgated by the CRTC.62 In this
section, I examine these other service obligations and how they interrelate
with carriers common law duties.
A. The Regulatory Framework
The Telecommunications Act affirms that Canadian telecommunica-
tions policy has among its objectives to render reliable and affordable tel-
ecommunications services of high quality accessible to Canadians in both
urban and rural areas in all regions of Canada (the universal service ob-
jective).63 The act requires that rates for telecommunications services
shall be just and reasonable and specifies that no carrier shall unjustly
discriminate or give an undue preference in relation to the provision of a
telecommunications service.64 The act empowers the CRTC to ensure
compliance with these and other obligations and confers broad regulatory
62 As Cornwall illustrates, the common law duty to serve may exist alongside a public util-
itys statutory service obligations. In that case, the court held that the city was com-
pelled to supply water to consumers as a matter … of duty and the common law and al-
so s. 55 of The Public Utilities Act (supra note 24 at 684).
To say that a common law duty to serve may exist in parallel with statutory service
obligations is not to say that the common law courts retain jurisdiction to enforce such
duties where a regulatory authority, such as the CRTC, has a statutory mandate over
the subject matter. Where the jurisdiction of the courts and that of a specialized tribu-
nal overlap, the case law indicates that the courts will generally decline jurisdiction and
defer to the regulator. See e.g. Mahar v Rogers Cablesystems Ltd ((1995), [1996] 25 OR
(3d) 690, 34 Admin LR (2d) 51), and the discussion of that case and others in Michael H
Ryan, Canadian Telecommunications Law and Regulation, loose-leaf (consulted on 25
January 2012), (Scarborough: Carswell, 1993) at s 503 (a).
63 Supra note 1, s 7(b).
64 Ibid, s 27(1)-(2). These provisions replicate the common law duty that requires carriers
to charge only prices that are reasonable and not unreasonably discriminatory for their
telephone services and extend those requirements to all telecommunications services.
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 539
powers on the CRTC for that purpose.65 The act does not impose a statu-
tory duty to serve on carriers.
Exceptionally, the Bell Canada Act imposes a duty on Bell Canada to
provide telephone service [w]here a telephone service is requested … in a
municipality or other territory within which a general telephone service is
provided by the Company. The duty applies if the premises for which the
service is requested front on a highway, street or lane or other area
along, over, under or on which the Company has a main or branch tele-
phone service or system, but not if the telephone on the premises would
be situated more than 62 metres or such other distance as the Commis-
sion may specify from the highway, street, lane or other area.66
The ongoing relevance of the common law duty to serve is reflected in
CRTC decisions. The CRTC was evidently referring to the common law
when it stated in a 1979 decision that there was a duty on Bell Canada
and CNCP Telecommunications to provide their monopoly services (public
telephone service and telegram service, respectively) to anyone seeking
service in their entire operating areas irrespective of location.67 In 1999,
the Commission said that a local exchange carriers obligation to serve
means that it must provide service to subscribers in its service territory
at a reasonable price without unjust discrimination. It added that [t]he
concept of an obligation to serve developed within the context of a tradi-
tional, regulated monopoly in telecommunications services.68
In 1985, the CRTC proposed to add a stipulation to carriers standard
terms of service expressly requiring them to supply their tariffed services
65 Section 24, for example, provides that the offering and provision of services are subject
to any conditions imposed by the Commission or included in a tariff approved by the
Commission. Section 32(g) provides that the Commission may make any order relating
to the rates, tariffs, or services of carriers subject to the Telecommunications Act (supra
note 1, ss 24, 32(g)).
66 Bell Canada Act, SC 1987, c 19, s 6 (having its origins in Act Respecting Bell 1902, su-
pra note 10, s 2). The Commission is also empowered to shorten or lengthen the dis-
tance to which the obligation to build facilities beyond existing lines applies, but it has
made no such order to date (ibid, s 6(2)(b)). See also the following statutes, now re-
pealed, which imposed a duty to serve: Telecommunications Act, SA 1988, c T-3.5, s 42,
as repealed by Telecommunications Act Repeal Act, SA 2007, c 42, s 1 (duty to provide
telephone service imposed on city of Edmonton); The Rural Telephone Act, RSS 1978, c
R-27, s 14, as repealed by The Miscellaneous Statutes Repeal (Regulatory Reform) Act,
2001, SS 2001, c 23, s 7(1) (duty to serve imposed on rural telephone systems for farm
applicants); Telephone Act, RSO 1990, c T.4, ss 32, 94, as repealed by Municipal Act,
2001, SO 2001, c 25, s 484(2)27. Section 32 of the Telephone Act incorporated section 55
of the Public Utilities Act, RSO 1990, c P.52.
67 Decision 79-11, supra note 49 at 226-27.
68 Telephone Service to High-Cost Serving Areas (19 October 1999), Telecom Decision
CRTC 99-16 at paras 31-32, online: CRTC
540 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
to all who apply.69 Possibly as a consequence of questions raised by some
carriers about the Commissions power to prescribe a duty to serve,70 the
provision ultimately adopted (and that continues to apply today) stopped
short of imposing an affirmative duty to serve and instead specified when
the duty does not apply. The resulting text, article 3.1 of the Terms of Ser-
vice, provides as follows:
3. Obligation to Provide Service
3.1 The Company is not required to provide service to an applicant
where:
a)
b)
c)
the Company would have to incur unusual expenses which
the applicant will not pay; for example, for securing rights
of way or for special construction;
the applicant owes amounts to the Company that are past
due other than as a guarantor; or
the applicant does not provide a reasonable deposit or al-
ternative required pursuant to these Terms.71
Article 3.2 adds the requirement that, [w]here the Company does not
provide service on application, it must provide the applicant with a writ-
ten explanation upon request.
While there is no duty to serve prescribed by the Telecommunications
Act or the Terms of Service, the prohibition on unjust discrimination im-
poses an implicit duty to serve in some circumstances; it precludes a car-
rier from refusing service to a potential customer without just cause if it is
providing the service to an existing customer in similar circumstances.72
69 Review of the General Regulations of the Federally Regulated Terrestrial Telecommuni-
cations Common Carriers: Phase II Draft Revisions to the General Regulations (6
March 1985), 1985-22, s 3.1, online: CRTC
70 See Submission by CNCP Telecommunications, 22 April 1985, at 7; Comments of Brit-
ish Columbia Telephone Company, 22 April 1985, at 3. Both the submission and the
comments are cited in Ryan, supra note 62 at 3-17, n 53.
71 Review of the General Regulations of the Federally Regulated Terrestrial Telecommuni-
cations Common Carriers: Terms of Service (26 March 1986), Telecom Decision 86-7,
App I, ss 3.1-3.2, online: CRTC
Service apply, by their terms, to any service in respect of which the Commission has ap-
proved a tariff (ibid, App I, s 1.1).
72 In Lachance v Bell Telephone ((1958), 77 CRTC 294 [Lachance]), the Board of Transport
Commissioners was asked to order Bell to provide telephone service to the applicant,
whose next-door neighbour had such service. Despite the proximity of his next-door
neighbour, Bell contended that the applicant was in a territory served by another tele-
phone company and did not, strictly construing the relevant provision of the Bell Cana-
da Act (supra note 66), fall within the class of persons entitled to demand an extension
of the companys lines to his premises. The Board was of the view that, in light of the
fact that the applicant and his neighbour resided in the same area, had residences
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 541
As a general matter, the Telecommunications Act does not empower
the CRTC to require a carrier to extend service beyond its existing lines.
This gap in regulatory authority was critically commented upon by the
Board of Railway Commissioners as long ago as 1910, which described the
governing legislation as lame in contrast to the corresponding legislation
respecting railways, which gave the same board ample authority to re-
quire railways to extend their lines.73 In 1928, the board concluded for this
reason that it was powerless to assist rural residents in the townships of
Madoc and Elsevir, who had petitioned it for an order requiring Bell Can-
ada to extend its lines to their area.74
construction of facilities is provided for in section 42(1):
The one circumstance in which the CRTC is empowered to order the
Subject to any contrary provision in any Act other than this Act or
any special Act, the Commission may, by order, in the exercise of its
powers under this Act or any special Act, require or permit any tele-
communications facilities to be provided, constructed, installed, al-
tered, moved, operated, used, repaired or maintained or any proper-
ty to be acquired or any system or method to be adopted, by any per-
son interested in or affected by the order, and at or within such time,
subject to such conditions as to compensation or otherwise and un-
der such supervision as the Commission determines to be just and
expedient.75
This power is not free-standing. In order to trigger the power to order the
construction of facilities, the Commission must be acting in the exercise
of its powers under the Act or any special Act. The 1992 decision of the
Commission ordering Bell Canada and BC TEL to modify their switches
to facilitate the interconnection with competitive providers of long dis-
tance services which had been mandated under section 40 of the Tele-
communications Act provides an example of a situation where section 42
fronting the same road, and were engaged in the same business, discrimination existed.
It is clear from the decision that the Board would have granted an order compelling the
telephone company to provide service on that ground; at the time, however, the non-
discrimination provisions of the Railway Act applied only to rates and not to services
and facilities provided by a carrier (see Railway Act, supra note 10, s 252). The Board
held in these circumstances that it was without jurisdiction to grant the relief request-
ed.
73 See Tinkess v Bell Telephone (1916), 20 CRC 249 at 254 (citing an earlier oral judgment
of the chief commissioner of the Board, denying, for lack of jurisdiction, an application
by the proprietors of a hotel for an order directing Bell to install telephones in rooms).
See also North Lancaster Exchange v Bell Telephone (1917), 21 CRC 220 at 224.
74 Residents between Queensboro and Cooper v Bell Telephone (1928), XVIII Board of
Railway Commissioners for Canada, Judgments, Orders, Regulations and Rulings 390
[Queensboro].
75 Telecommunications Act, supra note 1.
542 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
applied. A violation of section 27(2), which prohibits unjust discrimination
by telecommunications carriers, might also serve as a trigger for a section
42 order to extend a carriers lines, although no such order has ever been
made.76
The Commission has said that [t]he obligation to serve [not only] re-
quires ILECs [i.e., incumbent local exchange carriers] to provide tele-
phone service to existing customers, new customers requesting service
where the ILEC has facilities, [but also to] new customers requesting ser-
vice beyond the limits of the ILECs facilities.77 Such requests by new cus-
tomers are governed by Commission-approved tariffs. These do not, how-
ever, impose an obligation on carriers to extend their facilities so much as
to define a process for dealing with such requests. Bell Canadas tariff is
representative. The tariff provides that when the Company elects to pro-
vide service or facilities in territory other than that as stated in [the Bell
Canada Act], the construction charges specified in its tariff shall apply.
This includes a free allowance for the first 165 metres of construction,
which is deemed to be covered by monthly rates and rentals, after which a
cost-based charge applies.78
B. Universal Service
The CRTCs consideration of the duty to serve has taken place almost
entirely within the context of discussions of its universal access policy.
A review of the decisions of federal regulatory authorities prior to
1976the year that jurisdiction over telecommunications was transferred
to the CRTC79suggests that the Commissions predecessors80 did not see
the promotion of universal access to telephone service as a regulatory ob-
jective. These agencies construed their mandate narrowly: it was to en-
sure that rates were just and reasonable and free of unjust discrimination
and undue preferences; and consideration of the telephone companies du-
ty to serve were addressed only within the context of disputes over indi-
76 The possibility of an order by the Board of Railway Commissioners to construct facili-
ties based on the prohibition against unjust discrimination was mooted in Stoney Point
Village v Bell Telephone (1915), 18 CRC 319 at 320-21 [Stoney Point] (concerning the ju-
risdiction of the Board to order the reopening of a telephone pay station).
77 OTS Decision, supra note 4 at para 6 [emphasis added].
78 General Tariff 6176, Item 150.
79 Canadian Radio-television and Telecommunications Commission Act, SC 1974-75-76, c
49, s 3(1).
80 Telecommunications was regulated by the Board of Railway Commissioners from 1908
until 1938, when the Boards name was changed to the Board of Transport Commis-
sioners. The latter had the responsibility until 1967, when it was replaced by the Cana-
dian Transport Commission. The CTC regulated telecommunications until 1976.
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 543
vidual service issues.81 The CRTC brought a fresh approach to regulation
and a concern for broader social issues. The CRTC made the universal
availability of telephone service at affordable prices, now endorsed as an
objective of Canadian telecommunications policy by the Telecommunica-
tions Act,82 one of its prime objectives.83 The absence of a statutorily man-
dated duty to serve and a power to require the construction of extensions
to facilities to implement it does not seem to have impeded the CRTC in
pursuing that objective. It did so principally by incorporating considera-
tion of accessibility to a carriers telephone services in its assessment of
the justness and reasonableness of the carriers rates. The Commission
made it clear that, where it regarded the level of availability of telephone
service as unsatisfactory, it would be reluctant to authorize rate increases
until the carrier could demonstrate significant progress towards improv-
ing the situation.84 Under this regime, telephone companies were allowed
to recover the costs of improved access through rate increases for other
services sanctioned by regulationand in particular long distance tele-
phone services. By means of this regulatory bargain, the Commission
was able to drive a continued expansion of access to service over the fol-
lowing decades.85 The Commissions decision in British Columbia Tele-
phone CompanyExtension of Service to Remote Communities86 provides
a good example of this process in action. In that case, the Commission en-
dorsed a plan under which the company would contribute up to $10,000
per subscriber to extend or improve service to remote locations, which
sum would be recoverable by the company from the general body of tele-
phone customers. It was the regulatory bargain, and not the prescrip-
81 See Stoney Point, supra note 76; Queensboro, supra note 74; Lachance, supra note 72;
McKenna v Bell Telephone (1963), [1966] 85 CRTC 157, revd Metcalfe Telephones Ltd v
Walter J McKenna (1963), [1964] SCR 202, 43 DLR (2d) 415.
82 Supra note 1, s 7(b).
83 In 1977, the CRTC said that it must … ensure that all segments of the public have rea-
sonable access to telephone service: Bell Canada, Increase in Rates (1 June 1977), Tele-
com Decision CRTC 77-7 (Ottawa: CRTC, 1977) at 9. In 1978, it described universal ac-
cessibility to basic telephone service as a fundamental principle of regulation: Bell
Canada, Increase in Rates (10 August 1978), Telecom Decision CRTC 78-7 (Ottawa:
CRTC, 1978) at 26.
84 See e.g. CN Telecommunications, Increase in Telephone Rates in Newfoundland
780144200 (5 July 1978), Telecom Decision CRTC 78-5 (Ottawa: CRTC, 1978) at 18.
85 The percentage of households with telephone service rose from 96.5% in 1976 to 98.4%
by 1997. The 1976 data is from Robert Pike & Vincent Mosco, Canadian Consumers
and Telephone Pricing: From Luxury to Necessity and Back Again? (1986) 10:1 Tele-
comm Poly 17 at 22; the 1997 data is from CRTC, Report to the Governor in Council:
Status of Competition in Canadian Telecommunications Markets, online: CRTC
86 (6 June 1990), Telecom Decision CRTC 90-11, online: CRTC
544 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
tion or enforcement of the duty to serve, that underpinned the Commis-
sions universal access policy and to which the success of that policy must
be attributed.
The elaborate system of internal telephone company cross-subsidies
that evolved during this period became so central to the Commissions
universal access policy that the Commission initially resisted proposals
for the introduction of competition in the provision of long distance tele-
phone services out of concern for the threat competition might pose to the
sustainability of the mechanism funding universal access.87 These con-
cerns were ultimately overcome through adoption of a scheme under
which new entrants were required to make payments to the incumbents
to preserve affordable rates for basic services.88 An amendment to the Tel-
ecommunications Act in 1998 provided a statutory foundation for the crea-
tion of a new subsidy mechanism under which all carriers now pay a
CRTC-prescribed percentage of their revenue into a fund to subsidize the
provision of basic residential local telephone services in Commission-
designated high-cost serving areas.89
87 See Interexchange Competition and Related Issues (29 August 1985), Telecom Decision
CRTC 85-19, online: CRTC
CRTC on 29 August 1985 to coincide with the release of the latter decision, the Chair-
man of the CRTC, Andr Bureau, said I want to assure Canadians that the Commis-
sion would not make decisions which would jeopardize the principle of universal acces-
sibility to telephone service at an affordable price (quoted in Pike & Mosco, supra note
85 at 31). The implications of introducing competition in the provision of telecommuni-
cations services were later the subject of a special report: see Federal-Provincial-
Territorial Task Force on Telecommunications, Competition in Public Long-Distance
Telephone Service in Canada, Report (Ottawa: Minister of Supply and Services Canada,
1988).
88 In Competition in the Provision of Public Long Distance Voice Telephone Services and
Related Resale and Sharing Issues, the CRTC authorized the introduction of long dis-
tance telephone competition ((12 June 1992), Telecom Decision CRTC 92-12, online:
CRTC
ment of a per-minute charge by new entrants as a contribution to the costs of operat-
ing the ILECs access networks. In Local Competition, the Commission created a cen-
tral contribution fund and made it possible for any local exchange carrier, ILEC, or
competitive local exchange carrier, to draw on the contribution fund to subsidize its lo-
cal rates ((1 May 1997), Telecom Decision CRTC 97-8, online: CRTC
ILECs should be eligible to draw from the fund since only they have an obligation to
serve (supra note 4 at para 140).
89 Telecommunications Act, supra note 1, s 46.5, as amended by An Act to amend the Tele-
communications Act and the Teleglobe Canada Reorganization and Divestiture Act, SC
1998, c 8, s 6. The new contribution arrangements adopted are described in Changes to
the Contribution Regime (30 November 2000), Telecom Decision CRTC 2000-745,
online: CRTC
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 545
In Telephone Service to High-Cost Serving Areas, the Commission for
the first time defined a basic service objective (BSO) for ILECs. The ser-
vices to which the BSO applies include:
Individual line local service with touch-tone dialling, provided by
a digital switch with capability to connect low-speed data trans-
mission to the Internet at local rates [i.e., Primary exchange
service];
Enhanced calling features, including access to emergency ser-
vices, Voice Message Relay Service, and privacy protection fea-
tures;
Access to operator and directory assistance services;
Access to the long distance network; and
A copy of a current local telephone directory.90
The BSO does not purport to impose a requirement on ILECs to provide
the relevant services. The Commission made it clear in setting the objec-
tive that it did not expect the industry to extend and improve service to all
areas immediately; the only actual obligation imposed was a requirement
that all incumbents not meeting the objective submit multi-year service
improvement plans designed to achieve the basic service objective in their
entire service territory.91
The Commission has rejected proposals to impose a duty to serve on
pay telephone service providers and to impose a duty on a carrier to serve
as a toll carrier of last resort.92 The Commission has also said that it
would consider including an obligation to provide toll-free Internet access
in the carriers obligation to serve if there was evidence that no ISP was
providing such service.93
In its recent decision in Obligation to Serve and Other Matters, the
Commission considered whether it should play a role in improving access
an Revenue-based Contribution Regime (8 June 2007), Telecom Decision CRTC 2007-15,
online: CRTC
90 Decision 99-16, supra note 68 at para 24.
91 Ibid at paras 37-41. The Commission said that subsidies would be available to under-
write some of the costs incumbents incur in meeting the BSO (ibid at para 79).
92 See e.g. Local Pay Telephone Competition (30 June 1998), Telecom Decision CRTC 98-8,
online: CRTC
and Related Matters (13 September 2001), Telecom Decision CRTC 2001-583 at paras
76-86, online: CRTC
93 Implementation of Price Regulation for Tlbec and TELUS Qubec (31 July 2002), Tel-
ecom Decision CRTC 2002-43 at para 396, online: CRTC
546 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
to broadband Internet services and, specifically, whether it should add ac-
cess to broadband Internet services to the BSO.94 Some parties, including
most ILECs and other major Internet access providers, argued that the
Commission lacked the legal authority to require them to provide broad-
band Internet access; and other parties, including consumer groups, took
the contrary view. In the end, however, the Commission decided that it
would not add the provision of broadband Internet access to the BSO. The
Commission noted that the rollout of broadband Internet access in Cana-
da has been successful through a combination of market forces, targeted
funding, and public-private partnerships at all levels of government, even
though service gaps remain in rural and remote areas. It decided that the
existing policy should continue. Instead of adopting any prescriptive
measures, the Commission established target speeds (5 Mbps downstream
and 1Mbps upstream) for broadband Internet access and stated that these
speeds should be available to all Canadians by the end of 2015 and that it
would monitor progress towards reaching these targets.95
C. The Impact of Competition
I have stated above that the common law duty to serve attaches only
to services provided on a monopoly or near-monopoly basis. The CRTC
has implicitly acknowledged this limit on the common law duty to serve.96
It is appropriate to turn now to a consideration of how the CRTC has ad-
dressed the duty to serve in the increasingly competitive environment
that has emerged since the 1990s.
Although competition in the provision of public long distance tele-
phone services was introduced in 1992, it was not until 1997, when the
Commission liberalized the provision of local exchange services, that the
Commission was compelled to address the implications of competition for
the duty of the incumbents to provide telephone service.97 The subject at-
tracted considerable comment in the proceeding that led up to the 1997
decision. Stentor, the umbrella group for the major incumbents, submit-
ted that in a competitive environment the incumbents obligation to serve
would in effect become a carrier of last resort obligation under which
Stentor members would be ready to serve not only their own customers,
but also competitors’ customers. Stentor also submitted, however, that the
94 OTS Decision, supra note 4 at para 29.
95 See ibid at paras 81-84. The Commission also decided against establishment of a fund-
ing mechanism to subsidise the deployment of broadband Internet access services more
generally: ibid at para 64.
96 See Decision 79-11, supra note 49 at 226-27; Decision 99-16, supra note 68 at para 32.
97 Decision 97-8, supra note 88.
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 547
case for maintaining such an obligation would disappear in a competitive
marketplace after the incumbents made interconnection and other essen-
tial facilities available to new competitors. The Commission responded
that it would not be appropriate, in markets characterized by effective fa-
cilities-based competition, to designate one carrier as having carrier of
last resort responsibilities. It also considered it unlikely that fully effec-
tive competition would develop in all areas in the near term, and even
then that it would be unlikely that market forces, on their own, would
achieve the Telecommunications Act’s accessibility objective in all regions
of Canada. The Commission concluded that the most appropriate way to
reach this goal was to maintain the incumbents current obligation to
serve, pending further investigation into an approach for serving high
cost areas more suited to a fully competitive environment.
In Telephone Service to High-Cost Serving Areas, the 1999 decision in
which it established the BSO, the Commission invited comment on how
the obligation to serve might be changed where competition is present.
However, it again concluded that effective local service competition would
not likely occur in the short term and that, in the meantime, incumbent
local carriers must retain their obligation to serve.98
Over the following ten years, local exchange markets became increas-
ingly competitive and ILECs and others in the industry began to call on
the Commission to exercise its statutory power to forbear from regulating
local exchange markets99 where competition had taken hold, as it had in
long distance and other markets in similar circumstances. The Commis-
sion initially resisted these calls for local forbearance. In 2005, however,
the Commission initiated a proceeding that resulted a year later in a deci-
sion entitled Forbearance From the Regulation of Retail Local Exchange
Services. The Commission said that it would be prepared to forbear from
regulating local exchange services in a relevant market where an appli-
cant ILEC could demonstrate that it had suffered a 25 percent market
share loss in the relevant market, had met certain quality of service
standards in relation to services provided to competitors, had complied
with certain measures designed to facilitate competition, and could in fact
demonstrate that rivalrous behaviour existed in the relevant market.100
98 Decision 99-16, supra note 68 at paras 31-36 [emphasis in original].
99 The power to forbear is conferred by section 34 of the Telecommunications Act (supra
note 1, s 34).
100 Forbearance from the Regulation of Retail Local Exchange Services (6 April 2006), Tele-
com Decision CRTC 2006-15 at para 242, online: CRTC
2006-15]. This decision was later amended by Order Varying Telecom Decision 2006-15,
PC 2007-532, (2007) C Gaz II, 408 [Order Varying Decision 2006-15]. A consolidated
548 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
The Commission declined, however, to relieve incumbents of their duty to
serve. The Commission stipulated that incumbents would continue to be
required to offer primary exchange service in forborne markets, reasoning
that there may remain pockets of uncontested customers for whom the in-
cumbent would remain the primary or only local exchange carrier. It also
decided, in order to ensure that residential stand-alone PES is available
to all residential customers in forborne markets … to retain in forborne
markets the ILECs’ obligation to serve with respect to residential stand-
alone PES.101
Pressure for further deregulatory measures prompted the Governor-
in-Council to intervene in the following months with two initiatives. First,
the Governor-in-Council directed the CRTC, in exercising its powers and
performing its duties under the Telecommunications Act, to rely on mar-
ket forces to the maximum extent feasible as the means of achieving the
telecommunications policy objectives, and when relying on regulation,
[to] use measures that are efficient and proportionate to their purpose and
that interfere with the operation of competitive market forces to the min-
imum extent necessary to meet the policy objectives.102 Second, the Gov-
ernor-in-Council issued an order varying the criteria established by the
Commission in its local forbearance decision by eliminating the 25 percent
market-share-loss requirement and substituting a test which mandates
forbearance in a local exchange where there are at least two other inde-
pendent facilities-based service providers serving the same local exchange
that are capable of serving at least 75 percent of the local residential
lines.103
The variance order did not alter the CRTCs conclusions respecting
continuation of the duty to serve, but in response to the Governor-in-
Councils direction to rely on market forces to the maximum extent feasi-
ble, the CRTC adopted an action plan for reviewing past regulatory
measures, including the obligation to serve.104 It was against this back-
version of Decision 2006-15 that includes the variations can be found online: CRTC
101 Decision 2006-15, supra note 100 at paras 374-385 (especially para 381).
102 Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunica-
tions Policy Objectives, PC 2006-1534, (2006) C Gaz II, 2344 at 2344-2345. The Direc-
tion was issued pursuant to section 10 of the Telecommunications Act (supra note 1, s
10).
103 Order Varying Decision 2006-15, supra note 100. The power to vary CRTC decisions is
conferred by s 12 of the Telecommunications Act (supra note 1, s 12).
104 Action Plan for Reviewing Social and Other Non-economic Regulatory Measures in
Light of Order in Council P.C. 2006-1534 (17 April 2008), 2008-34, online: CRTC
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 549
drop that the CRTC launched Proceeding to Review Access to Basic Tele-
communications Services and Other Matters in 2010.105 Examination of
the obligation to serve and the BSO formed part of the agenda. The pro-
ceeding went through several phases. It is sufficient for present purposes
to note that there was a diversity of views expressed about how these two
issues should be addressed in the future. The large ILECs argued that the
obligation to serve and the basic service objective should be eliminated in
forborne exchanges and retained in regulated exchanges. These parties
generally argued that market forces are sufficient in forborne exchanges
to ensure that high-quality PES continues to be accessible to all subscrib-
ers. They also argued that, if the obligation to serve and the basic service
objective were to be retained in forborne exchanges, ILECs should be giv-
en greater pricing flexibility by raising the price ceiling on stand-alone
PES to the highest affordable level. Other parties, including consumer
groups and small ILECs, submitted that the obligation to serve and the
basic service objective should be retained in both regulated and forborne
exchanges. They argued that reliance on market forces alone, even in for-
borne exchanges, would not ensure that vulnerable (e.g., low-income) and
uncontested (i.e., without access to competitive wireline services) custom-
ers would continue to have access to quality voice services at affordable
rates. Most of the large cable carriers submitted that the obligation to
serve and the basic service objective should be eliminated wherever at
least one competing alternative wireline or wireless voice service is pro-
vided within an ILECs serving territory. These parties argued that mo-
bile wireless services are pervasive across the vast majority of Canada
and are substitutes for wireline services.106
The Commission decided that ILECs should continue to have an obli-
gation to provide stand-alone [primary exchange service], which includes
unlimited local calling at a flat monthly rate and a choice of long distance
service provider,107 but gave the ILECs the freedom to charge higher
rates for the service (subject to a price ceiling).108 The Commission also re-
jected the idea that the obligation to serve and the BSO should be applied
symmetrically to all carriers. In regulated exchanges, the Commission
said, it would not be appropriate because the majority of competitors
105 OTS Notice, supra note 4.
106 OTS Decision, supra note 4 at para 36.
107 Ibid at para 49. The Commission rejected the argument made by some parties that an
obligation to serve arises only where there is a monopoly and that the Commission does
not have the legal authority to impose such an obligation in forborne exchanges, where
there is competition. The Commission characterized this view as unduly narrow … in-
consistent with the broad statutory powers granted to the Commission, and … the broad
policy objectives to which the Commission must have regard (ibid at para 46, n 33).
108 Ibid at paras 46, 50-53.
550 (2012) 57:3 MCGILL LAW JOURNAL ~ REVUE DE DROIT DE MCGILL
have a minimal presence; and in forborne exchanges, it would be unduly
duplicative and would not be a minimally intrusive means of achieving
the policy objectives underlying the obligation to serve.109
Conclusions
The scope of carriers service obligations is defined by an amalgam of
common law duties, statutory service obligations and CRTC-mandated
policies that can be summarized in the following points:
1. At common law, suppliers of services of fundamental importance
to the public are required to provide their services on demand.
Telephone services are included within this category, but no Ca-
nadian court has ever extended the duty to other types of tele-
communications service.
2. The duty arises only in respect of the territory that the service
provider professes to serve. There is no duty on the part of a ser-
vice provider to extend its service beyond its existing lines of sup-
ply unless denial of service would subject a potential customer to
unreasonable discrimination.
3. The duty arises only where a carrier has a monopoly (de jure or de
facto) on the provision of the relevant service, or the service sup-
plier stands in a position of special advantage and the circum-
stances and the relative position of the parties is such that the
imposition of such a duty is warranted.
4. The common law duty to serve exists alongside statutory obliga-
tions imposed on telecommunications carriers by the Telecommu-
nications Act, which requires them to charge just and reasonable
rates and prohibits unjust discrimination. The act is silent, how-
ever, on the matter of the duty to serve (although, exceptionally,
the Bell Canada Act imposes such a duty on Bell Canada).
5. In the exercise of its regulatory mandate, the CRTC has adopted
policies promoting universal access to basic telecommunications
services. Since 1993, it has been a statutory objective of Canadian
telecommunications policy to render reliable and affordable tele-
communications services of high quality accessible to Canadians
109 Ibid at paras 42, 47. For contrasting views about whether the duty to serve should con-
tinue in the presence of competition, see Payton (supra note 8 at 121, 144-5) who argues
in favour, and Willie A Grieve & Stanford L Levin (Common Carriers, Public Utilities
and Competition (1996) 5:4 Indus & Corp Change 993 at 999-1000) who express con-
cern about the sustainability of a regime that imposes a duty to serve on incumbents in
the presence of competition.
TELECOMMUNICATIONS CARRIERS AND THE DUTY TO SERVE 551
in both urban and rural areas in all regions of Canada.110 The
Commissions authority to impose an obligation on carriers to ex-
tend service to unserved areas is limited, however, and, instead of
imposing prescriptive measures, the Commission relied in the past
on its rate-setting power to encourage the necessary investment.
Using this approach, the Commission permitted carriers to recov-
er the cost of network expansion and improvement through in-
creased rates (and indicated that it would withhold approval of in-
creases where service was judged inadequate). This approach has
now been superseded by a scheme administered by the Commis-
sion, which provides explicit subsidies to support the provision of
basic telecommunications services by ILECs in certain high-cost
areas.
6. The Commission has also defined a non-binding basic service ob-
jective for ILECs. The BSO includes the provision of individual lo-
cal line service (primary exchange service). The CRTC has de-
clined to extend the BSO to other services, such as pay phone ser-
vice and toll-free access to the Internet.
7. The Commission has forborne from the regulation of ILECs local
exchange services in exchanges where competition has taken hold.
The BSO no longer applies in such cases. The Commission has,
however, decided that ILECs should continue to have an obliga-
tion to provide stand-alone primary exchange service throughout
their territories.
8. The Commission has rejected the idea that the obligation to serve
and the BSO should be applied symmetrically to all carriers.
9. The Commission has also rejected proposals that it should add the
provision of broadband Internet access to the BSO. The Commis-
sion has opted instead to continue the existing policy, which relies
upon a combination of market forces, targeted funding, and public-
private partnerships at all levels of government, to expand the
reach of broadband. The Commission has established target
speeds for broadband Internet access and set a date of 2015 for
achievement of those targets, which, it has said, it will monitor.
110 Telecommunications Act, supra note 1, s 7(b).
