It was interesting that there was a minority dissenting opinion issued from Commissioner Stuart Langford. In his view, at least some of the tax benefits to be obtained under the new corporate structure should be shared with the subscribers. The majority of the Commissioners applied their own ‘test’ of whether an exogenous event had occurred that would merits revisiting the rates. Events or initiatives are considered to qualify for an exogenous factor adjustment if:
- they are legislative, judicial, or administrative actions which were beyond the control of the company;
- they are addressed specifically to the telecommunications industry; and
- they have a material impact on the company.
The income trust creation was caused by the company and could hardly be considered to be beyond its control. Income trusts are not limited to telecom and therefore both of the first two tests fail, despite the obvious material impact on the company.
Commissioner Langford disagreed. He recalled the special adjustment made to accommodate the privatization of MTS and the need for the company to pay taxes for the first time.
Imagine this scenario: MTS, as it was, is privatized. It appeals to the Commission for permission to raise rates so as to offset this new expense, saying that its going-in prices are no longer correct. The Commission, as it did, agrees. A short time later, MTS converts itself into an income trust. Surely no one would allow consumers to be gouged in such a way on the grounds that a true exogenous event had not triggered the transition of MTS back to a non taxpayer.
What’s good for the goose…