Lessons from the Regulatory Modernisation Initiative: Case study on the Canadian Transportation Agency (CTA)
Over the past two decades, transportation sectors have been undergoing rapid change in business models and operating practices as a result of factors such as technological advancements and market liberalisation. At the same time, users' (the travelling public and shippers) expectations with regard to transportation services have increased. It is important to ensure that transportation regulators have the appropriate mandates, authorities, and tools to keep up with these changes. The Canadian Transportation Agency's (CTA) Regulatory Modernization Initiative (RMI) was aimed at addressing regulatory issues related to these rapidly evolving standards, practices and technologies. The CTA also leverages co-operative relationships with other federal organisations and international counterparts to address issues where regulatory jurisdictions may overlap.
The CTA is an independent regulator and quasi-judicial tribunal that, among other things, makes, applies, and enforces economic and accessibility-related regulations covering Canada's national transportation system. Most of those regulations were decades-old and, in some respects, outdated, which had problematic implications for industry, travellers and shippers, and the efficiency and effectiveness of the CTA itself. To address this regulatory sclerosis, the CTA launched its RMI in May 2016 – an ambitious project to review and update every regulation the CTA administers, with the goal of ensuring that the regulations keep pace with changes in business models, user expectations, disruptive technologies and best practices in the regulatory field.
This case study describes how the RMI unfolded, draws some lessons on the challenges and factors for success associated with such an initiative, and underscores the importance of both regular reviews of legal frameworks and greater multilateral co-operation to address emerging issues.
Context
The CTA exercises oversight in respect of economic and accessibility matters for Canada’s federally-regulated modes of transportation: air, interprovincial and international rail, inter-provincial and international marine, and (with respect to accessibility) inter-provincial bus services.
The CTA has three core mandates:
Ensuring that the national transportation system runs efficiently and smoothly in the interests of all Canadians: those who work and invest in it; the producers, shippers, travellers and businesses who rely on it; and the communities where it operates
Protecting the human right of persons with disabilities to an accessible transportation network
Providing consumer protection for air passengers.
To deliver these mandates, the CTA has three primary tools at its disposal:
The first is rule-making: The CTA develops and applies ground rules that establish the rights and responsibilities of transportation service providers and users, and that level the playing field among competitors. These rules – which can take the form of binding regulations or less formal guidelines, codes of practice, or interpretation notes – are applied by the CTA through the issuance of regulatory authorities, licences and permits, and through a dedicated compliance monitoring and enforcement program.
The second tool is dispute resolution: the CTA, on application, resolves disputes that arise between transportation service providers on the one hand, and their clients and neighbours on the other, using a range of tools from facilitation and mediation to arbitration and adjudication. When it delivers adjudications, the CTA acts as a quasi-judicial tribunal and exercises all the powers of a superior court.
Finally, the CTA provides information on the transportation system, including the rights and responsibilities of transportation service providers and users, and the CTA's own mandates and services.
Issues
Many of the regulations for which the CTA is responsible came into force 20 to 25 years ago. In many cases, the provisions of these regulations did not keep pace with changes in business models, user expectations, and best practices in the regulatory field.
As a result, transportation service providers had to comply with sometimes cumbersome administrative obligations, protections for travellers (including those with disabilities) were uneven, and the CTA's ability to deliver timely and appropriate services was affected.
In respect of accessibility, prior to the RMI, there existed only two sets of regulations: one that set out certain accessibility-related service obligations for airlines, and the other prescribing mandatory training for front-line employees who assist persons with disabilities moving through the federally-regulated transportation network. To fill the gaps not covered by these regulations, the CTA developed six voluntary codes on accessibility matters. As they were not formal regulations, these codes were not legally binding.
In respect of consumer protection for air passengers, the previous regime in Canada only required that each airline develop and apply a tariff – a document outlining the carrier's terms and conditions of carriage. The CTA's only role was to determine whether an airline had properly applied its tariff and whether the terms in the tariff were reasonable. As each airline develops its own tariff, it was difficult for air travellers to know what rights and recourses were available to them. Other jurisdictions, notably the EU and the U.S., had developed more general air passenger rights regimes that laid out minimum standards of treatment and levels of compensation for flight disruptions.
In respect of market entry and operating conditions for air carriers, previous regulations included elements such as lengthy application periods and CTA approval requirements for routine activities, both of which were out-of-step with how the industry had evolved. They also set minimum insurance levels whose real value had been seriously eroded by inflation.
Finally, for rail transportation, previous regulations referenced statutes that had been repealed and did not reflect new obligations and processes created by legislative amendments.
Approach and intervention
The RMI was launched to address these challenges. It had four consultation phases: one each on accessible transportation, air transportation, air passenger protection, and rail transportation.
For accessible transportation, the RMI consolidated the existing regulations and the voluntary codes of practice into one comprehensive, robust, and binding set of regulations called the Accessible Transportation for Persons with Disabilities Regulations (ATPDR). They cover six key areas:
Communications;
training for transportation personnel that interact with persons with disabilities;
services;
technical requirements for facilities and equipment;
requirements for terminals, and
border and security screening.
While the new regulations address emerging issues not related to new technologies – such as accessible travel for persons with severe allergies – they do respond to the changing technological landscape. In particular, the regulations set accessibility requirements for technology and equipment now commonly used by transportation service providers and travellers, such as online check-in, self-service kiosks, and complex on-board entertainment systems. In keeping with the Canadian process, these regulations were pre-published for public comment, and the final regulations were published in summer 2019. The regulations, most of which will come into effect in June 2020, will benefit Canadians with or without disabilities who use the national transportation system.
In terms of the air passenger protection component of the RMI, the Transportation Modernization Act gave the CTA authority to make regulations establishing minimum airline obligations towards passengers in a number of areas, including clear communication, delayed or cancelled flights, denied boarding, tarmac delays over three hours, the seating of children under the age of 14, damaged or lost baggage, and the transportation of musical instruments. These new regulations have brought about a transparent, clear, fair, and consistent regime to the Canadian market, and align Canada with best practices in other international regulatory regimes such as the EU and the U.S. The Air Passenger Protection Regulations (APPR) were pre-published at the end of 2018 for public comment and finalised in May 2019. The requirements took effect in two phases – on 15 July 2019 and on 15 December 2019.
The other two phases of the RMI updated the CTA's existing air transportation and rail transportation regulations. These have not been updated frequently and as a result, they have not kept up with the significant changes in their respective industries. The objective for the air transportation phase was to amend the Air Transportation Regulations, which set out the criteria that air carriers must meet regarding the carriage of passengers and/or cargo by air, to better reflect market realities (e.g., amending insurance coverage requirements that were unchanged for three decades). Amendments to the CTA’s Rail Regulations included filing requirements for railway insurance, penalties for non-compliance with railway requirements, and updates to the regulations to reflect statutory changes in recent years. The amended air and rail regulations were finalised and published in summer 2019. Building on the momentum of the RMI, the CTA is looking at further regulatory reforms. In December 2019, the CTA launched public consultations on a second phase of regulatory reform in the area of accessible transportation. Areas of focus for these consultations include how to apply the ATPDR to small transportation providers, and what to require of transportation providers with respect to emotional support animals (ESAs) and service animals other than dogs. The CTA is also looking at additional updates to the rail regulations it administers.
Results, impacts and lessons learnt
As the ATPDR are not yet in force and the APPR only completely came into force at the end of 2019, it may take time to assess the impacts of the new regulations on the Canadian transportation network, and how effectively they have aided the CTA in pursuing its mandates. A regulatory cost benefit analysis (CBA) for the accessibility regulations, the ATPDR, suggested a cost to industry of CAD 7 million per year over a 10 year period, with benefits to Canadians of CAD 80 million per year over the same period. Qualitative impacts included reduced stigmatic harm, increased safety, and greater independence for persons with disabilities and wider access to desired destinations. For the air passenger regulations, the APPR, the regulatory CBA suggested a cost of CAD 218 million per year over a 10-year period for air carriers, with benefits to Canadians of CAD 232 million per year over the same period.
The consultations undertaken as part of the RMI also identified constraints in regulating at the national level that do not permit the CTA to fully respond to emerging technologies that disrupt the air industry, or air industry issues of an international nature. One example is the practice of data scraping air carriers' websites to obtain the lowest possible fare for customers. This practice involves extracting pricing and flight scheduling data to monitor and analyse trends in order to combine several unrelated itineraries, or to take advantage of "throwaway ticketing" to present the cheapest itinerary to the end user. Such websites circumvent Canadian regulatory requirements on airfare pricing advertising as they typically operate outside of Canada. The impacts of disruptive technologies on air travel is an issue that implicates different sectors, as well as different jurisdictions within Canada and internationally. Engagement with other federal organisations and other levels of government in Canada, other states, and international organisations such as the International Civil Aviation Organization (ICAO) will be required to assess the breadth of this issue and address it as required.
International co-operation is also key to addressing technological challenges in promoting accessibility across jurisdictions. For instance, as mobility aids become larger and more customised, more work is needed within and across countries to co-ordinate their carriage, particularly on airlines. The CTA decided to address this issue by creating a multi-stakeholder Mobility Aids Forum that collaborated to develop near-term goals and recommendations to promote the safe storage and transportation of mobility aids. The CTA is also working to promote accessibility more broadly at the international level. In particular, the CTA has joined with other federal organisations to increase the emphasis placed on accessible air transportation in ICAO deliberations. The CTA and other representatives from participating states are also leveraging new data sharing technologies to create an easily accessible compendium of regulations, statutes, and policies to promote a harmonised approach for accessible international travel. One key objective of this initiative is the passage of an accessibility-related resolution. These efforts recognise that when travel crosses borders, solving problems requires international support and co-ordination leading to international solutions.
Co-operation
The CTA actively fosters co-operative relationships with other organisations, both nationally and internationally, in order to share information and best practices, align regulations, and adopt and promote international standards.
The CTA has established formal arrangements with other jurisdictions and regularly participates in international fora. This has included:
Establishing a dozen Memoranda of Understanding (MOU) with other Canadian federal regulators as well as federal regulators in the U.S. and Mexico to foster co-operation and facilitate the sharing of information and best practices. The MOUs, among other things, allow for the sharing of information and data related to transportation and dispute resolution.
Collaborating with international counterparts through fora such as ICAO in order to promote uniform policy and regulatory practices across the air industry.
Regularly participating in the OECD's NER conferences and initiatives. This forum allows the CTA to share its experiences and lessons learned to an international audience of economic regulators, and it also provides an opportunity for the CTA to learn from the international community.
International consultation and analysis of best practices are a critical component of the CTA’s regulatory development process. In the case of the RMI, the CTA held meetings with counterparts in the United States and the EU to discuss the regulatory proposals, potential international considerations, and to learn about their experiences. Furthermore, when developing regulations at the federal level, government departments and agencies are required by the Treasury Board of Canada Secretariat to assess the approach of other jurisdictions in order to identify possibilities for regulatory alignment.