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Phone companies amassed about $1.6 billion in extra fees between 2002 and 2006. ((iStock))

Bell, Telus and other phone companies must pay back about $310 million to urban customers in the culmination of a bitter dispute with consumer groups that has lasted years, the Canadian Radio-television and Telecommunications Commission has ruled.

The phone companies, including Bell Aliant and MTS Allstream, must give refunds to customers who were overcharged between 2002 and 2006. The rebates will be between $25 and $90 per customer, the CRTC said Tuesday.

The regulator also approved a plan for the deployment of broadband internet to 287 rural and remote communities at a cost of $421 million, with roll-out taking place over the next four years.

"Today’s announcement is a positive solution for Canadian consumers," CRTC chairman Konrad von Finckenstein said in a statement. "Subscribers of the major telephone companies in urban areas will enjoy a rebate on their home telephone service. And residents in hundreds of rural communities will soon be able to take advantage of the many social and economic benefits broadband internet access provides."

The money for both the refunds and the broadband expansion comes from so-called "deferral accounts." In 2002, the CRTC allowed phone companies to charge above their normally regulated price caps so that new competitors entering the market for home phones — primarily cable companies such as Rogers and Vidéotron — could undercut them.

The extra charges went into deferral accounts, which over the years amounted to $1.6 billion. Phone companies were allowed to draw on these accounts to lower the wholesale rates they charged competitors such as Primus and Yak to access their networks.

In 2008, the CRTC ruled that the phone companies had to spend about half the remaining money — $350 million — on expanding rural broadband and improving services for disabled persons, while the remaining $300 million had to be returned to the urban customers who had originally been overcharged.

The total remaining amount has since risen to $770 million, including interest.

Both the phone companies and consumer groups objected to the original split of spending. Bell said it wanted to spend all of the remaining money on rural broadband, while consumer advocates wanted it all returned to customers. The issue made it all the way to the Supreme Court, which in 2009 sided with the CRTC's decision.

Bell and Bell Aliant will now connect 112 rural communities in Ontario and Quebec, Telus will connect 159 communities in British Columbia, Alberta and Quebec, and MTS will connect 16 communities in Manitoba, the CRTC said.

The CRTC rejected Bell's suggestion that the rural rollout be done using HSPA wireless technology, with a monthly usage limit of two gigabytes. The regulator said the phone company must use DSL wired connections and provide rural customers with comparable usage to what urban subscribers are getting.

Michael Janigan, executive director of the Public Interest Advocacy Centre consumer watchdog, was generally happy with the regulator's ruling and particularly pleased the Bell's wireless plan was rejected.

"It's a reasonable conclusion to a flawed regulatory adventure," he said. "Whatever the merits associated with wireless and DSL, it's clear that the pricing was presented in a way that was extravagant."

Michael Hennessy, senior vice-president of regulatory and government affairs at Telus, said the company is looking forward to connecting the smaller communities.

"We share that priority with the federal government," he said. "It is unfortunate the commission reduced the amount we can spend on connecting communities by $20 million. [That] may make it more challenging."

Bell spokesperson Jacqueline Michelis said the company is considering its options.

"It's unfortunate that the CRTC has denied customers in these rural and remote communities access to the latest broadband network technology and advanced services," she said.

"The CRTC does not have the expertise to choose technologies. Providing we meet any service requirements set out by the CRTC, technology choices should be left to the service providers."

The ruling comes one day after the regulator also ordered big phone companies to share their higher internet speeds with smaller wholesale service providers.