Connections +
Feature

Where did things go wrong?

Policy foot-dragging by the federal government leaves Globalive and other wireless operators twisting in the wind.


March 1, 2011  


Print this page

n the last issue I wrote about the importance of consistent government policy to spell out the regulatory environment in which wireless companies operate. (The same principle applies to all ICT companies, and indeed any company in any sector.)

I wrote, in part: “I’m not wading into the debate over whether start-up wireless companies like Globalive Wireless Management need to meet the established rules of Canadian ownership – or, if they do not, whether incumbent wireless operators should benefit from the same opportunity to secure foreign capital.”

Well, earlier this year we saw the results of unclear public policy, as a Federal Court ruling in February struck down the Cabinet decision that allowed Globalive to operate in this country.

Here is the timeline: Globalive won its spectrum at auction in July 2008. In October 2009, the CRTC ruled that Globalive, which is primarily financed by the deep pockets of Egypt-based Orascom, did not meet the Canadian ownership requirements to operate a wireless service in this country.

The Federal Cabinet overturned that ruling in December 2009. Then another new entrant, Public Mobile, appealed Cabinet’s decision to the Federal Court in January 2010.

That’s right. It has been more than two and a half years since Globalive won its spectrum at auction, and as I write this we still don’t know whether they should be a player in Canada. That’s too bad because the company is the largest of the new, independent wireless companies, with a customer base of more than 200,000 Canadians for its Wind Mobile service.

It begs the question, where did things go wrong? Well, the CRTC was within its rights to rule against Globalive. The foreign ownership laws were clear when the federal government conducted its spectrum auction in 2008.

At the same time, Cabinet acted in the interest of increased competition in the wireless sector and its move to overturn the CRTC’s decision and give Globalive the green light sent a signal that maybe, just maybe, the federal government was finally going to address the country’s increasingly contentious foreign ownership restrictions.

Both new entrants and incumbents in the wireless sector would like to see the restrictions eased, although they disagree on the degree to which this should be done.

It must be noted that the government has had several opportunities to tackle foreign ownership. It is fair to assume that the bureaucrats who draft policy have been thinking about this issue for some time and that they have some good ideas about the direction a new policy should take.

So the government could have introduced new rules at several points in this drama. First, as soon as it was clear that Orascom, through Globalive, wanted into Canada.

Second, upon recognizing that Globalive’s win at auction was going to be contentious, thereby giving the CRTC no reason to make its October 2009 decision. And third, at the very least, when Cabinet overturned that decision in December 2009.

But that’s not what happened. Instead, Public Mobile and Globalive are spending money on a legal battle that would be better spent building their brands. (For the record, Public Mobile is not trying to pull the plug on Globalive: It argues that Cabinet’s Order in Council created a unique exception for Globalive, which prevents others, including Public Mobile, from pursuing the same kind of financing opportunities.) And everyone, including the incumbents, has been left twisting in the wind on the question of foreign investment.

It’s always difficult to make predictions when columns are written several weeks before they’re published. But just days before Globalive’s foreign ownership issue once again broke the surface to vent fetid air, another, higher-profile issue released a sulfurous cloud across the Canadian telecom sector.

That issue was of course the CRTC’s January 25th ruling on usage-based billing (UBB), which would effectively force all ISPs to meter their customers’ bandwidth usage. As I write this, Industry Minister Tony Clement has vowed to overturn the UBB ruling – and until this controversy is resolved, Globalive’s ownership question is going to take a back seat.

As with Globalive, the fact that the CRTC and the federal government disagree on UBB is a clear indication that all is not well with Canada’s current telecom regulations. And so I will close by repeating what I said last issue:

“Clearly defined investment policies are preferable to inconsistent, case-by-case rule-making. Understanding ahead of time how regulators will respond to a proposal is far preferable to consulting Ouija boards, Magic 8 Balls, goat entrails and so on to try to guess whether one’s business plan has a chance of success.” CNS

Trevor Marshall is a Toronto-based reporter, writer and observer of the Canadian wireless industry. He can be reached (on his mobile) at 416-878-7730 or at trevor@wordstm.com