Industry divided on public review of Globalive Wireless’ foreign ownership

Industry reaction is mixed on whether the CRTC should conduct a public and open review of Globalive Wireless Management Corp.’s ownership structure. Proponents say it’s high time the commission drop its antiquated closed-door review process, while opponents say an open review will only serve to delay market entry, something the established players want. Comments come after the commission issued a call for submissions following an application from Telus Corp. in April requesting a public review of Globalive Wireless’ ownership structure. It should come as no surprise that the large established wireless operators want the CRTC to open Globalive Wireless’ books to the public. They say it’s a matter of fairness and transparency that ownership and control of a Canadian service provider be the same for all players. They also note that the public ownership and control reviews of broadcasters conducted under the Broadcasting Act should serve as a model for the CRTC’s reviews of telecommunications service providers. Opponents to an open review say giving third-parties the opportunity to comment and seek information from the provider under review will only lengthen the process and delay market entry of the new competitor. They also say a public review can open the door to regulatory gaming on the part of those wishing to delay or halt entry of a new competitor. Ciel Satellite Group goes one step further, warning that an open books approach could drive away investors. “Faced with the prospect of elongated review proceedings, the significant administrative burden of a protracted confidentiality process, the potential for regulatory gaming and other anti-competitive behaviour, and the overarching possibility that commercially sensitive information will be made available to the public and competitors, many investors – Canadian and foreign – may become reluctant to invest in Canadian telecommunications carriers, choosing instead to opt for nations with less daunting regulatory processes and requirements,” the company writes. The CRTC was last presented with a public ownership and control review in 1996 following a request from Call-Net Enterprises and Stentor. The commission refused to conduct an open review. Proponents of a public review say the time for closed-door ownership reviews has passed. Rogers Communications suggests the CRTC follow the lead of the Canadian Transportation Agency, which offers “fulsome reasons”, describing in detail the basis for ownership and control rulings. “This closed process has resulted in a lack of transparency and a dearth of precedent,” writes Rogers. “In effect parties and the public are left to guess about how the commission is applying the Canadian ownership and control requirements in the Telecommunications Act based on ‘word of mouth’ and inferences from decisions in other contexts, such as the Broadcasting Act and CTA decisions.” Bell Canada notes that although it is “relatively straightforward” to count up the voting shares and analyze the board structure of a service provider, it’s less so when determining control in fact – third leg of the ownership and control stool. “The commission's public determinations about new corporate and governance structures would inform the business community about which corporate and governance structures satisfy section 16 of the Telecommunications Act, and thus would allow the development of a helpful set of guiding precedents,” Bell tells the CRTC. In an earlier interview with Report on Wireless, Michael Hennessy, senior VP of regulatory and government affairs, said the commission and Industry Canada have a duty to explain how Globalive Wireless meets the Canadian ownership and control requirements when it seems not to. “The principle reason is that if both CRTC and Industry Canada look only at the deal behind closed doors, when it has been publicly stated that Orascom has up to 65% of the equity, then there’s absolutely no certainty as what are the rules around foreign ownership,” Hennessy told RoW last month. Acknowledging that public reviews in all ownership and control reviews may not be the best use of commission resources, Bell suggests that the CRTC limit its reviews to companies entering the market and those having undergone significant restructurings. Service providers that have been reviewed recently wouldn’t have to go through this type of comprehensive process. Under current foreign ownership rules, foreign entities can’t hold more than 20% direct voting interest in a Canadian common carrier and have no more than 33% non-voting control. Combined direct and indirect ownership by a single foreign company can’t exceed 46.6%. In addition, 80% of board members must be Canadian. If the CRTC decides to conduct a public and open review of the ownership and control of Gloablive Wireless, it could affect all future telecom ownership and control reviews, according to law firm McCarthy Tetrault. In a May 25 brief, the law firm asked if reviews should apply to the 200 telecom service providers registered with the CRTC? If not, what are the criteria for deciding which ones are subject to review? The many other questions McCarthy’s poses include: What would happen if, following a public proceeding, the commission issued a decision that was contrary to one already made by Industry Canada on the same issue, such as its decision that Globalive is in fact Canadian owned and controlled? Would conflicting decisions be subject to judicial review? Could the decision then be reviewed by the federal Cabinet, as is permitted under the Telecommunications Act? Conversely, if the commission issued a decision that Globalive is Canadian owned and controlled, could competitors avail themselves of their right under the Telecommunications Act to petition the federal Cabinet for a review? In either case, the Cabinet has a year to make a decision. What would be the impact of delays associated with such Cabinet reviews and judicial appeals? What will be the impact of a public review process on the attractiveness of Canadian telecommunications markets to foreign investors? Will non-Canadian investors that consider making a significant investment in a Canadian carrier be deterred from doing so by the prospect of a public review of the terms and conditions of their investments? These are just some of the questions the commission has to consider during its deliberations on the matter.

Industry divided on public review of Globalive Wireless’ foreign ownership

News | 06/11/2009 6:15 pm EDT

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