Globalive debacle an “embarrassment” for Canada; single review for foreign ownership overdue: Lemay

Canada should take steps to streamline its review process for foreign ownership of telecoms, or risk putting a further chill on foreign investment, warns an analyst in response to last Thursday’s CRTC ruling that Globalive Wireless is not Canadian-owned and controlled. The call for change comes in the wake of the Globalive Wireless debacle which saw Industry Canada first approve the upstart wireless operator’s ownership structure, only to have it struck down by the CRTC in a subsequent process. “I think to make the necessary changes so you only have one review,” Johanne Lemay, co-president of Lemay-Yates Associates, tells Report on Wireless. “When you think that…Globalive paid the spectrum fees in September 2008 and now they cannot launch, it is somewhat of an embarrassment for a country like Canada to treat foreign investors that way.” The CRTC decision is also expected to put a further chill on direct foreign investments in Canada’s telecom sector, which already has trouble attracting foreign capital because of foreign ownership restrictions. Lemay predicts the Globalive case could have lasting implications for Canada’s domestic communications industry. “You have a company that was willing to invest in spite of these restrictions and I think this means that this whole issue of foreign investment restrictions is detrimental to the growth of the industry,” Lemay says. Globalive Wireless was the most aggressive of new entrants in the Advanced Wireless Services spectrum auction, spending $442 million to acquire licences in every region of the country with the exception of Quebec. The company had planned to launch under the Wind Mobile brand later this year, but those plans are now in jeopardy. Rules around foreign ownership restrictions have been reviewed several times in the recent passed, the most recent coming from the Competition Policy Review Panel in 2008. At a high level, the CPRP said that as a first step foreign firms should be allowed to establish beachheads or acquire smaller providers with less than 10% market share. Removing foreign ownership limits would then be phased in over a number of years. Incumbent doubts minority government can change legislation The three major wireless incumbents say they aren’t against elimination of foreign investment restrictions in the telecommunications sector, but one operator maintains it isn’t likely to happen with a minority federal government. “I’ve always felt that no matter what government is in power, it would take a majority government to change foreign ownership rules,” says Ken Engelhart, senior VP of regulatory affairs, Rogers Communications Inc. Industry Canada’s review process is flawed, he notes, in that it doesn’t document its review and doesn’t report on its findings. Engelhart says there’s no way to know what the department does or doesn’t do, but its procedures could be bolstered by adopting those used by the Competition Bureau of Canada. “I think what Industry Canada needs is to put out some interpretation bulletin like the Competition Bureau does so people know how they’re interpreting these things,” he says. A common review methodology could also go a long way in avoiding other Globalive-like situations, says Engelhart. “I think that would be good for parties to have a common review process. It would save time and lead to more certainty.” Another way Industry Canada could prevent similar occurrences is to require spectrum auction participants to prove they are Canadian-owned and controlled prior to allowing them to take part in the auction – something long argued for by the wireless industry. In Globalive’s case, pre-approval may have allowed the upstart to get its ownership ducks in a row and avoid the quagmire now facing the industry. When contacted for comments on the CRTC decision and its impact on its own ownership review process, Industry Canada said that it was reviewing the decision. Perry Hoffman is an Ottawa-based freelance writer. He can reached at perry@messagingmechanics.com.

Globalive debacle an “embarrassment” for Canada; single review for foreign ownership overdue: Lemay

News | November 1, 2009

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