Investors like business risks, but ‘despise’ regulatory uncertainty, Lacavera says

TORONTO—Regulatory uncertainty could interfere with Industry Canada's upcoming spectrum auctions if foreign investors feel they have to take a chance in an “ambiguous” Canadian market, Globalive Wireless Management Corp. chairman Anthony Lacavera said Thursday. “Investors despise uncertainty. It’s already enough to have a business risk—that’s what investors like to focus on. If there’s a regulatory risk, a legal risk? It makes it just impossible,” Lacavera told The Wire Report in an interview. “If the Globalive question is still outstanding and the foreign ownership still ambiguous, I think it would be very hard to get people to come to the country at this point, given the last two years of nightmare for Globalive.” In a lively speech at the Canadian Telecom Summit Thursday, Lacavera said he favours set-asides for the 700 MHz auction to support smaller players. Michael Hennessy, Telus Corp.’s senior vice-president for regulatory affairs, said his company and others like Videotron Ltd. are finding a balance and gravitating towards the centre on auction rules, but Globalive remains too “extreme.” “The government is looking for solutions about how to get more spectrum into everybody’s hands—not just hands,” Hennessy said in an interview Thursday. “Coming to the table and saying, ‘Set aside everything for me,’ is a bookend, but it’s not helpful in doing what the minister asked the industry to do, which is, ‘Let’s work to achieving some kind of balance.” Lacavera also spoke about the perils of vertical integration, the need for regulation on tower sharing and spectrum squatting, and what he called the incumbents’ nefarious campaign to limit competition in Canada. Following the speech, Lacavera said he’s “optimistic” about the position of new Industry Minister Christian Paradis, who addressed the conference Tuesday. “From my perspective, it could have been Tony Clement saying that speech. Essentially he towed the line on every policy that Clement had stated,” Lacavera said. “As much as the incumbents hope he’ll be more culturally-oriented being from Quebec and everything, I feel pretty optimistic the government’s going to proceed with its stated policy .” Industry Canada used a set-aside policy for new entrants and small players in its 2008 wireless auction. Lacavera promoted Canadian content during his speech, drawing a line between foreign ownership in telecom and broadcasting. He said he opposes the creation of a single act to govern both sectors—as CRTC chair Konrad von Finckenstein supports—saying “content and carriage are distinct.” He also warned of the concentration of content ownership in vertically integrated companies. “Where we once had a variety of choices, we are increasingly living in a Canada where our content distributors own and control our content,” Lacavera said. “Those same content distributors will find ways to use their content distribution pipelines to steer customers toward content they control and away from content controlled by their competitors.” Lacavera also called for more regulation and punishment for spectrum squatting, tower sharing and seamless roaming. “If you can’t eat what’s on your plate, don’t ask for more,” he said, referring to the incumbents' use of spectrum, and encouraged them to watch the hit TV program Hoarders to “gain some insight.” But Hennessy said he takes “umbrage” with those who claim spectrum isn’t being used, saying the global switch from voice to data on mobile devices is leading to increased spectrum demands all over the world. When asked about an upcoming CRTC decision over Globalive’s undue preference complaint against Rogers Communications Inc.'s third-party roaming services, Lacavera told The Wire Report that carriers in other countries hand off calls seamlessly, and accused the incumbents of exploiting a regulatory loophole. “There’s no technical reason whatsoever they should be dropping our calls,” he said. In his speech, he also called for more tower sharing in the interests of residents who don’t want more towers built as well as for environmental and economic reasons. Hennessy said parties to the disagreements must bring capital and contribute to infrastructure costs to make tower sharing feasible. “You don’t share your network with your competitor at marginal cost when you’re in a constant state of investment because what that says is, you carry all the capital costs—the equipment costs, the infrastructure costs of the network—and the other guy just gets to ride it at incremental costs,” he said. “That’s not a commercial arrangement.” Lacavera said he expects a Federal Court of Appeal decision any day on whether his company can operate in Canada as a Canadian-owned company, and that he would proceed to the Supreme Court if Globalive loses the appeal. On Feb. 4, 2011, the Federal Court struck down the Conservative government’s order-in-council decision, which in late 2009 had overturned an earlier CRTC ruling. The CRTC had ruled that, due to Globalive’s debt with Egyptian telco Orascom Telecom, the company was controlled “in fact” by non-Canadians. Orascom Telecom owns a majority of Globalive’s debt. Hennessy said he’s on the same page as Globalive to some extent when it comes to foreign ownership. But he said the policy should not be rushed to benefit smaller companies with less than a 10 per cent market share, a move he called asymmetrical and damaging to the industry. mburgess@thewirereport.ca

Investors like business risks, but ‘despise’ regulatory uncertainty, Lacavera says

News | June 2, 2011

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