Moore’s office told telcos wireless auction policy isn’t changing, sources say

Industry Minister James Moore’s office told Canada’s wireless providers during closed-door meetings Monday that the government is not changing its mind on the 700 MHz auction rules, said John Lawford, executive director of consumer group the Public Interest Advocacy Centre (PIAC), who met with the minister. “It was clear from speaking to them that they had told everybody yesterday that they weren’t changing their mind,” Lawford said in a phone interview Tuesday, hours after PIAC met privately with the minister and a day after Moore met with representatives from Canada’s wireless providers. “They seem to be very committed to this policy. They had them trooping in there yesterday to tell them, ‘We’re not changing our mind,’” Lawford said. Incumbent wireless carriers BCE Inc., Rogers Communications Inc. and Telus Corp. are campaigning to convince the government to change the rules of the upcoming spectrum auction, scheduled to start in January. The incumbents say the auction rules create an unfair playing field because the incumbents are capped at how many "prime" spectrum licences they can purchase and U.S. telecom giant Verizon Communications Inc., which is now considering a Canadian market entry, could purchase twice as many as Bell, Rogers, or Telus. Two industry sources who spoke to The Wire Report on a background basis confirmed that government officials told them the auction rules and timelines will not be changed. On Monday, in response to a question from The Wire Report Monday about whether the government is considering changes to its auction policy, Sébastien Gariépy, a spokesman for Minister Moore, said in an emailed response: “The policy has been announced and we are moving forward with the spectrum auction (as announced by Minister Paradis on June 4th, 2013).” PIAC said in a press release Tuesday that the auction and wireless policy rules, as written, will help increase competition in Canada’s wireless market, benefiting consumers. “It’s a breath of fresh air to see the government giving these guys the finger,” Lawford said in jest, speaking about the incumbents. “It’s just amazing." Former industry minister Christian Paradis, who Moore replaced in a cabinet shuffle this month, said in June that the government is committed to ensuring the presence of a fourth wireless competitor to challenge the three incumbents in each region of the country, and that it would “use any and all tools available to achieve competition objectives.” Paradis said at the time that government would not permit Telus’ proposed acquisition of new entrant carrier Mobilicity (operated by Dave Wireless Inc.) during a five-year moratorium on incumbents acquiring the new entrant carriers or the “set aside” spectrum licences they purchased in the 2008 AWS spectrum auction. The government, Paradis said, will also review any proposed transfers of spectrum licences going forward to ensure that they do not result in an “undue concentration” of the spectrum under one owner. The CEOs of the incumbents have been campaining against the government's wireless policy, holding editorial board meetings with major daily newspapers, and BCE has run advertisements with an open letter from its CEO, George Cope. The incumbents' corporate board members also registered this month to lobby the government and the Prime Minister's Office on the issue. On Monday, Telus filed a Federal Court application seeking a judicial review of new spectrum transfer rules that Industry Canada finalized last month. That application charges that the industry minister overstepped his authority when he imposed rules that will require companies to apply for ministerial approval of “deemed” spectrum licence transfers, or those in which spectrum assets are acquired through the purchase of a company. Telus argues in the court filing that it is outside the minister's legal powers to add a new requirement for ministerial approval of all acquisitions of companies with spectrum assets. The new requirement, Telus said, will prevent incumbents from purchasing new entrant carriers after the five-year moratoriums expire, and interfere with their long-term business plans. Under Section 6 of the Radiocommunication Act, the federal cabinet, or the "governor in council," may make regulations “prescribing the eligibility of persons to whom radio authorizations, or any class thereof, may be issued.” Those regulations can cover the “ownership or control of the corporation” that holds a spectrum licence. Ted Woodhead, Telus’ senior vice-president of government and regulatory affairs, said in a brief telephone interview Tuesday that the legal challenge seeks to ensure that the government is following the proper process in establishing wireless spectrum policy. “What our issue is in the judicial review is that the way the minister actually implemented this, it exceeds his jurisdiction. It needs to be a cabinet decision through an order in council as opposed to just a ministerial policy announcement,” Woodhead said, agreeing that the cabinet has the ability to issue an order-in-council decision on the issue at any time. “We live in a parliamentary democracy here. The minister has certain powers and the cabinet has others ... There is a proper way of doing it and we believe that that’s part of the checks and balances of the system and that cabinet approval is required,” Woodhead said. Lawford said the Telus application is “sabre-rattling,” and “a difficult road to hoe.” He said the company’s goal may be to plant a seed of regulatory uncertainty in the minds of Verizon executives who may be weighing the company’s Canadian entry options. “It’s throwing up more smoke for Verizon,” Lawford said. “I’m sure they’re trying to scare away Verizon, absolutely.” Fran Shammo, Verizon’s chief financial officer, said during a July 18 conference call with analysts that Canada’s “regulatory environment” is one “caution” the company will consider as it weighs its potential entry to the market. Consumer advocacy group OpenMedia.ca also came out against the arguments of the incumbents Tuesday, saying in a release that the government “must not buckle in the face of unprecedented pressure from coddled cell phone giants.” Michael Geist, the Canada research chair in Internet and e-commerce law at the University of Ottawa, wrote in a blog post Tuesday that Canada’s “twin policy of encouraging foreign investment plus establishing set-asides to facilitate competition is very common” in other countries. He pointed to G8 states Germany, Italy and the U.K., among others, as countries that have no restrictions on foreign ownership of their telecom services and which have crafted spectrum auction policies that favour new entrant players. Quebecor Media Inc., which operates new entrant carrier Videotron Ltd., has also, over the past week, called on the government to change the auction rules to set aside one of four coveted “prime” spectrum blocks for a Canadian new entrant. “he solution is not to throw away the baby with the bath's water like Bell and Telus would like,” Serge Sasseville, Quebecor’s senior vice-president of corporate and institutional affairs, said in an emailed statement. “The government simply must modify the existing regulatory framework to reserve one prime 700 MHz spectrum block per region to new entrants under Canadian control. Failing this, regional new entrants with a lesser financial foothold than incumbents (and of course Verizon) will be the first ones to bear the brunt of the American giant’s foray into the Canadian market," he said. Gariépy, Moore's spokesman, declined to comment on Telus application, though he said the minister's office is aware of it. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Moore’s office told telcos wireless auction policy isn’t changing, sources say

News | July 30, 2013

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