Incumbents’ campaign against government called ‘unmitigated failure’

Industry Canada’s long-awaited auction for the coveted 700 MHz wireless spectrum got underway Jan. 14, but the most interesting story may have played out over the summer in a high-stakes public relations and lobbying fight whose outcome and consequences are still being dissected. Although Wind Mobile’s late withdrawal from the spectrum auction last week provided some last-minute drama, the most significant event occurred months earlier when U.S. telecommunications giant Verizon Communications Inc.’s chief executive Lowell McAdam announced in September that it would not enter the Canadian market, and that its possible entry had been “way overblown.” This claim has been debated. The firm had participated in a meeting and a phone call with Industry Canada officials in May and June, according to government documents obtained last year by The Wire Report through an access to information request. Verizon hired a lobbyist from Dentons Canada LLP to lobby the federal government on foreign ownership and spectrum rules in October. The lobbyist, Peter Burn, contacted senior Industry Canada officials and Industry Minister James Moore’s political staff in November, the federal lobbyists registry shows. Verizon’s announcement marked the end to a major lobbying campaign from the big three wireless providers — BCE Inc., Rogers Communications Inc. and Telus Corp. — that featured harsh words and aggressive tactics, and was countered by a campaign from the federal government. The intent was to change the auction rules that would have allowed new entrants like Wind Mobile and Quebecor Inc., and foreign players like Verizon, to purchase two of the four available prime blocks of the prized 700 MHz spectrum in each licence area, while the big three were limited to buying one each. The incumbent carriers’ Fair For Canada campaign categorized the situation as an uneven playing field favouring U.S. giant Verizon, and managed to rally major business lobby groups and unions to its cause. The campaign, and the government’s ongoing response, is still being discussed in government relations circles, with opinions divided over what it means going forward. Earnscliffe Strategy Group principal Robin Sears is among those who characterize the big three’s campaign as a disaster. “There’s not really a circumstance in which it’s advisable to attack a government if you are a regulated industry seeking a favour from the government. It’s so, on its face, absurd to think that that would be a way that was going to be successful,” he said in an interview. Sears’ firm is registered to lobby for VimpelCom Ltd., the majority owner of Wind Mobile, and for Shaw Communications Inc. Playbook Communications senior strategist Erik Waddell, whose firm represents Wind Mobile, called the big three’s campaign an “unmitigated failure.” “What it has left is a very poisoned atmosphere between the big three telcos, their divisions and the federal government, which is going to last for much longer than the summer campaign did,” he said in an interview. Waddell has served in a number of government roles and was an adviser to Tony Clement when he was industry minister and later president of the Treasury Board. The incumbents' campaign began in July after speculation about Verizon’s interest in entering the 700 MHz spectrum auction had been widely reported, and the September deadline to enter the auction approached. Members of Bell, Telus and Rogers’ boards of directors registered en masse to lobby on the auction rules. Most never communicated with the government, and one consultant told The Lobby Monitor in July that the registrations were probably more of a signal for the government to take notice. The companies had various consulting firms working for them, such as Hill & Knowlton Strategies for BCE, as well as Crestview Strategies and The Rothwell Group for Telus, which in October also added Norton Rose’s Derek Burney, the head of Prime Minister Stephen Harper’s transition team in 2006. At the same time, the companies’ CEOs met with newspaper editorial boards and ran full-page ads in national papers. There were radio spots and a Fair For Canada website, which opened by stating, “The Government of Canada is risking the future of the Canadian wireless industry.” The campaign was intended “to inform Canadians about the possible impact of government rules that could give a large foreign player an unfair advantage over Canadian companies,” Rogers spokeswoman Jennifer Kett said in an emailed statement. “We believed this was an important issue for Canadians, and through the campaign our goal was to inform consumers about potential consequences of government rules for the current spectrum auction.” All the sources contacted for this article estimated the campaign cost was in the millions of dollars. Sears said he was astonished by the campaign’s tone. One op-ed from Bell director Anthony Fell in the Financial Post in August took aim at Moore, who had just taken over the industry portfolio in the July 15 cabinet shuffle. Fell called the government’s treatment of the three incumbents arrogant and “disrespectful,” and said Moore making pronouncements as a telecom expert when he was so new to the file was “unseemly.” Moore fired back on his website, writing that Canadians “know very well what is at stake and they know dishonest attempts to skew debates via misleading campaigns when they see them.” Waddell said the companies might have thought they could more easily convince a new minister of their arguments but became more aggressive when they realized that wasn’t the case. Moore was forced to respond, he said. “As a brand new minister who just occupied the chair he had two choices. He could either look weak and accede to what were quite honestly demands of the telecommunications companies, or he could stand up to them on behalf of his constituents, on behalf of Canadians, and look strong. It’s a no-brainer decision for a politician,” he said. Soon after, Moore launched a cross-country tour to defend the government’s policy. The Industry Canada website was changed to promote the wireless policy, and the Conservative party launched its own “Consumers First” website to outline it. New television ads, part of a $9-million government advertising campaign, aired in December, talking about the large carriers’ market share and the high prices Canadians pay for service. The Conservative party had already circulated a petition in early July, using Harper’s Facebook page as a means of distribution, asking Canadians to sign if they believed they could benefit from “more choice and greater competition among wireless providers.” While Sears said it’s not unusual for political parties to attack industries for fundraising purposes, he said the difference this time is that public dollars are being used to purchase paid media. “One has not, I don’t think, in the market economy world, as opposed to a different kind of governmental structure, seen a government attack a key industry in paid media using taxpayers’ dollars in such a fashion,” he said. Bernard Lord, president of the Canadian Wireless Telecommunications Association (CWTA), said he was surprised by the government’s campaign. The CWTA, a lobby group whose members include Bell, Rogers and Telus, ran its own advertising campaign over the summer, independent of the big three’s, that focused on information on the sector, and price and service comparisons with other countries. The association was also seeking to change the auction rules. “ was unusual. I think most people would agree it’s not a very good use of tax dollars. I don’t think people give money to the government so they can be lobbied by their own government,” Lord said in an interview. A spokesman for Moore has defended the ads by saying the government has an obligation to ensure the facts about its policy are communicated to Canadians. John Lawford, executive director of the Public Interest Advocacy Centre, said he is not sure the government could have behaved differently, though he does not think it was appropriate to politicize the Industry Canada website. “It was an unfortunate response to a very big provocation,” he said in an interview. Both Lawford and Sears said the government could have responded more quietly, but Lawford said it preferred to use cellphones as a populist issue to win votes. The government has avoided blowback by framing its response as spending tax dollars to defend Canadians’ interests against unfair business practices, Sears said. “I don’t think there’s any way the federal government would keep going after this if they didn’t feel it was working with them among the voters that they care the most about,” said pollster Greg Lyle of the Innovative Research Group. “This is a populist, pocket-book issue that puts the Tories on the side of the little guy against the big guys. So long as it continues to do that, you’ll continue to see more of this.” Waddell said the big three's campaign might have even opened the government’s eyes to the populist appeal of going after the companies. “I don’t think realized how easily they could tap into that resentment on behalf of Canadian consumers until it was brought to their attention by the big three telcos,” he said. “That was really the biggest mistake of the summer campaign.” Both Lawford and Lord said the big three’s campaign might have affected Verizon’s decision to stay away. “I think it may have had side effects,” Lord said. “That’s possible. I think there’s still some uncertainty in the marketplace.” Lyle said some might claim the campaign “poisoned the well” and led Verizon to decide Canada was too complicated and not worth the bother, while others would take Verizon at its word that Canada was just not that important. “The truth is somewhere in between the two,” he said. “How much of that credit they can claim is really a matter of opinion. The only people that really know are the people in Verizon, and they’re not going to tell us what they really thought.” Both the government and the incumbent wireless companies say their relationship continues despite the summer battle. Rogers’ Kett said her company continues “to work with government on a variety of issues and files, and shares the government’s objective of a healthy, competitive wireless market.” Lord said it’s important for the CWTA to maintain a relationship with the government. “I can assure you that is one my priorities for this year, is to maintain and strengthen, where we can, that dialogue with government officials and other key stakeholders in the industry,” he said. Moore has also pushed this message, telling reporters in September about his meetings over lunch or dinner with Rogers and Telus chief executives, and on Jan. 10 that the perception of a battle between the big three and government wasn’t true. Some observers aren’t convinced. “The government feels they’re still scoring points on this and they’re going to keep scoring points on this. There’s no kiss-and-make-up for the industry. They have to continue to manage the threat,” Lyle said. Lawford described the big three’s bridges to government as “crisped” rather than burned. Court challenges to the government’s policy followed the summer campaign, and Lawford said he didn’t see any evidence of a rapprochement. “I think as long as this group of ministers and staff and officials are in the chairs they’re in now, will be lucky to get their phone calls answered,” Sears said. Since a Sept. 24 meeting with Moore, Telus and its consultants’ communications with government have focused on senior public servants at Industry Canada, CRTC officials and a few MPs from all three parties, the federal lobbyist registry shows. Rogers officials also haven’t communicated with Moore since September, but in-house lobbyists contacted his policy director in December and PMO issues management director Alykhan Velshi in November. Bell board member Carole Taylor communicated with Moore twice in November, but the last meeting in-house officials had with the minister was July 30, the registry shows. Waddell said the companies have probably felt “a chill” from Ottawa since the summer, but he said they could be hoping for “a thaw” in the spring once the auction is over and news in the telecom sector quiets. Sears raised the possibility of a broader fallout. When society’s big institutions—whether government, business or labour—attack each other’s credibility and legitimacy, “some of the mud attaches to everybody involved and the broader societal consequence over time is a diminution of public respect for all the institutions,” he said. “That’s not a good thing. That’s really playing with fire.” This story was originally published in The Hill Times on Jan. 20. For more exclusive coverage of federal politics and the federal government, go to www.hilltimes.com. — With reporting by Mark Burgess at mburgess@hilltimes.com and editing by Derek Abma at dabma@thewirereport.ca

Incumbents’ campaign against government called ‘unmitigated failure’

News | 01/20/2014 4:47 pm EST

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