Wireless wizardry

Is Globalive truly a Canadian company? The Tories say yes.

by John Geddes

Wireless WizardryTony Clement did his best last week not to put himself at the centre of an uproar over Canadian ownership of sensitive parts of the economy. The industry minister announced that the federal cabinet was letting Toronto-based Globalive into the Canadian cellphone business, overturning the Canadian Radio-television and Telecommunications Commission’s earlier ruling that the Egyptian-financed company failed to meet Canadian control rules. But Clement insisted cabinet wasn’t “removing, reducing, bending or creating an exception to Canadian ownership and control requirements in telecommunications and broadcasting.” No matter how far he dug into his thesaurus, though, many expert observers weren’t buying it.

The potential implications of the decision, announced Dec. 11, were just too obvious to be smothered under even the wordiest denial. The CRTC had ruled in October that Globalive didn’t satisfy Canadian ownership requirements because Egyptian telecom giant Orascom holds almost all of its debt, owns most of its non-voting shares, and provides its technical expertise. But cabinet exercised its power to overrule the regulator, accepting Globalive’s argument that its corporate structure puts voting shares mainly in Canadian hands. Clement stressed that the decision was “based on the legal facts of the ownership, and not on the government’s position that there needs to be more competition in this marketplace.”

It was the prospect of another competitor, of course, that had led the big wireless companies—BCE, Telus, and Rogers (owner of Maclean’s)—to oppose Globalive’s bid to step onto their turf. The CRTC doesn’t see the Canadian wireless marketplace as too dominated by a few players: it says wireless prices in Canada are about in the middle compared with the U.S., Britain, France and Australia. But the Conservatives perceive a problem. Two blue-ribbon panel reports—one on telecom alone and another more broadly on the Canadian economy—have urged them to open up the industry. “We believe,” Clement said, “that when consumers have more choice, when there’s more competition, that lowers prices and increases quality.”

University of Ottawa law professor Michael Geist, an expert on telecommunications, said the Conservatives seemed more motivated by their desire to see another cellphone company vying for customers than by legal analysis of Globalive’s ownership. “The government has made it clear for a couple of years that they view wireless as an area where there’s not enough competition,” he said. And letting Globalive’s Wind Mobile brand compete fits with a pattern of Tory marketplace populism. “Their approach on this issue,” Geist said, “is consistent with their political approach more generally—do things that the broad public, the Tim Hortons people, can get and understand.”

If one more wireless company was the Conservatives’ sole goal, they might end up getting much more than they bargained for. Clement said green-lighting Globalive “is a specific decision that is pertinent to the specific facts of this case.” But Michael Hennessy, vice-president of regulatory and government affairs for Vancouver-based Telus, argues the decision opens the door to more foreign investment—not just in telecommunications, but also in other sectors where federal law requires Canadian control, like broadcasting, banking and airlines. “There is a bit of public-relations artifice to saying this is a one-off,” Hennessy said. “Politically they’re going to have great difficulty saying we have a unique and special rule for Egyptians only, when many of us in the industry might want to look at more European or American financing for certain activities.”

An obvious point of interest is the future of Canwest Global Communications, which owns the Global TV network, and filed for creditor protection for a portion of its troubled business earlier this year. Would the debt-burdened Winnipeg-based media conglomerate now be allowed to follow the Globalive model in seeking more foreign capital? “Canwest of course watched this very closely,” Hennessy said. Still, cellphones are one thing, TV quite another. “Broadcasting raises cultural issues that telecom just doesn’t,” Geist said.

Exactly how the government would respond to another company testing the Globalive precedent is impossible to predict. “As of this decision,” Hennessy said, “you cannot say with any certainty what the law of the land is or how it will be interpreted.” Clement said cabinet didn’t bend the rules. He didn’t say anything about not blurring them.




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Wireless wizardry

  1. Canada seems to love "cozy deals" whereby a small number of big players divide up a market to there own advantage, customers be damned. I know what my American friends pay for cell service, and I know what they get. No matter how you cut it, we are being hosed by the big operators. If I could purchase an American plan, I would use a cell for my primary phone. As it is now, I will not. Anything that brings real competition is good – and if it hurts the big three, they have no one to blame but themselves.

  2. Jan is right. The CRTC is a bunch of company goons from the Big 3 and they would do anything to keep the power squarely in their hands. Canadians are paying some of the highest internet and cell phone charges in the world and they sit cozy in their office with million dollar bonuses.
    Clement made the right choice here, legal semantics be damned.

  3. this new player is already saving me over $60 pm on what used to be a $100 pm plan with my carrier!how?i phoned and asked for a lower bill.even though i stll have 4 months to go on my contract,they agreed to lower my bill WITHOUT resigning or paying out my plan!
    this is the perfect time for us all to nickel and dime THEM for a change!

  4. …be allowed to follow the Globalive model in seeking more foreign capital?

    Rephrase the question: Does it benefit Canadian consumers? If the answer's yes, then it's one (very large) step forward to advocate such a change.

    Canada is one of the least "mobile" communities in the world. A recent study found only about 60% of Canadians own a cellphone, compared with 80% for the rest of the western world. This is problematic because wireless technology is the future, and we're being left behind. It's all thanks to archaic rules and protecting Canadian interests (which means making sure companies are sufficiently "Canadian," even if it leads to less competition and higher prices).

    Open up the floodgates to foreign investors!

  5. way to go cabinet! CTRC is being controlled by the only 3 telecoms in this country. This move will surely benefit consumers

  6. The CRTC is not controlled by the big three, it makes their lives miserable. The CRTC ruled on a point of law which is what they are there for. Telecommunications is considered an essential service, and should be. If during a crisis you were to lose communications the problem could turn into a catastrophe. The US and Canada set up rules on foreign ownership to protect their countries. Imagine now if Iranian communications were run by US or Israeli companies, they would have been attacked a long time ago and had no defences with no communications which would have been cut off. Clement's decision is not only against the law, but detrimental to Canada. It would not be tolerated in the US.

    • One would think this would be obvious but governments don't run essential telecom on FIDO plans. There's a difference between competition in consumer markets and national defence. I'm all for more competition.

      As to the rest of the article, I'm not an expert but I all I seem to hear are people comparing our mobile service to Europe and, absurdly enough, Japan without remembering that our drastically lower population density has a large impact on the infrastructure needed to sustain cell service here. I'm not defending price gouging, which I can't deny in our situation to some degree, but let's compare apples to apples. It take much more equipment to service this vast and mostly empty land than countries of small geography and high density.

  7. Though I agree more competition is the end goal and all consumers will benefit from more options in the wireless industry, Wind Mobile does not offer any drastic change from the existing marketplace and turning over the CRTC ruling was a terrible decision as a precedent setting industry.

    If anyone thinks this one other company, that is clearly Egytpian, is going to disrupt the industry and actually create legitimate competition, you are fooling yourself.

    Since the 2008 spectrum auction, companies other than the big three have been planning to come into the market for early 2010. Why, at this stage, when other companies are just about to come in to the market is it necessary. Why not let in providers that will actually drive prices down and benefit the Canadian economy and not help get foreign companies out of debt by gauging us Canadians.

  8. We need competition, and for Bell to keep banging on about this new company is a joke They, Bell, outsource everything to India, and cut jobs in Canada Give me a break.Were do I sign up with this new company.

    • Of course Bell outsources to India. Someone always has to pay for lower prices. In the land where stock values are the be-all-end-all and where the general consumer doesn't consider anything beyond the lowest price for a service there is constant pressure to lower cost. Using your dollar to vote exclusively for the lowest price is an inevitable drive towards a slave or near-slave workforce (in the end company itself as well as it's suppliers). Just look at how Walmart drives wages down and puts small business out of business. Your dollar casts a far more important vote than any piece of paper you put in a ballot box.

  9. So this is what they mean by "Made in Canada" solutions? Hopefully, Canadians will save some $$, and hopefully some of the profits will stay in Canada!

  10. Good decision. CRTC is like any other market regulator- there to protect vested interests from competition. If CRTC was really interested in helping Canadian consumers they would make the existing companies provide the same services to rural areas as they do in the big markets.

    • The CRTC should make for-profit companies provide service at a loss? How does that work in a market system? Choosing to live in a rural area implies other choices as well. I live in a city and one cell tower will serve thousands and the cost is diffused among those thousands. Why should rural customers not bear the cost of the infrastructure it takes to serve them? Cell service is a luxury, not a human right.

  11. I suppose ammend "stock prices" to corporate greed as companies will trend towards slave labour in any case to maximize profits.

  12. I hope he knows what he's doing. Great article. Very well written.

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