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UPDATED: Clement elaborates on the Globalive decision


 

In a news story published this morning, Industry Minister Tony Clement seems to explain that the federal cabinet overruled the CRTC last month to allow Globalive to launch a Canadian cell phone business because the government is determined to see more competition in the wireless marketplace.

That might sound like a straightforward position, except it’s at odds with what Clement said when he originally announced cabinet’s trumping of the federal telecom regulator on Dec. 11. At that time, he stressed that the move was “based on the legal facts of [Globalive’s] ownership, and not on the government’s position that there needs to be more competition in this marketplace.”  [UPDATED AT THE BOTTOM]

Here, for the sake of contrast, is the apparently different tack Clement took in his interview with Canwest New Service’s Andrew Mayeda, as reported this morning:

“[The CRTC] looked at a set of facts and came to one conclusion; we looked at the facts and came to a different conclusion. That’s all this was. So the CRTC still has a job to do, we still have a job to do in terms of the development of proper public policy, and the proper public policy in this area is more competition, more choice, better rates for consumers.”

The “set of facts” Clement refers to is Globalive’s ownership structure. The CRTC had ruled in October that Globalive didn’t satisfy federal Canadian-control requirements because Egypt’s Orascom holds almost all of its debt and most of its non-voting shares. But cabinet, which has the final say, accepted Globalive’s argument that its corporate structure puts voting shares mainly in Canadian hands.

Cabinet would not have been legally justified in rejecting the CRTC’s interpretation of the Canadian ownership law simply on the grounds that more competition is better. So its reason was—had to be—that it disagreed with the regulator’s judgment that Globalive is foreign-controlled. Yet Clement now appears to be linking the decision very closely to the government’s policy preference for “more choice.” (The Ottawa Citizen sure heard him that way, headlining Mayeda’s story “Wireless competition behind CRTC overruling.”)

As well, Clement explained that the government’s key pro-competition move was its 2008 auction of wireless spectrum to companies ready break into the marketplace, making sure Rogers (owner of Maclean’s), Bell and Telus couldn’t consolidate their cell dominance. He’s right, of course—but that landmark auction would have made no difference if new entrants like Globalive were blocked from using the spectrum they’d bought because they failed to meet Canadian ownership rules.

In other words, to make the 2008 auction matter, Globalive needed to pass muster by being deemed sufficiently Canadian. Clement comes perilously close in this story to admitting that the driving factor behind cabinet’s decision to reject the CRTC’s ruling was increasing competition, rather than any interpretation of the Canadian-control law.

UPDATE:

Tony Clement’s office disagrees with any interpretation of his remarks that draws a link between the government’s avowed preference for a more competitive cell phone market and its decision that Globalive is sufficiently Canadian to provide some of that competition.

“The decision is, as it was in December, based entirely on our finding of the facts Globalive presented to CRTC on the company’s ownership and control,” Darren Cunningham, the industry minister’s director of communications, emailed to say. “We remain resolute in our finding that Globalive is a Canadian company; that is what our review was to determine, and the only factor in the decision was that determination.”

On the relationship between the  government’s decision two years ago to make sure companies just entering the market got a share of the newly available wireless spectrum and cabinet’s ruling last month that one of those aspiring entrants is Canadian enough to launch its business, Cunningham added this:

“Two years ago, the government set aside spectrum for new entrants, and the intent was for increased competition in the market with the some of the highest cell rates in the world, that was two years and another Minister ago. Minister Clement’s job simply was to  determine if Globalive was a Canadian company under the Telecommunications Act. It is, and they are now in business.”




 
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UPDATED: Clement elaborates on the Globalive decision

  1. It's easy to pick on the government of the day, but I'm hard pressed to recall a weaker cabinet in our history than the current one.

    Maybe it's a consequence of perpetual siege mentality, whereby the ministers lose any sense of coherency and ration that might be fostered by occasional engagement with the outside world.

    Whatever the reason, it's disheartening to have such a mediocre group at the helm.

    • or….

      maybe they simply are relatively incompetent,

      or maybe it's their control-freak boss who hasn't allowed them to develop independent leadership and communication skills,

      or maybe it's a consequence of our media being too fixated by political games, at the expense of analyzing policy (present company excepted, to be sure)

      or maybe I'm completely wrong and this lot is no better or worse than most cabinets fielded throughout our history.

      • If the Liberals had as many ors in the water as you, they might make some headway……

    • "It's easy to pick on the government of the day, but I'm hard pressed to recall a weaker cabinet in our history, than the current one."

      It is quite hard if you don't bother to look pre-2006. Government talking out of both sides of their mouthes and flip-flopping on their explanations is not an innovation of the Harper cabinet and it hardly qualifies them as "worst cabinet ever" or even mediocre.

      • So, you would argue that our current cabinet is as talented as any prior?

        • No, but I'm not arguing that it's the best ever. I'm just saying it's not really all that unimpressive. Their performance is at least as good as Martin's cabinet, for example.

  2. Maybe he thought he was talking about Kairos?

  3. Well, we could use more competition in the telecom market in this country; prices and poor service and all that jazz. Clearly, that's beside the point.

    Keep in mind that this is the same government that issues memoranda directives to use the simplest, shortest language possible to describe policy initiatives when issuing public statements. This could simply be one more shining example of obfuscating the real motivations behind a decision in favour of expressing the most easily communicated one.

  4. I think this is another example of Conservatives crafting policy to serve politics.

    Speaking as a (very, very minor) investor in each of the three incumbents, it infuriates me that the new entrants are allowed to play under a more lenient set of rules.

    At this point I'd like to see the incumbents deliberately violate the foreign ownership rules – just go out and help themselves to some of that sweet foreign capital, and dare the feds to do something about it.

    • "At this point I'd like to see the incumbents deliberately violate the foreign ownership rules – just go out and help themselves to some of that sweet foreign capital, and dare the feds to do something about it."

      And ruin their claim to be Canadian owned which is the entire basis for keeping the competition out? If they wanted foreign capital they would be lobbying the government to change the rules and would have been doing so for years. As another minor investor, I'm glad that you're not running Bell, Rogers or Telus.

      • What are you talking about?

        My point is that the incumbents are constrained in their access to foreign capital. Since the cabinet has summarily removed that constraint for a single competitor, the incumbents should feel free to ignore that constraint going forward.

        Also – at least one of those incumbents (Rogers) has done plenty of lobbying over the years in favour of relaxing foreign ownership restrictions, which would increase the value of its holdings. Your point is not well taken.

        • And not only did they bend the rules, they did so without making clear how the rules would apply to everyone in the future. It's an enormous bungle and I'm not exaggerating.

        • What, seriously? First, the incumbents were founded and nurtured along when there were no constraints at all on foreign capital and, in fact, relied heavily on it. Second, it is simply incorrect to state that the new entrants are allowed to play by different rules. If you disagree with the Industry Canada decision, you might state which part you think was incorrect.

        • "My point is that the incumbents are constrained in their access to foreign capital."

          Yes, and in return they have been able to keep competitors out. Can you please point me to the flood of news stories where Bell, Rogers, and Telus are now demanding that the Conservatives loosen foreign ownership rules to allow them that "sweet, foreign capital"? If they really wanted the rules loosened then now is the time to speak up.

  5. Instead of saying what they believe – competition is a good thing for economy and consumers – Cons turn themselves into pretzels trying to explain their decisions in a way that won't frighten Libs. Instead of saying CRTC is rubbish and needs serious reform, Cons leave it as is and work around it. Thereby doing nothing to help conservatives advance their agenda.

    Cons are in office but not in power.

    • Uh, ok but there are foreign ownership rules in place, and Globalive is obviously not in compliance with those rules. The CRTC made the right decision – that all players, new and incumbent, should operate under the same set of rules.

      The CRTC made the only decision it could, and it was the right decision. Only a shameless cabinet decision could produce such a bizarre outcome.

      • I am curious. Why is it obvious to you that Globalive is not in compliance with the rules? Have you read the CRTC and Industry Canada decisions? Do you understand on which points they disagree? On which ones did you think that the CRTC got it right, and Industry Canada wrong?

    • "Cons are in office but not in power."

      I've seen you sign off with this a couple of times, jolyon. I think I get what you're saying, but may I ask: is it by their choice or someone else's? The way I see it, based on the way they've conducted their business as "Canada's New Government," is that the power is theirs to assume, should they choose to do so.

      • They are enjoying the trappings and accoutrements of power – the office part – but they are not doing anything with the power they have. God know's why but Cons have chosen to emasculate themselves in order to appear non-scary, I guess, but they are doing nothing to help conservatism progress in Canada or become less 'scary'.

        All they have done is convince people they are a lot like Libs but with different party colours.

        • "All they have done is convince people they are a lot like Libs but with different party colours."

          And even less respect for our democratic institutions.

  6. John Geddes, one of the things I find astonishing is the speed with which they were able to launch a national marketing campaign complete with kiosks, promo events, commercials, print ads….promotional 'statues' even (not sure if everyone has seen these…cute trick)
    Considering that these guys were turned down by the CRTC and were (if we are to assume there are no backroom shenanigans) crossing their fingers that the Industry Minister MAY overturn a decision…..I think a week to roll out a lauch seems remarkably fast when they didn't even know if they had approval……..anyone else notice this?

    • We you have a half a billion dollars on the line, you will be ready to go no matter what happens.

    • They had it all ready to go Stan because the assumption was that the CRTC was going to approve them. They had to put everything on hold and lobby cabinet to overturn it. The kiosk and store employees were actually kept on the payroll and farmed out for volunteer events. Nothing shady in the way they rolled it out. In fact I would think it shows some pretty crafty business sense to have been able to roll with the punches the way that they did.

      • I know the rational for having the design and strategy prepared, and in their position I would spend a lot of money having all that ready so that when the decision to launch is made you can go….. ….

        BUT within a week of approval, they have fully fabricated kiosks ready along with national ad campaign on air and in print…….clearly they worked on production in advance of approval and what I am saying is that fabricating, going to press etc….with THAT much material in advance of approval is odd……it may be the way they do business, but we are talking a pretty big sum of money on a gamble that they would get approval…..and let's bear in mind they intially did not get approval, they got the benefit of a over turned ruling by Clement…….

        it seems odd…..

        • They originally had approval to buy bandwidth before their competitors made the ownership complaint which resulted in the CRTCs ruling. So they just kept their plan in place.

  7. First off, any CRTC decision can be appealed to the Federal Court (or whetever the appropriate court might be). Oresco had that option available to it when "[t]he CRTC had ruled in October that Globalive didn't satisfy federal Canadian-control requirements because Egypt's Orascom holds almost all of its debt and most of its non-voting shares."

    This would take a number of months to resolve, and would be the normal course of action. However, the intervention by the Harper Gov't clearly is motivated by the political decision to foster more competition. In effect, they are by-passing the appeal process. So, Clement could be right on both points – they overriuled the decision due to an improper ruling by the CRTC, and their actions were motivated by having more competition in the cell phone market.

    Now, it seems to me that other potential cellphone players who may have been disadvantaged or hurt by the Harper decision could take the Fed gov't to court and sue for damages if they can prove, to the court's satisfaction, that the overruling was improper – ie that the CRTC decision was correct, and they suffered financially as a result (ie they could also have qualified under the looser interpretation of foreign ownership/control). Doubtful anyone would, though.

    • That was why I referred to "no effective legal recourse". Any carrier that dared take the government to court would be akin to entering the LindaKeenRichardColvin school of career advancement.

      • Or pull a Ballsillie. Seemed to work well for him re Nortel.

        • It did?

  8. With due respect to Sean and Lynn, I believe this is simply another example of how Conservatives approach governance. Clement is now being honest with the Tim Horton constituency about the real reason behind the decision, however as Geddes points out, it could not legally use that reason to overrule the CRTC. So, earlier Clement had to lie in order to achieve the desired outcome… no big deal, since in almost all cases achieving the desired outcome trumps due process.

    One might argue that this government has been caught in yet another illegal activity, but I would not. After all, there is no effective legal recourse for the CRTC, or the other companies involved. This Conservative government is by no means the first to take advantage of the large grey areas in Canadian governance but it is certainly the most strategic and aggressive in doing so.

    • I agree with you. It's not the particular policy or decision in this case that's troubling (I've never been a fan of governments intervening selectively this way, but then the CRTC is generally a bureacratic train wreck.)

      It's just that the Conservative government has a way of rendering minor or benign policies and decisions into exemplars of miscommunication, self-contradiction and incoherence.

      I don't know if it's the quality of individual drawn to that particular party, but in objective terms of management skills they seem to be lacking. Put another way, can you imagine any member the cabinet stepping up to become a competent PM? I can't.

      • I disagree with your assessment of incoherence. Had they said this right off the bat as being the primary reason, then they might have found themselves trapped in a bureaucratic and legal quagmire as the opposition scrutinized the decision.

        The primary reason had to be the assessment of ownership for the decision to meet the minimum resistance.

        You would also expect them to explain the full picture at a later date, which is exactly what has happened (and this is what I expected their reasoning to be).

        • Speaking as a citizen, I cannot and will not give them a pass for politcal excuses. I like the idea of more competition, I think the CRTC has become a massive hindrance in many ways, and I share your discomfort with selective opportunity being granted by the government. But it's a slippery slope to defend the means via the end.

          But more importantly, I think the Globalive should have been shut out on the basis of their name alone. I can't put my finger on it, but it's an aesthetic dud.

          • I agree with you on all those points. Hopefully Globalive can do a better job naming their products. Globalive is a word with no apparent meaning and it also looks awkward.

          • I think Globalive is calling their service wind (which is funny because they're breaking it into a new market, right?)

        • This is interesting, because everybody seems to be on the same page in the comments.

          I guess the thing that bothers me, besides the politics trumps the law, is that there is an opportunity to improve the CRTC or the rules it must work under–an opportunity not taken in favour of this sleight of hand. Granted, those changes couldn't be brought out and implemented within a day (I assume it will take time to find changes that will accomplish the intended improvements, and not some totally unanticipated result)

          • It's an opportunity missed in favour of proroguing parliament; otherwise, I'll agree.

    • I agree with your assessment.

    • I believe if things were as simple as "we want a more competitive marketplace" a la standard Conservative policy, we would have had a lot more telecom players in the market by now.

      Certainly, introducing additional competition was a factor in their decision; I'd consider it icing on the cake to Conservatives, rather than their main motive. I could argue that the main motive would be undermining the legitimacy of the CRTC (if it ever really had any…)

  9. Re UPDATE

    It appears that the Appeal was made under section 12 of the Telecommunications Act http://laws.justice.gc.ca/eng/T-3.4/page-1.html#c

    . My previous comment was assuming they could appeal under section 64 http://laws.justice.gc.ca/eng/T-3.4/page-3.html#c

    The reason why they used section 12 appears to be that they were appealing a finding of fact by the CRTC.

    I think Darren Cunningham, the industry minister's director of communications is being a bit disingenuous. If competition was not an issue under consideration, and receiving some weight by cabinet, then NGOs like the Public Interest Advocacy Centre would not bother making submissions on that basis, in support of the appeal.

    Here, they clearly did:

    http://www.piac.ca/telecom/review_of_globalive_wi

  10. yeah, he made it into Feschuk's dictionary, didn't he?

    • Well, yes, but I don't think that was his ultimate goal. I'm sure he's thrilled anyway, of course.

      • Let the record show that the Feschuk Dictionary honorarium preceeded the joint honour of G&M award for the decade Nation Builder: Innovation Jim Balsillie and Mike Lazaridis
        http://www.theglobeandmail.com/news/national/deca

        It's just like winning the Golden Globe before the Oscars.

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