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Globalive: InstaAnalysis of Wind Mobile Decision

Globalive’s (Wind) ability to operate and compete in Canada’s cellphone market was given surer footings and wider berth yesterday.  That’s the effect of a Federal Court of Appeal ruling that said that the Government acted properly when it used an “order-in-council’ to allow Globalive to enter the Canadian wireless market even though it was clearly owned and financed by capital from Orascom, an Egyptian company that has since passed into the hand of new owners: VimpelCom, a Russian based outfit.

The decision has not yet been posted on the Federal Court of Appeals website, and even using the mighty Google proved fruitless in turning up the original decision, or perhaps I’m just dumb. Several other sources of varying quality, however, are available: here’s Windmobile’s self-serving cant; an online source that looks useful is TelecomPaper, and the law firm Stikeman Elliot offers a thorough review. After this, there’s the cascade of your run-o-the-mill news sources — CBC, the Star, National Post, and Globe & Mail, in roughly that order — that all seemed to follow the basic line that hit the wires (and here).

So, the fact that the actual decision itself is missing is, umm, a problem. It appears that some people have not quite got that we now live in a ‘show me’ environment, where having the actual decision easily to hand would be nice. We should not have to work so hard to find important things, or rely on hand-me downs in the news and information realm.

In December 2009, the CRTC found that the Egyptian-based Orascom owned and essentially controlled Globalive, mostly because it provided the lion’s share of capital investment standing behind the erstwhile Canadian cellphone company. The CRTC denied Wind Mobile a wireless license, thereby stopping it from entering the market.

The Government overturned the regulator, but then found its own path subverted when communication workers (CEP), Telus and Public Mobile successfully challenged the Government’s ability to skirt the Telecommunications Act’s limits on foreign ownership by way of Cabinet Directive before the Federal Court earlier this year. The Federal Court agreed with them and slapped down the Government for using the power of Cabinet Directives to do an end run around the regulator and existing law, putting Wire Mobile in limbo.

Complicating matters greatly, just before the CRTC denied Wind Mobile’s application for a wireless license, Industry Canada had sold spectrum rights to Globalive, in line with Government policy.  With Industry Canada and the CRTC at odds with one another, something had to give. The CRTC was pushed aside in the end, Wind Mobile can go ahead with its spectrum and wireless markets now more firmly in hand.

Cabinet has broad authority to interpret and reconcile such clashes between different branches of ‘the State’, according to yesterday’s Federal Court of Appeal decision.

That the CRTC decision had made the spectrum rights just given by Industry Canada to Globalive useless, demanded that Cabinet step up with a novel interpretation of telecoms law and policy in Canada. It did, arguing in a novel manner that nobody else seems to have thought of that promoting access to foreign capital is part of promoting competition in the marketplace. I can see the link, but think that interpretation is pretty hard to square with the foreign ownership restrictions in the Telecommunications Act.

Many might not complain too much about promoting competition by loosening the foreign ownership rules, although some would (CEP).  Few, however, would agree that the Telecommunications Act is meant to promote access to foreign capital. A plain reading is that its restrictions are designed to limit foreign ownership and control. And few would suggest that it’s okay for the government to do end runs around the regulator and law to achieve changes to the law that it could not obtain in Parliament.

That’s what the Federal Court said in March. That set of principles, however, was thrown out on appeal yesterday by the Federal Court of Appeal, and everything else that the CRTC and Federal Court had said. The Appeal decision accepted the Government’s position. It gave a blank cheque to Cabinet to rule by fiat rather than the Telecommunications Act. And it broadened Windmobile’s scope for action and the security of its spectrum and market access rights.

The decision may delay the introduction of more competition, however, because the ground rules remain murky and the existing foreign ownership rules in the Telecommunications Act intact. The Government may find good reason to move even slower on reforming the law because there is no longer a specific case to prod its hesitant hand.

This state of affairs will serve Wind Mobile and almost all of the other incumbents reasonably well. However, Public Mobile intends to appeal the case to the Supreme Court.

The Communication Energy and Paperworkers will likely join it. As the banner hanging from CEP Headquarters in Ottawa proudly declares, “it’s your’s, own it”, by which they mean telecoms, culture, broadcasting, lumber, energy plants, etc. “The need to maintain Canadian-control of telecom and broadcasting is more critical than ever”, Peter Murdoch, CEP’s VP media, states.  I am not so sure. Is that really true?

I do agree with CEP and PM (Public Mobile), though, that opposing giving Cabinet the authority to do end-runs around regulators and laws, to rule from the top rather than the messy processes of ‘regulation from below’, is a bad thing.

One thing that CEP might take cold solace in is that foreign ownership ain’t gonna happen just because Harper et. al. and the Federal Court of Appeal have opened the Pearly Gates to Canada’s telecom market — big as it is, ranking around eighth or so, depending on whose doing the counting.  But make no doubt about it, that we’ll need rules . . . . , and even then it is not certain how much capital will come.

When the rule of law and regulators clashed with policy and politics yesterday, it was the former that crumbled. Of course, Globalive, and its ultimate owners and investors, Vimpelcom, are the immediate beneficiaries of this court decision. So, too, are customers, a point made with no time wasted by Windmobile Chairman Anthony Anthony Lacavera, and figure-head for the concept that, regardless of where the money comes from, it is Canadians like him and other Directors on Windmobile’s board that are in control.

As Lacavera exclaimed, “we and our 300,000 customers are thrilled with this decision.” Well, maybe not thrilled . . . . . but you know what, he’s not entirely off the mark.

Just yesterday, another OECD report placed Canadian wireless users at the bottom of the international heap for outrageous international roaming charges, 25 bucks/MB for Canadians versus less than $5 for people in Greece and just under $10 for OECD countries on average. The full report can be found here.

Lacavera’s other comments were little more than self-serving cant: “Now we can continue . . . without the distraction and expense of challenges by our competitors to our right to operate.” Ya, sure, whatever.

I do not like it when politics and policy trump law and regulation in a heavy handed way. There’s lots of room to finesse this, but for now I can say that I do not thing that rule by Order in Council is a good way to make policy. It politicizes it. In fact, there seems to be a penchant for this in Canada when it comes to telecom, media and the Internet, as I have shown in a previous post. You can see for yourself by looking at the Privy Council Office’s Order-in-Council database.

The penchant for rule by Cabinet Directive has been ramped since the Chretien Liberals in the mid-1990s and has not abated since. Canadian levels of intrusiveness appear to be high by my estimation points to a certain backwardness in Canada that allows relationships between telecom-media-Internet titans, regulators and the ruling Government of the day to be too close. That’s code, in other words, for the cozy relationship between politics and telecom-media-Internet companies in Canada is a bad thing, anti-democratic and at odds with the ideals a free and open network media system.

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