OTTAWA – The complexity – some might say silliness – of Canada’s telecommunications foreign ownership rules were on full display last week as the Federal Court heard arguments on a petition to overturn Cabinet’s decision to approve Globalive Wireless’ ownership structure.
According to people at the hearing, Globalive Wireless’ lawyers argued that because the Telecommunications Act says Canadian telecom firms can’t be controlled by non-Canadians doesn’t mean they must be controlled by Canadians. Therefore, a telecom company can find itself in the situation of being controlled by neither Canadians or non-Canadians.
Globalive, of course, is in business under the Wind Mobile brand.
The argument didn’t take hold with the court. Justice Hughes noted that someone has to control the company. He wondered if stateless people are in control of Globalive Wireless.
Globalive Wireless didn’t return requests for an interview.
The Federal Court hearing was sparked by a Public Mobile petition seeking a declaration quashing the Governor in Council’s (GIC) late 2009 decision to overturn the previous CRTC ruling that Globalive Wireless didn’t comply with the Telecom Act’s foreign ownership rules. Such a ruling would essentially turn back the clock on Globalive Wireless forcing it to once again go through an ownership review before the CRTC.
Counsel for Public Mobile and Telus Corp. argued during the hearing that Cabinet failed to connect the dots on control. Not only did Orascom hold 65% of the equity and 99% of the debt in Globalive Wireless, the two companies had a technical services agreement, requiring Globalive to purchase engineering and consulting services from Orascom. In addition, Globalive Wireless was required to use the Wind brand in Canada. Together those three elements put control of Globalive Wireless in the hands of Orascom, they said.
Asked whether the horse has left the barn on this, Telus said no. Globalive would have to go back to the drawing board and file a compliant ownership structure with the CRTC.
“What they would need to do is go back to the CRTC and present them with a compliant ownership structure,” Telus’ VP of telecom policy and regulatory affairs Ted Woodhead tells Cartt.ca, noting that the company isn’t interested in shutting Globalive Wireless down.
“They’re here, they’ve built network, they continue to build network and they’ll be here tomorrow, all they need to do is comply with Canadian law,” he adds.
Even if Cabinet’s decision is allowed to stand, it doesn’t open the doors for other providers to adopt an ownership structure similar to that of Globalive Wireless. Woodhead says that following Cabinet’s green light for Globalive, the CRTC said it wasn’t a precedent and that it was going to conduct ownership reviews as it had done in the past.
“So this hasn’t determined the matter for everybody. There is no certainty,” he says. “There is still the same amount of uncertainty as there was the day after the GIC decision.”
And this is the root of the problem says Michael Hennessey, senior VP of regulatory and government affairs at Telus. Another carrier could go out and secure similar types of arrangements for foreign equity and debt and not be assured of a similar outcome from the federal government.
“The government could say, ‘we don’t think the circumstances are the same, you’re bigger, you’re different, there’s X’ and so, it leaves anybody that’s asking what are the rules of entry are in Canada confused. Anytime you have uncertainty that risk can result in higher cost of capital,” he says.
Cultural groups also appeared at the hearing arguing that approving Globalive Wireless’s ownership structure puts cultural goals in jeopardy. Speaking with Cartt.ca, Joanne Deer, director of public policy and communications at the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA), describes Cabinet’s decision as precedence setting, noting that once telecom assets are owned by a foreign entity then it will be easy to effect changes on the content side.
“It really does set the stage for, for example, a foreign company to sweep in a take everything at once. It’s really hard to even consider for example that Rogers [Communications Inc.] could sell its telecommunications arm to foreign company without having all its broadcasting and its distribution services affected as well,” Deer argues.
And in the face of even more telecom and broadcasting convergence, it becomes more critical to ensure Canadian ownership.
“We feel that [Canadian ownership of telecom is] even more pressing now because of the amount of convergence that we’re having in terms of our broadcasters and our telecom companies are all becoming the same and they are both becoming vehicles for delivering our content,” says Deer.
Many have argued in the past that broadcast regulations would be enough to protect Canadian culture on Canadian airwaves, but ACTRA isn’t one of them. “We think you need both [legislation and regulations]. Obviously regulation is very important to our industry and it’s vital frankly we believe. But as well you need legislation because it’s very difficult regulate a foreign owned company in Canada,” Deer notes.
Hennessey argues that ownership is irrelevant and appropriate regulations on the broadcast side would be enough to protect Canadian content. “Carriage rules are determined by regulation, not simply the economic imperatives of the company. And the regulation would apply to a Canadian or foreign enterprise engaged in the distribution of content irrespective of ownership. The rule of law applies, just like it does in every other sector where we have foreign and Canadian ownership. You obey the rules of the country you operate in.”
Woodhead adds that there are reasons why services such as Hulu aren’t available in Canada. “There’s lots of, either through contracts or otherwise, regulation of content and there’s no reason under a licensing regime or a copyright regime or [other type of regime] that that wouldn’t continue.”
