By Ahmad Hathout
TORONTO – Telus Corp. has lost one step in its Federal Court case to stop Quebecor’s Videotron from getting its hands on 3.5 GHz spectrum licenses in western Canada.
A Federal Court judge on Friday denied Telus’ request to order Innovation Canada to temporarily halt the issuance of the licenses during the time the court deliberates on the arguments in the case.
At a hearing last week, Videotron and the counsel for the Attorney General of Canada both told the Court if Videotron is not issued the licenses in British Columbia, Alberta and Manitoba, it would be at a competitive disadvantage when other telecoms receive their licenses, and the status quo power balance would be altered against the interest of the public.
“Telus’s arguments are untenable and do not raise a serious issue,” judge Sebastien Grammond said in his decision Friday, adding there is “no basis” for Telus’ assertion that Videotron needed physical infrastructure in those provinces to be eligible for the licenses.
Grammond also said Telus has not shown it would suffer irreparable harm if the stay is granted. “Although Videotron’s entry will change existing market conditions, the same result would have obtained if another regional carrier had won the disputed licenses,” Grammond said.
On his third reason for denying the interim ban, Grammond noted the “decisive factor is the public interest in fostering greater competition in the market for mobile phone services,” he said. “This public interest weighs heavily in favour of denying the stay.”
Bell brought similar arguments trying to stop the issuance of the licenses on the basis that Videotron did not qualify for them.
The case now moves on to the merits of the arguments.
In a press release Friday, Quebecor said it welcomed the decision and is “disappointed by Telus’s relentless efforts to block at all costs the implementation of government policy to encourage the entry of a fourth player into Canada’s wireless market in order to create healthy competition where it does not exist and lower the prices Canadians pay for mobile services.
“The legal maneuvering by Bell and Telus demonstrates, once again, that they cannot abide competition and the interests of Canadians are eclipsed by their financial objectives,” the release added.
Regulators in Canada are currently in the midst of deciding whether Rogers should be allowed to buy Alberta-based Shaw Communications, which has instigated major changes in the wireless industry under its brand Freedom. An acquisition like that would reduce the players from four to three in some provinces, and the Videotron and its Fizz brands – both among the lowest-cost mobile services in the country – could step in and fill that vacuum.
Videotron applied for the set-aside 3.5 GHz licenses, those blocks that cannot be purchased by the larger carriers to facilitate easier access by smaller or regional providers. In July, it was awarded 294 licenses for nearly $830 million.
Telus said during the hearing on the matter last week it initially pitched the idea that carriers should be able to purchase spectrum and set-up networks outside of their footprint, but was struck down by ISED, which instead wrote an auction framework that required applicants to show they are actively providing telecommunications services to the general public in the areas they want the licenses.
Telus and Bell brought the case to Federal Court on that point – whether, on the basis of the framework rules, ISED erred in awarding licenses to Videotron because subsidiary Fibernoire provides fiber backhaul services to businesses out west.
The Vancouver-based company first argued those wholesale services to businesses do not qualify as actively providing telecommunications services to the general public, and that the federal ministry limited the definition to retail services to businesses, not wholesale services. The company also argued Videotron had not demonstrated it had a retail distribution network in those areas.
The parties that presented arguments last week all focused on some aspect of the market impact of Videotron being able to offer retail services in the west for the first time. While Telus said the issuance of licenses to Videotron would skew the market due to the alleged $1.1 billion discount Videotron paid for its licenses, the latter argued the former just wants to delay the inevitable competition it did not see coming.
As the case moves on, still more information may emerge because critical pieces of information in ISED’s possession may shed light on the minister’s reasoning for granting the licenses have been locked away due to confidentiality purposes. Telus and Bell have both filed motions to obtain those records but were not able to obtain them before this decision was made.
ISED did not respond to Cartt.ca’s questions related to the issuance of licenses in light of this decision in time for publishing.
Updated Oct. 26: ISED responded to Cartt.ca and said: “The Government of Canada has taken note of the Federal Court’s decision, which allows the 3500 MHz licensing process to continue. Innovation, Science and Economic Development Canada (ISED)’s consultation on interim technical rules for 5G operation in the 3500 MHz band to ensure continued air safety for Canadians closed on October 15, and ISED is carefully reviewing comments received. Licenses will be issued by ISED only after the review process is completed.”
