Public Debate Intensifies on Impact Of Verizon Entry into Canadian Markets

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By Peter Menyasz  

 

OTTAWA--Canada's major telecommunications companies are misleading the public by suggesting that the federal government is courting Verizon Communications Inc. to enter the Canadian market, Industry Minister James Moore declared on Aug. 20.

Canadian officials have not met with the U.S.-based wireless telecommunications firm to encourage it to invest in Canada in the upcoming wireless spectrum auction, Moore stated in an interview with the Financial Post, one of a series of media interviews to respond to a public campaign by the incumbent telecommunications firms suggesting that Verizon would enjoy an unfair advantage in the spectrum auction.

“Whether Verizon comes or does not come, in either circumstance consumers are going to benefit from our policy,” Moore insisted. “Verizon coming or not coming is not the success or failure of our government policy.”

Moore conceded that Canadian officials met with Verizon officials earlier this year in New York, but he said the meeting was at Verizon's request and represented only an exchange of basic information about the nature of the spectrum auction and the rules governing it.

The industry minister had told CBC News on Aug. 19 that he was “pushing back a bit” against the Canadian telecommunications firms' efforts to protect their commercial interests. “Our job as a government is larger than that. Our job is to serve the public interest and make sure that the public is serviced in this,” he said.

Industry Canada had announced in June that it would delay the start of its upcoming auction of spectrum licenses in the 700 Megahertz band to Jan. 14, 2014, with the deadline for applications moved back to Sept. 17, to give companies planning to bid on the spectrum time to assess the government's new policy on subsequent transfers of spectrum licenses. The auction was originally scheduled to start Nov. 19.

The major telecommunications companies have argued that the current rules would permit a major new market entrant like Verizon Wireless to bid on two of the four blocks of available prime wireless spectrum being auctioned, while incumbent Canadian firms are only entitled to bid on one block each; that the rules would permit a major new entrant to build infrastructure in urban centers only while ignoring rural and suburban Canada; and that the rules would prevent Canadian firms from competing against a new entrant in bidding on small Canadian wireless firms and the spectrum they hold.

Campaigns Misleading

The media interviews reiterated statements in an Aug. 13 statement in which Moore described as “misleading” elements of the public campaign undertaken by the incumbent firms--Rogers Communications Inc., BCE Inc., and Telus Corp.--to urge the federal government to amend its spectrum auction policy to eliminate a perceived advantage for a new foreign entrant like Verizon.

The statement specifically criticized suggestions in a letter by long-time BCE board member Anthony Fell, published in the Financial Post, that suggested the government is not giving Canadian consumers full information on which to determine whether the current spectrum allocation policy is beneficial for competition in the Canadian market.

“I do not believe the public is misinformed. I think Canadians know very well what is at sake, and they know dishonest attempts to skew debates via misleading campaigns when they see them,” Moore asserted in a statement posted on his blog as a Member of Parliament. “Equally, Canadian consumers know instinctively that more competition will serve their families well through better service and lower prices.”

Fell's letter, which he had sent to Prime Minister Stephen Harper before making it public, said he is “dismayed” with Moore's handling of the issue, and he was particularly critical as “quite unseemly” Moore's speaking with authority on major telecommunications policy after only having been assigned the industry portfolio less than a month before. “To be frank, there is an arrogance about both the ministry and the department which I believe is inappropriate,” the letter said.

The letter also criticized as “highly biased” the application to a major new foreign market entrant of the current spectrum auction rules, which were designed to benefit small, startup Canadian wireless providers. In developing the policy, the government gave no thought or consideration to the possibility that one of the world's telecom “giants” would take advantage of the substantial subsidies and preferential treatment the policy provides, Fell contended.

“Verizon should participate in the spectrum auction on the same basis as the Canadian telecoms, and Verizon should build out its own network the same was Rogers, Telus, and Bell,” he suggested. “If the Canadian market is so uncompetitive and if cell phone charges so high and Canadian telcos so profitable, why can't Verizon enter the market with no subsidy just like everyone else? It's a legitimate question worth thinking about, and I believe the answer is self-evident.”

The opposing sides in the policy dispute have put in place competing websites to promote their positions, with the governing Conservative Party on Aug. 16 launching a website--Consumers First--to counter the major telecommunications firms' website--Fair for Canada.

Poll Favors Incumbents

Meanwhile, the results of a survey, released on Aug. 21 by Ottawa-based Nanos Research Group, concluded that 81 percent of Canadians prefer that government auctions of wireless spectrum favor neither foreign-owned nor Canadian-owned telecommunications firms.

If the government does provide preferential treatment, the survey found that 70 percent of Canadians would prefer more favorable treatment for Canadian than foreign-owned entities, the polling firm said in a statement on the survey, commissioned by Bell Canada and Telus.

“Respondents are clearly more likely to think that Canadian companies would do a better job at creating jobs, investing, and providing rural service compared to foreign companies by a margin of about seven to one,” it reported.

A union representing Canadian telecommunications workers even questioned the security implications of Verizon's entry into the Canadian market, calling on Aug. 20 for the federal government to indicate how it will review and address national security concerns.

The Investment Canada Act requires the Industry Minister to review and remedy any potential national security concerns of major new foreign investments, Dave Coles, president of the Communications, Energy, and Paperworkers Union of Canada, pointed out in a statement.

“Verizon has been deeply involved in the world's biggest ever spying scandal. Not to fully assess the security and privacy implications of their takeover of Canada's telecommunications would be a complete betrayal of Canadian citizens,” he said. “When the Harper government discussed lifting foreign ownership restrictions on telecom companies, Public Security Canada said that such a move increased national security risks.”