Carrier opens another front in the war to get the federal government to change its telecom strategy in the face of Verizon Communications’ possible entry here

Telus Corp. is making good on its promise to take the Harper government to court over its refusal to allow incumbent wireless carriers to buy startups, another way of ratcheting pressure on Ottawa to change policies it says tilt in favour of Verizon Communications and other foreign carriers who may want to come here.

The Vancouver-based telecommunications company filed a motion Monday asking the Federal Court to stop Industry Canada from implementing a framework announced June that gives the industry minister the right to refuse acquisitions of startups who got licences in the 2008 spectrum auction.

Briefly, Telus will argue that the framework unlawfully gives the Industry Minister new rights to get advance approval to transfer of wireless spectrum between companies.

The court challenge is not only against the government. It also names every wireless carrier that won licences in the 2008 spectrum auction including BCE Inc.’s Bell Mobility, Bragg Communications (owner of Eastlink Cable, which earlier this year launched wireless service), Mobilicity (which Telus tried to buy earlier this year before being refused by Ottawa), Wind Mobile, Public Mobile, Manitoba Telecom Services, Rogers Communications, SaskTel and Shaw Communications (which bought spectrum, then decided not to get into the cellular business).

The case will go back to that auction, which the government staged in a way to encourage new companies to enter the cellular business. It did that by setting aside sections of the most valuable spectrum, in the AWS band, strictly for companies that either had never been in cellular, or had small market share.
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There was another way the government protected new entrants: Mindful of the fact that Telus bought Clearnet in 2000 and Rogers Communications bought out competitor Microcell in 2004, Ottawa said companies that bought AWS spectrum – including Wind, Mobilicity, Shaw, Eastlink — couldn’t sell their frequencies to incumbent carriers for five years. That ban expires next year.

That hasn’t stopped incumbents from being interested. With Shaw looking to sell its Western Canadian spectrum, earlier this year Rogers announced it had purchased an option to buy Shaw’s frequencies when the five year ban expired.

Then Telus struck a $380 million deal to buy Mobilicity before the five year ban expires because the startup’s future was struggling with debt. But then-industry minister Christian Paradis killed the deal, saying at the time the five-year ban had to be honoured.

Several weeks later the government issued a formal framework on licence transfers, saying that even after the five year bans have expired Ottawa has the right to review – and possibly refuse – in advance all sales of wireless spectrum between companies. The framework sets out the conditions under which licence transfers will be reviewed and conditions that can be attached.

“Industry Canada has developed this framework to support the government’s policy objective to maximize the economic and social benefits that Canadians derive from the use of the radio frequency spectrum resource, including the efficiency and competitiveness of the Canadian telecommunications industry, and the availability and quality of services to consumers,” the documents says.

Not only will the framework apply to carriers that bought AWS spectrum like Mobilicity, but also to operators like Public Mobile, which bought PCS spectrum that was supposed to be free of limitations on being sold.

“The Harper Government is committed to promoting at least four wireless providers in every region of the country to support greater competition in the market,” Paradis said in releasing the framework.

 

In its motion to the Federal Court Telus says it will argue that in framework setting out the rules for the 2008 auction, the industry minister at the time said the policy decisions – including the five year ban — were final. The moratorium was then set in the licences of all winning bidders.

Telus [TSX: T] will argue that its bidding strategy in 2008 and its corporate planning relied on those statement, including that the moratorium would only last five years.

However, it says, the latest framework imposes a new requirement – that any deemed spectrum licence transfer has to be approved by the industry minister. That is “contrary to the clear, unambiguous and unqualified representations the minister made” in 2008 that the ban would only last five years, Telus will argue.

Also, the new framework interferes with the “vested rights” carriers have over their licences, Telus argues.

While the Radiocommunications Regulations approved by the cabinet say licences can’t be transferred without the permission of the industry minister, no approval is needed for the change of control of licences, Telus argues.

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