To the surprise of some telecom industry analysts, Ottawa has overruled the federal telecommunications regulator by finding that Globalive Wireless Management Corp. meets Canadian ownership and control requirements under law.
In a press conference Friday, Globalive chairman Anthony Lacavera said the carrier will launch service in Toronto and Calgary “as early as next week.”
The Cabinet decision paves the way for Globalive’s Wind Mobile brand, backed by billionaire Egyptian telecom mogul Naguib Sawris’ Orascom Telecom S.A.E., to go up against the nation’s big three incumbent wireless carriers.
But the federal cabinet backed Industry Canada and minister Tony Clement, which in the spring concluded exactly opposite: that Canadians controlled Globalive by having 66 per cent of the voting shares.
The cabinet order said it is changing the CRTC ruling “so that Globalive can begin operating in Canada without delay.”
“It’s a big surprise,” admitted Wind Mobile CEO Ken Campbell. “We are obviously very pleased.”
“People are buzzing, people are excited,” in the company’s Toronto headquarters,” he said. “A whole level of anxiety’s been removed and we’re focusing on what we need to do to get this plane off the ground.”
As the cabinet was mulling the case, for the past two weeks Wind Mobile staff have been gaining publicity by working for charitable organizations. This morning Campbell said they are concentrating on making sure business and customer service processes are ready so “all the stuff you need for launch are in place.”
In fact the company has some sales kiosks up and manned at Blockbuster Video stores in Toronto and Calgary and other locations, leading to speculation that a launch is imminent.
The cabinet ruling may not end the legal process. Competing wireless operators — Bell Canada Enterprises Inc., Rogers Communications and Telus Corp. — can launch cabinet or legal appeals which might temporarily stop Globalive’s start.
Bell didn’t have much to say Friday morning.
“It’s disappointing as we think Globalive quite clearly does not meet the requirements for Canadian control,” a spokesperson wrote in an e-mail to Network World Canada. “We’ll be taking a close look at the reasoning behind this decision.”
Michael Hennessy, Telus’ senior vice-president of regulatory and government affairs said the telco is disappointed with the ruling, which gives Globalive “a unique advantage.” Bidders who spent $4 billion on spectrum at last summer’s AWS auction — including Globalive and Telus — “were explicitly told that the rules prohibited foreign ownership and control,” Hennessy, said in a news release. Bidders should feel they were misled, he said, Globalive shouldn’t have been allowed to bid.. “This decision has implications extending well beyond the telecommunications industry, given it creates a precedent on what constitutes compliance with foreign control restrictions.”
“I’m sure we will see more [legal] action,” predicted Iain Grant, managing director of the telecommunications consultancy SeaBoard Group
. On the other hand, he said it would be a “bold, brave and courageous” move to try and challenge a cabinet ruling in court.
If there isn’t an injunction blocking the cabinet ruling Wind Mobile will be in business on Saturday, Grant predicted.
In its decision, the cabinet said its determination “is based on an assessment of the facts before the CRTC
during the course of its public hearing into Globalive’s compliance. The test for Canadian ownership and control under the Telecommunications Act is comprised of both legal requirements and a factual requirement. The government and the CRTC
agree that Globalive meets the requirements. In particular, Canadians own at least 80 per cent of the voting shares of Globalive and 66 2/3 percent of the voting shares of Globalive’s holding company. Also, at least 80 per cent of Globalive’s board of directors are Canadians.
“The factual requirement involves assessing whether a foreign entity controls “in fact” the company. Control in fact is the ongoing ability to determine the strategic decision-making or to manage the day-to-day operations of a company,” the ruling said.
While the CRTC suggested Globalive make some changes to its structure to ensure Canadian control, cabinet said “no additional changes are required to the company’s structure and shareholder arrangements, including to its debt and equity financing arrangements and to the composition of its board of directors.”
The ruling is a vindication for Industry Minister Tony Clement and his department’s decision to give Globalive its spectrum licences despite Orascom’s heavy involvement. While Globalive had those licences, it also needed a carrier licence from the CRTC. As a result, both a government department and a regulator had to interpret the Telecommunications Act, and came to different conclusions.
During the October CRTC hearings, Bell, Rogers and Telus insisted that Globalive doesn’t meet the legal requirements of Canadian control.
Some observers believe that the cabinet ruling changes the law on foreign control. However, to meet potential complaints -and, perhaps, a court challenge — the cabinet specified that its decision is specific to the facts of the Globalive case, and is based on a “rigorous application” of the Canadian ownership and control”
requirements. “In varying the CRTC
decision, the Government is not removing, reducing, bending or creating an exception to [those] requirements in the telecommunication and broadcasting industries,” the ruling said.
That was picked up on by telecommunications consultant Mark Goldberg
. “In some way its satisfying that we’re not seeing a wholesale discarding of foreign ownership restructions,” he said in an interview. “We just had a confusing environment where two branches of government reached different conclusions on similar facts and I think that creates a real challenge for capital markets. So among other things what this does is hopefully provide stability for the investment climate in telecommunications.”
Dave Dobbin, president of another cellular startup, Data and Audio-Visual Enterprises Wireless (DAVE Wireless), said he wasn’t surprised by the ruling. “We’ve always believed Globalive would be in the market,” he said. DAVE Wireless plans to launch its service next year in a number of major cities.
Two other new wireless services are scheduled to start shortly. Public Mobile will go after those who have never had a cellphone in Toronto and Montreal areas, while Quebecor’s Videotron cable division, which has been re-selling wireless spectrum from Rogers under its own brand, will be able to expand its coverage with spectrum of its own.
More will be filed on this story as the day goes on. Globalive is scheduled to hold a press conference at 11 a.m. Eastern time.
At a mid-morning press conference in Toronto, Campbell said service will start in Toronto and Calgary “as early as next week.”
“Our objective is to have quite a few Wind Mobiles under Christmas trees,” he said.
The Toronto network already stretches from Oshawa in the east to Stoney Creek (near Hamilton) in the west. However, subscribers will be able to roam across the country and in the U.S. when they leave the main coverage areas.
The vagueness on the launching is because the company wants to make sure all of its operational processes are ready, Campbell said. “The worse thing we could do is pull the trigger too early,” he said.
The conference, attended by a boisterous crowd of Wind Mobile staffers, cheered loudly when chief customer officer Chris Robbins, Campbell and Lacavera walked in.
“Now we’re ready for action,” said Lacavera. “We are going to change the structure of the (wireless) industry in Canada.”
He thanked the cabinet for its ruling, saying that while the interpretation of the foreign control regulations was subjective, the CRTC “made the wrong decision” while cabinet made the right one. Globalive complies with the law, he said, At the October hearings it “demonstrated at various points our full commitment to full compliance with the control and ownership rules.”
While respecting the need for foreign ownership laws, having the buying power and experience of Orascom is “critically important” to go up against Bell, Rogers and Telus, he said.
“We’re extremely well-positioned to truly compete effectively for the long term.”
Wind Mobile hasn’t publicly set its rates yet, but has said it will offer a number of plans with no contracts, no activation fees and no limits on the time of local voice calls. Plans will likely differ by a number of add-ons, such as long-distance and call answer offerings. There will be limits on the amount of data subscribers can download each month. Wind may also have a pay-as-you go offering under the Yak brand. Yak Communications, a long distance dial-around company, was one of the first telecom firms Lacavera created more than 10 years ago. He has folded Yak and several other companies into Globalive Wireless’ holding company, in which Orascom holds a one-third share.
Wind Mobile will start off with BlackBerry handsets from Research In Motion as well as units from HTC and Samsung.
Bell, Rogers and Telus have been preparing for a while for the new entrants by lowering or eliminating fees. In addition to their standard brands, they have entry-level pay as you go brands called Solo (Bell), Fido (Rogers) and Koodo (Telus).
Not only will this trio face Globalive, Videotron and Public Mobile, there are two other well-funded new spectrum owners in the wings. Halifax’s Bragg Communications, which operates Eastlink Cable, has been quietly talking to equipment suppliers. Calgary’s Shaw Communications has been tight-lipped about its plans.