The status of wireless startup Wind Mobile
is in question after a judge quashed the federal cabinet order allowing it to start business in 2009.
In a ruling issued Friday, Federal Court Judge Roger Hughes said the 2009 cabinet order concluding Wind was controlled by Canadians as required by the Telecommunications Act was “based on errors of law and must be quashed.”
The order was crucial for Wind’s parent, Globalive Wireless Management Corp., because it has significant investment from Egyptian-based Orascom Telecom Management that raised questions about whether it was Canadian-controlled. After a hearing the federal telecommunications regulator ruled Globalive wasn’t controlled by Canadians, and therefore denied it an operating licence. The cabinet disagreed.
But in overturning the regulator, the cabinet erred twice, the judge wrote:
–First in concluding that the Telecommunications Act should be interpreted to encourage foreign investment. There is no such requirement in the act, the judge said.
–Second, cabinet erred saying its decision only applied to Globalive Wireless, which many felt meant it alone got a break. The cabinet can’t restrict its interpretations to one person or organizations, the judge said.
However, Wind is still in business for the time being. The judge suspended his order for 45 days to give the company and the government time to consider their options.
“We are very disappointed with this decision,” said Wind chairman Anthony Lacavera in a press release. “From the beginning, we have maintained that we are fully compliant with the rules. Industry Canada saw this clearly. Cabinet saw this clearly. This court decision does not suggest that cabinet got it wrong, only that cabinet made two errors in explaining their rationale and characterizing the decision.”
“We are currently examining our options but this is not over yet. We don’t intend to back down. I am a proud Canadian and Wind Mobile, like the entire Globalive group of companies, is proudly Canadian. Since 2009, we have brought on more than 250,000 subscribers who opted for wireless choice. We won’t let this be a set-back for wireless competition in Canada and are consulting with our advisors to determine our next steps.”
Competitor Public Mobile brought the case to the Federal Court early last year, complaining that cabinet acted beyond its jurisdiction when it overturned a ruling by the telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) that Wind wasn’t controlled by Canadians. Instead, the commission concluded, it was controlled by Egyptian-based Orascom Telecom Holdings, which put up hundreds of millions of dollars so Wind could buy spectrum and build its network.
Understanding that Wind is now in business, operating in Toronto, Ottawa, Calgary, Edmonton and Vancouver, the judge suspended his order for 45 days. That gives the cabinet time to ammend its order to comply with the judge’s conclusion. Wind or its parent, Globalive Wireless Management Corp. and the government could also appeal the decision to the Federal Court of Appeal. In any event for the next 45 days Wind is still in business.
Telecommunications consultant Iain Grant, managing director of the Montreal-based SeaBoard Group, said subscribers and would-be customers shouldn’t be worried because the Harper government has too much invested in the creation of Wind to let it die.
“I don’t think we’ll see a few hundred subscribers wandering around without a signal,” he said. “The government is committed to making this [Wind] happen. The cabinet is committed to making this happen. (Industry Minister Tony) Clement, of course, has it personally on his to-do list to make it happen. I suspect it will happen.”
He emphasized that Public Mobile’s goal was not to kill a competitor but to get the same access to foreign investment that Wind has. As such, Grant said, this is more a fight about foreign investment regulations.
The government is working on overhauling the foreign investment rules in the Telecommunications Act
, but it is also dealing with creating the rules for the upcoming 700 Mhz spectrum auction and creating a digital economy strategy. As a result its time-table for foreign investment changes — which will have to be passed by Parliament — is getting stretched out.
Wind had a controversial birth. Its controlling shareholders are Lacavera, a Toronto telecommunications entrepreneur who created a number of companies under the Globalive banner, including Yak Communications, an Internet, local and long distance provider.
When the federal government decided to auction AWS spectrum in 2008 with a special set-aside for new competitors, Lacavera decided to join the bidding. However, he found it hard to convince Canadians to help finance the venture. In the end, Orascom would be his only partner.
After the newly-named Globalive Wireless spent $442 million of Orascom’s money on spectrum covering almost all of the country except southern Quebec, the startup had to convince both Industry Canada and the CRTC that it met the foreign ownership and control conditions under the Telecommunications Act.
Industry Canada was apparently no problem. However, the major incumbent carriers – BCE Inc.’s Bell Canada, Rogers Communications Inc. and Telus Corp. – raised heated objections at what at times wasan acidic hearing in the fall of 2009
Ultimately the CRTC ruled against Globalive
, saying that because Orascom holds two-thirds of Globalive Wireless’s equity and the vast majority of its debt means the Egyptian company has the ability to control the startup.
Two months later the cabinet overturned that decision.