A group of 150 leading Canadian CEOs is appealing to Stephen Harper to alter course on a wireless competition policy they say would hobble domestic companies while giving privileged treatment to a deep-pocketed foreign wireless player such as Verizon Communications Inc.
The Canadian Council of Chief Executives delivered a letter to the Prime Minister late last week asking him to rethink rules that president John Manley says would give Verizon, which is considering expanding into Canada, a preferential right to buy wireless spectrum.
The group’s intervention is a clear signal that corporate Canada is now widely concerned about the Harper government’s strategy for shaking up Canada’s wireless market.
Mr. Manley said the chief executives, who collectively represent every industrial sector, rarely speak out on matters specific to one industry but feel in this case there are broader principles at stake.
“Your government has clearly indicated its desire for increased competition in the telecommunications sector,” Mr. Manley wrote in a July 26 letter to Mr. Harper. “While we as a council support that objective, we also believe that public policy should not discriminate against Canadian companies in favour of large foreign operators.”
The Big Three telecoms – BCE Inc., Rogers Communications Inc. and Telus Corp.– have been mounting a PR blitz to persuade Ottawa to close what they call loopholes in telecom policy that they argue were meant to help small new entrants, not behemoths. Their entreaties come ahead of a January, 2014, auction of licences for exceedingly valuable wireless spectrum where new entrants will be able to purchase more spectrum than incumbents.
Mr. Manley said his 150 CEOs agree the rules need to change. “There is no level playing field here,” he said in an interview.
In addition to serving as president and CEO of the Council of Chief Executives, Mr. Manley sits on Telus’ board. Telus CEO Darren Entwistle is also a member of the Council of Chief Executives’ board.
The potential arrival of Verizon has spurred the council’s campaign.
Verizon is considering the purchase of Wind Mobile and Mobilicity – two urban-focused start-up carriers that are for sale, but cannot be acquired by the Big Three due to rules surrounding the wireless spectrum they own.
The U.S. telecom giant is also assessing whether to participate in the upcoming auction of 700 megahertz spectrum. Under the rules for the auction, Verizon would qualify as a new entrant and could purchase two out of four blocks of so-called “prime spectrum,” while the Big Three are capped at one block apiece. Since there are only four prime blocks, there is a risk that one of the major players could be shut out.
The Council of Chief Executives is calling on Mr. Harper to rewrite the rules, allowing incumbents equal rights to bid on the new spectrum and equal opportunities to snap up small Canadian wireless companies.
“We favour open markets and competition – bring it on – but don’t tie somebody’s hand behind their back,” Mr. Manley said in an interview.
As an aside, the CEOs point out that Ottawa will likely earn more money from a wireless spectrum licence auction where all bidders have equal rights. “An open, competitive auction that does not favour foreign operators would likely have the added benefit of increasing government revenues,” the council president wrote in the letter.
Current rules also mean new arrivals – even big foreign firms – would be able to piggyback on incumbents’ networks.
The CEOs say Verizon or other big arrivals to Canada shouldn’t as new entrants be granted any exemption from the requirement to build network infrastructure. “Large foreign firms wishing to enter the Canadian market should be subject to the same infrastructure build-out requirements that apply to incumbent Canadian firms,” Mr. Manley said in the letter.
Mr. Manley – a former industry minister once responsible for telecom policy – said this wasn’t how Ottawa originally sold the wireless strategy it’s laid out over the past few years.
“They repeatedly framed their policy in terms of new entrants being small and therefore needing special treatment,” he said. “We kept hearing that this [major foreign entrants] was not supposed to happen. It was not supposed to be Verizon or AT&T coming into the Canadian market. It was always [envisioned] as fledgling start-up firms.”
Ottawa appears to be unmoved by the pleas of incumbents who insist the system is ripe for exploitation by massive global firms. Industry Minister James Moore’s office responded last week by pointing out the government removed foreign investment restrictions on small telecoms precisely to attract outside capital to make the Canadian wireless marketplace more competitive.
The 150-CEO council normally steers clear of sector-specific issues except where it feels a matter has broader implications for the economy and the business community. The consensus of CEO council board members was that concern over Ottawa’s wireless strategy meets this test, Mr. Manley said.