BCE latest carrier to say Ottawa is misguided on wireless policy

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BCE Inc.'s top executive says he received assurances from the federal government a year ago that deep-pocketed foreign telecoms such as Verizon Communications Inc. would not use "loopholes" in Ottawa's wireless policy to enter the Canadian market.

George Cope is the latest CEO of a major wireless carrier to argue in recent days that Ottawa has taken a wrong turn in its attempts to ensure there is a fourth wireless player in every regional market. The Big Three telecoms – BCE, Rogers Communications Inc. and Telus Corp. – are now engaging in a public relations blitz to persuade the government to change course before Sept. 17, when any prospective bidder for wireless spectrum must formally apply for next year's auction. Such an application will freeze any potential acquisition talks.

"What happens between now and Sept. 17 is going to define the telecom industry for the next 30 years," Mr. Cope told The Globe and Mail's editorial board Thursday. "This is important."

At stake is the government's ambitions to foster new competitors in the $19-billion wireless market, in the belief that will result in next-generation services and lower prices for consumers.

In response, Mr. Cope warns incumbents will be forced to pivot to core urban markets to defend their market share, with rural areas then suffering from reduced investment, if Verizon is allowed to capitalize on what he describes as regulatory loopholes designed to help small entrants.

Current rules give preferential treatment to new entrants wanting to buy spectrum or small wireless firms, and allow new entrants to piggyback on incumbents' networks.

Verizon has made a preliminary $700-million offer for Wind Mobile and is in early-stage talks with Mobilicity, according to sources.

Mr. Cope said he began raising his concerns with Ottawa shortly after Industry Canada released the preliminary framework for the auction of the 700-megahertz spectrum in the spring of 2012, only to be told that he had nothing to worry about.

Specifically, BCE approached the government "a year ago" regarding its concerns about the auction rules, Mr. Cope said. "And we were told that this would not happen – that this was a policy intended for small players and that 'Yes, you are right, BCE, that this could happen but we do not see this happening in this structure.'"

He added later: "Their view was they didn't think they would come …That was the view that we were given from inside."

When pressed on who specifically provided him with those assurances, Mr. Cope replied: "The most senior bureaucracy in the country has told me that. And I won't reveal the actual source."

Mr. Cope and his counterparts are taking their message to the media and, in BCE's case, to consumers directly through a cross-country advertising campaign. On Thursday, BCE published an "open letter to Canadians" in a two-page newspaper spread to win public support.

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 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. "Our government's view has been clear, we want effective competition across Canada. Competition that will strengthen Canadian industry and serve consumers," said Jessica Fletcher, director of communications for Mr. Moore. "Greater competition means better prices for Canadian consumers."

Ms. Fletcher said the government stands behind former industry minister Christian Paradis's June announcement where he said Ottawa was not inclined to allow spectrum reserved for new entrants to be transferred to incumbents and quashed a deal for Telus to buy Mobilicity.

BCE has not yet met with Mr. Moore, who was recently named Industry Minister in a cabinet shuffle, but is anticipating a meeting with Industry Canada shortly. (BCE owns a 15-per-cent stake in The Globe and Mail, with the remaining 85 per cent owned privately by the Thomson family.)

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 government declined to publicly address Mr. Cope's insistence that he had been assured major foreign players would not be able to exploit the rules. Privately, officials said they find it unlikely that anyone in a minister's office or the PMO would make that commitment. The bureaucracy, by contrast, they said, is too risk-averse to offer such an assurance.

Wind Mobile CEO Tony Lacavera said the Big Three incumbents are being "disingenuous" when they claim the rules put them at a disadvantage, arguing that the fact that a foreign player has stated that it is mulling a Canadian entry is proof that the government's efforts to level the playing field are working. "I think whether it is Verizon or it's AT&T or its Vodafone or Orange – they are all new entrants in the Canadian market because they are starting with negligible market share," he said.