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Editor's letter: New Industry Minister steps into the ring as telcos gear up for a fight

James Moore speaks during Question Period in the House of Commons on Parliament Hill in Ottawa April 25, 2012.

CHRIS WATTIE/REUTERS

A key political battleground began to take form this week with the appointment of James Moore as Industry Minister. In the coming weeks he will be briefed on reams of files, but none more politically explosive than wireless spectrum, the beachfront property of our publicly owned airwaves. Every mobile phone user in the country could be affected by the young B.C. minister's thinking.

His predecessors did not leave him a clean slate. The Conservatives think Canada's wireless industry has not been sufficiently competitive, and for the past five years they have contorted the market to generate more competition, to debatable effect. Now they seem to be open to allowing a giant U.S. operator, Verizon, to bid for the upstart Wind Mobile and possibly Mobilicity. Such a move could change the telecom industry forever, in ways Canadians may not have thought through.

With Mr. Moore not even settled in his new office, the industry began its counterattack this week, led by Telus and its indefatigable CEO Darren Entwistle, who visited our editorial board on Thursday. He spoke for two-and-a-half hours – we believe that's a record – on every aspect of Canada's wireless market.

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Make no mistake. Mr. Entwistle is poised for a fight, including, he says, possible legal action against the feds if they continue to show favour to foreign entrants by preventing the Big Three incumbents from having an equitable opportunity to purchase spectrum assets from small carriers once a federal ban on such deals expires in 2014. He will bid for rivals, too, if allowed. It is the fight of his life, and there are few CEOs with more fight in them.

Mr. Entwistle, and his rivals at Rogers, Bell and Quebecor, know their market positions will be threatened if Verizon comes to Canada. The Canadians argue they've spent billions building the infrastructure that delivers some of the world's best wireless service. Now they are being milked for political points by a populist government that tends to confuse economic policy with consumer policy. Read the Prime Minister's Facebook page if you want a sense of that.

Mr. Entwistle, who often shies away from a more public role, presented a detailed counterargument that seeks to establish the fact that Canadians pay less for wireless than most consumers in advanced economies, and we get better service. He even trotted out a video clip of Mark Carney praising Telus for being a model Canadian company through the recession, investing in jobs and innovation when others fled. Take that, Finance Minister Jim Flaherty.

(To declare our conflicts: Our own shareholders are involved in the fight. Bell owns 15 per cent of The Globe, while Peter Thomson, a member of our controlling family, owns one of the upstart rivals, Public Mobile.)

It's about more than retail politics. The Conservative brain trust believes one reason for Canada's middling performance on productivity is high wireless data costs – an idea they were convinced of by OpenText founder Tom Jenkins. (I heard Mr. Jenkins make the case passionately a few years ago to a small gathering in Waterloo that included Mr. Flaherty, then minister of state for science and technology Gary Goodyear and RIM co-founder Mike Lazaridis, who at the time had Mr. Harper's ear on telecom policy.)

Since then, Ottawa has done everything imaginable to stoke competition, without great success. The biggest victory to date may be a code of conduct, actually proposed by the industry, which among other things ends the practice of three-year contracts. (This government doesn't like to commit to policy, preferring ambiguity, as evidenced by its prolonged agony over foreign investment rules.)

There is even informed speculation that government officials encouraged Verizon to express interest in the Canadian market, just to get the competitive juices flowing.

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Trouble is, the wireless market has changed more in five years than perhaps any other sector, driven by the flurry of new smartphones, the creation of faster networks and the explosion of data. The bills that we all complain about reflect our own changing demand more than any fundamental shift in pricing. But no government wants to fault consumer behaviour.

This government may be trying to regulate the past (circa 2010) rather than position Canada for the mobile decade ahead. To flourish, Canada will need more than cheaper wireless rates. The next few years will be shaped by reliable, fast networks, innovative telecom companies and a startup economy that encourages businesses (and jobs) to be built out of thin air.

All that will be a test for Mr. Moore, an affable, hard-working, intelligent man who has no serious experience outside politics – and for that matter outside the Harper realm. He is known to have the Prime Minister's confidence. And as the Harper PMO looks to decentralize power ever so slightly in cabinet, look for more rope to be given to Mr. Moore. That means he will be the principal architect of the government's next move. If it is true that he has his eyes on a more senior government position – perhaps the most senior position one day – he will need to craft a wireless policy that pleases consumers but does not diminish the competitive strength of our phone companies.

It may win applause to say you pushed the big players to end three-year plans and reduce nuisance charges. It's quite another thing to have to explain on the campaign trail how you allowed winning companies such as Telus, Rogers and Bell to suffer (and cut jobs) for the benefit of an American giant.

Come to think of it, Mr. Moore's previous portfolio – Heritage – may have been the perfect training ground.

Enjoy your weekend,

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