Anthony Lacavera spent years trying to bring competition to the Canadian telecom market. Ultimately, he failed—thanks in large part, he says, to Canada's troubling attitude toward entrepreneurs
In 2007, brimming with ambition, Anthony Lacavera began his quest to offer Canadians a cheaper alternative to the major wireless carriers. Nine years later, he sold Wind Mobile to Shaw Communications for $1.6 billion, an experience that left him richer, but embittered. He had tried to introduce competition into the telecom market and found roadblocks at every turn. From Bell, Rogers and Telus, he'd encountered fierce resistance. From the government and regulators, which should have been protecting Canadians' interests, he'd gotten inertia or meddling. And from the people who stood to gain the most—Canadian investors and consumers—he'd received mostly indifference. After thinking about it for a few months, Lacavera partnered with author Kate Fillion on How We Can Win. The book (due out Oct. 3) devotes an early chapter to Wind's sail into troubled waters. Then it sinks its teeth into Canada's commercial ecosystem, chewing over all that Lacavera considers problematic about how Canada treats entrepreneurs and how those entrepreneurs measure up against the world's best. As far as the chairman of Globalive Communications is concerned, Canada can't or won't compete, and that is putting the nation's future prosperity at risk. "If we don't make some fundamental changes," he writes, "we are screwed."
Congratulations on the book.
Thank you, Trevor. It was a much bigger effort than I anticipated.
Having read it, I would describe its overall tone as angry. Would you agree?
No, I don't think it's angry at all. But we need to wake up. Because the long-term picture, just extrapolating from where we are today to 20, 40, 60 years, 100 years from now, looks very bleak.
The first part of the book deals mainly with your Wind experience. You called it a failure. But you sold Wind for $1.6 billion. That's a pretty successful-looking failure.
I would have never sold the company. I would be 90 years old on my deathbed owning that company.
You describe what happened to Wind as a case study in how Canada's economy resists competition, and you raise the issue of oligopolies.
The Canadian economy is structured as a series of oligopolies. In banking we have a clear oligopoly with five banks. As a result of that, we pay some of the highest banking fees in the world. We have a very oligopolistic mutual fund industry, and we pay some of the highest mutual fund fees in the world. We have an oligopoly in telecommunications, and so we pay some of the highest rates in telecom in the world. Since I sold Wind, prices have gone up 25%. So the presence of competition is very important for the benefit of consumers.
You spend a lot of time talking about how hard it was to find big-money Canadian VC investors for Wind. You also blame Canadian entrepreneurs in general for not aiming higher. Isn't that a chicken-and-egg scenario?
I think it is chicken-and-egg. But I think they need to move together. What's happening right now is we're losing. The Canadian entrepreneurs that do aim high—Stephen Lake is an example in my book, with Thalmic Labs. He did the largest Series B financing for a startup in Canada last year: $120 million (U.S.). All U.S. investors. That company was seeded by Canadian investors, and the real early risk was taken by Canadian angel investors and Canadian VCs. And then the real big economic opportunity came when they had proven their business model, and then the big investment was not available for Stephen Lake in Canada, and he raised it all in the U.S. And now the lion's share of the economics of that company have transferred to the United States.
Your major investor in Wind was Egyptian billionaire Naguib Sawiris. You're angry at how he was treated.
Yes. I think it's a black eye on Canada.
What do you think was behind that treatment?
There was a resistance to foreign capital. There was a resistance to real change. And that existed not just with the Big Three lobbying the government—it existed within government too.
Is foreign investment discouraged in Canada?
We don't create the environment and conditions that welcome it. And when I successfully did do it, the machinery that we have to deal with it failed. You can imagine, from Naguib Sawiris's perspective as an investor—he's invested $442 million into our country. He's bought this licence. He's paid cash for it. He gets approval from Industry Canada. Six months later, with the same set of facts, the CRTC comes to a different conclusion. We had invested another $200-some-odd million, hired 700 people, built 40 stores, because we had the licence. We had Industry Canada approval. Then the CRTC was lobbied successfully by the telcos, and they blocked the Wind launch.
The government overturned the CRTC's decision (1) but then allowed Rogers to charge you usurious data fees—$1,000 per gigabyte versus the usual $5. Obviously you tried to get the message across to government. Why were they ignoring you?
I don't think they were ignoring it. I think the machinery just moved way too slowly. There was just not a sense of urgency. And then of course the whole time there were dozens, if not hundreds, of experts speaking on behalf of the oligopoly. "The competition is not needed, it's already very competitive, look at all these global benchmarks." Tons of stats and data. And, unlike the competitive forces in telecom in the United States, where there would be consumer advocacy groups on the other side, we didn't have any consumer advocacy support at all.
Sawiris equated Canada's closed market to China's.
I didn't agree with him doing that. And I let him know that. Because Canadians have a very negative reaction to things like that. We lost even some supporters I think we had.
In your book, you list a number of problems with the Canadian economic culture: "It's not in the nature of Canadians to dream big"; "We think like underlings"; "We don't think long term"; "We think small." It sounds like the main problem is mindset.
The main problem? It's, like, 98% of the problem.
So how do you change a country's mindset?
I think we need to evolve our education system. We need to make it so that, from an early age, it's not looked down upon to create a new path and start a business. It's not looked down upon to create a new path in social enterprise or in the public sector. Innovation needs to start in mindset from a very early age. I use business as an example because those are my reference points. But my message is more general than that. It's that innovation is a mindset in any context. Innovation is a vision of how things can be better, and a relentless pursuit of that improvement.
You rail against the government's lack of effort on behalf of entrepreneurs, but they are spending a lot of money—60 programs across 17 departments—to promote innovation. Is the Canadian government friend or foe on this issue?
They want to see more innovation. They want to see more competition. They're speaking the right language. But their execution is horrific. That's why I highlight SR&ED (2), the research and development tax credit. That has been a disaster for taxpayers. We're just handing out money peanut-butter style, Canadian style: "Let's give everyone a little bit." No one emerges the winner, and we just throw away billions of dollars, every year. Other small markets pick winners. That's what Finland does. That's what Israel does. And that's how they win.
There's a quote in your book from Canadian entrepreneur Lorne Abony. He says, and you don't argue with him, that "profit is a dirty word in Canada." And now you're nodding. That's bullshit, isn't it? Don't shareholders expect profits?
People want to make profits. But what I mean by "dirty word" is that it's seen that the fundamental underlying motivation in business is to extract economic value from the consumer and from other businesses. And that's not accurate. There's lots of other things that are benefits, tangible and intangible, to profit. Rogers is a huge philanthropic force in Toronto and in this country. In the United States, they would celebrate Ted Rogers's commitment to city building and nation building. We don't do that here.
I don't think that was the point being made by "profit is a dirty word." Abony was saying that the Canadian government doesn't want to help business people succeed. Isn't that the point he was making?
Picking winners is not something the Canadian government has historically done. And that's part of my message here—that we need to rethink how we deploy public resources.
Have you been talking to decision makers in Canada? Have you spoken to Navdeep Bains (3) or Prime Minister Trudeau?
I've never actually spoken with Trudeau or Bains about these issues, but I certainly have talked to a lot of people in government about it. There's a thorough consideration of these issues but no urgency to get moving. They're sort of like, "We're already doing a lot of this." It's hard to say to them, "Your execution of it is terrible." But that is what I'm saying in this book.
You say at one point in the book that you were embarrassed to be Canadian. Do you still feel that way?
I certainly was embarrassed about the way my investors were treated. I think it was horrific for our country. My initial investors got killed. And they got killed because we did not welcome their capital. And they were forced to sell their investment for pennies on the dollar. (4) So yes, I am embarrassed about that. I'm not embarrassed overall. Actually, I'm quite proud to be Canadian when I go abroad and I start businesses and I market myself. I'm quite proud. But we need to deal with these issues.
(1) After the feds overturned the CRTC decision, another upstart carrier, Public Mobile, sued and got the CRTC ruling restored. Wind appealed that decision and won. Its competitors pushed the case to the Supreme Court, which refused to hear it, leaving Wind's victory in place and resolving the matter after roughly four years of uncertainty.
(2) Scientific Research and Experimental Development, which spends more than $3 billion a year on tax credits to encourage private-sector R&D.
(3) Canada's Minister of Innovation, Science and Economic Development.
(4) Lacavera is referring to his early investors, including Sawiris, who sold their holdings in the midst of Wind's regulatory struggles.
This interview has been edited and condensed.