Telus Corp. lost a key legal battle with the federal government over its policies to stimulate more competition in the $20-billion wireless market.
The Federal Court dismissed Telus's request for a judicial review of a government decision to limit the amount of "prime" spectrum that big carriers are allowed to buy in this month's auction of the 700 megahertz frequency. The Vancouver-based telco was also ordered to pay Ottawa the costs of pursuing its legal action, dealing a blow to the company's efforts to close what it claims is one of three "loopholes" in federal wireless policies.
Justice Cecily Strickland's decision comes less than two weeks before the start of bidding in the 700 MHz auction, and follows months of acrimonious relations between Ottawa and the Big Three wireless carriers. The spectrum auction, which begins Jan. 14, is considered a defining event for the wireless industry because it will shape the competitive landscape for decades.
Spectrum refers to the publicly owned radio waves that carriers use to provide cellphone service. This particular frequency is especially valuable because of its ability to travel long distances, penetrate buildings and carry wireless data to smartphone users.
Ottawa decided to "cap" or restrict the amount of premium 700 MHz spectrum that big carriers like Telus, Rogers Communications Inc. and BCE Inc. could purchase to one block apiece. New entrant carriers such as Wind Mobile are allowed to buy up to two prime blocks. The decision to use caps was first announced by former industry minister Christian Paradis in 2012 and reiterated in 2013.
Telus, which originally supported the idea of caps, filed its legal application on Aug. 20, 2013, arguing the minister lacked the authority to apply caps. By that time, James Moore had taken over as industry minister and the Big Three carriers were embroiled in their "Fair for Canada" campaign against Ottawa's wireless policies.
In issuing her Jan 2. decision, the judge stated the industry minister "correctly and reasonably exercised his authority" on the matter. "In conclusion, the Minister had the authority to impose conditions on spectrum licences for the 700 MHz band, including spectrum caps applicable to large wireless service providers such as Telus," wrote Justice Strickland.
Jessica Fletcher, director of communications for Mr. Moore, stated: "We are pleased that the court has rejected this attempt to block our government's upcoming spectrum auction and our drive for greater competition in Canada's wireless market. We are also pleased that Telus has been ordered to repay taxpayers for the costs of this unnecessary and baseless legal challenge."
It is unclear how much money Telus will have to pay. The company has no plans to appeal, said Ted Woodhead, senior vice-president of regulatory affairs.
"There's some interesting aspects of this decision – most important of which is clarifying what the standard of review is for ministerial policies and decisions of this sort," Mr. Woodhead said.
The decision could prove an important precedent because Telus is also seeking a judicial review of Ottawa's spectrum transfer rules, which it argues indefinitely extended what was supposed to be a five-year ban on major carriers purchasing spectrum set aside for new players.
Incumbents' inability to purchase small carriers such as Mobilicity is considered the second "loophole" in Ottawa's policies. The third centres on rules that enable new carriers to "piggyback" on established networks allowing them to provide uninterrupted service to customers outside of their own coverage areas. (BCE owns a 15 per cent stake in The Globe and Mail.)