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Letter from Public Mobile to the Industry Minister regarding Globalive: “Two Wrongs Don’t Make a Right!”

publicmobile

Personally I thought when Industry Minister Tony Clement sought more feedback from telecom players about the Globalive/Wind Mobile situation that the documents would not become public information. However, some of them have had Excerpts online (like TELUS)… but nothing like the Public Mobile submission.

The National Post somehow got hold of their letter and it’s entirety is below. Let us know your thoughts:

From: Public Mobile Inc.
November 13, 2009
To: The Honourable Tony Clement, P.C., M.P. Minister of Industry Ottawa,
RE: Two Wrongs Don’t Make a Right!

Sir,

I am writing this to you today to express my concern over the issue of Globalive and its authority to operate as a wireless carrier and specifically the CRTC’s decision to deny that authority based on Globalive’s foreign ownership and “control in fact” situation. As the CEO of one of the new wireless entrants, Public Mobile, and the former President of a wireless incumbent, Bell Mobility, I am absolutely in favor of more competition in our country.I understand how important competition is for all Canadians.

However, I believe that our government and our government’s institutions must ensure that the rules we have in place under the Telecommunications Act, while they continue to exist, are applied consistently and fairly to all players, new and incumbent alike. The CRTC’s decision is clearly reasonable, justified, and correct. If Cabinet overturns the CRTC’s decision, Canada would be sending an unfortunate message to everyone considering doing business in our country: “Take your chances with the rules Canada has in place. Sometimes we apply them and sometimes we don’t. And sometimes we reverse ourselves notwithstanding the rules.”

Market uncertainty is bad for everyone. The rules are very clear with respect to Canadian ownership and control in fact, and Globalive does not meet the test. The CRTC reached this conclusion based on a complete record and an oral hearing. Reversing a sound CRTC decision severely hurts both incumbents and new entrants like Public Mobile who have complied with the rules. For Public Mobile, this has nothing to do with adding a competitor in the market. Rather, it is about the difficulty that would be caused if there are effectively two sets of rules and the impact this would have on securing further investments that will ensure sustainable competition. Investors and lenders want the certainty that comes with consistent and fair application of the rules.

Turning a blind eye and approving a player that doesn’t meet the legal requirements hurts Canadians in the long run. With a cloud of confusion hanging over the rules and their enforcement, new entrants could fail like they have in the past, with the result being that the benefits of competition are not extended to consumers. Canadians have a strong sense of the importance of following the rules. Ignoring the rules will not foster competition, it will create chaos!

The first wrong: Orascom [the Egyptian owner of Globalive] should not be in the position where they believed that Industry Canada approval would translate directly to approval by the CRTC. Clearly, one can argue that both Globalive (and perhaps Industry Canada) could have been more vigilant with a view to the requirements, but it is also nothing less than cavalier for a sophisticated player like Globalive to not realize that the process in Canada has checks and balances. The CRTC has a mandate to review (and approve) wireless carriers; full stop.

When we had our initial meetings in late 2008 / early 2009, we received guidance from the CRTC and from Industry Canada and my shareholders realized that to become a wireless operator in Canada requires conformity with all relevant Canadian laws and regulations. In order to comply, we brought on additional Canadian investments from OMERS and other prominent Canadians (including the Thomson and Eaton families, and most recently Peter Munk). However, with what we knew about the Globalive ownership structure, we were surprised that Industry Canada approved Globalive in the absence of any meaningful Canadian investment. …. But we also knew that Globalive would need to clear the CRTC’s review. When the CRTC ruled that Globalive did not comply under the Telecommunications Act there was a feeling that the law had been properly applied.

The second wrong hasn’t been committed yet, but your decision will ultimately determine if it is to be the case…

If the decision is reversed in the absence of Globalive taking demonstrable steps to comply with the CRTC’s decision and the current law, a second wrong will be committed and an unfortunate set of messages will, unintentionally or not, be sent:

  • To new entrants and incumbents: “Canadian ownership and control rules are sometimes applied and sometimes not.”
  • To potential telecommunications investors in Canada: “Be aware that we aren’t saying ‘we reserve the right to change the rules’, we are saying ‘we reserve the right to sometimes not apply the rules’.”…

It is admittedly awkward that the CRTC’s decision is at odds with Industry Canada, but the CRTC’s decision is reasonable, justified, and correct. I believe your government must do the right thing and allow the CRTC decision to stand. Globalive should also do the right thing and go back to the CRTC as soon as possible with an amended structure that has real Canadian dollars of investment that allows it to operate in a fashion that is onside with the current legal regime.

Alternatively, if the foreign ownership and control rules under the statutes are found to not be good for this country, then I respectfully submit that it is for your government to make changes that apply to everyone. That way all players are extended the same opportunity and flexibility to seek foreign capital on a level playing field.

Yours very truly,

Alek Krstajic, Chief Executive Officer

  • Jason

    Yea…Thats easy for Public Mobile to say. They are only offering wireless service to those in Ontario and Quebec (provincial carrier), whereas WIND would be a national carrier, eventually provding coverage across Canada. Plus, I guarantee Public Mobile will sell themselves after their 5 years is up and WIND will be a carrier that starts and continues to be independant company and provide excellent service.

    Plus, this guy used to run Bell, so you know exactly where Public Mobile is heading….pfft what a joke this thing has turned out to be.

    • TNSF

      There is absolutely no proof that Wind is planning to stick around longer than any other of the new entrants. All the new entrants are in this game to make money and any one of them will sell out if the price is right.

      The only entrants that are truly unlikely to sell are Shaw and Videotron because they have huge cable operations as well.

      How are you so sure that Wind will provide “excellent service”? They have not demoed their network or phones. They have not provided any customer service to anyone yet. They haven’t released any price plans. So far all they have done is wage a PR campaign. I could do that out of the back of a van down by the river.

      Face the facts. ALL these new entrants are big unknowns until they actually open up shop and start selling services. And they’re all for sale if the price is right.

    • Jason

      Well…considering that WIND has been the only new entrant to show themselves to be a new national carrier with a ton of support from the people of Canada, Im pretty sure their goal wouldn’t ben to sell out after all their work thus far.

      And c’mon, obviously if WIND has built HSPA services across Canada, it will be equal to Bell and Telus and better than Rogers, at least. And they haven’t been able to show what they can do yet with phones, pricing, plans, network, etc. cause the CRTC wont let them. Why would you show something that you can’t sell or market? basically all they can do right now is start campaigns and describe how ripped off we’ve been by the big 3.

      Yes, the facts are true, and yes the CRTC ruling was correct, but you got to imagine that the only new entrant that would stick around longer than any of them would be WIND (And im not including Shaw and Videotron because they are in cable as well and obviously wont sell).

      And btw, at least WIND would be creating jobs, unlike Rogers.

  • Canadian Hopefull For Globalive

    “it will create chaos” – actually, it will create more competition to Public Mobile which, along with DAVE, have indicated in interviews and panels that they are seeking to grow membership and sell to a large as soon as legally possible.

    There is only one new entrant that has indicated clearly and continually that they are looking to become a long term player.

    The issue about allowing the foreign supported Globalive in is that this is the ONLY new player that wants to remain a player some 4 years from now.

    If the CRTC is differed from, it’s because of the nature of the beast. To ensure a new entrant that wants to continue past the moratorium to sell off the spectrum, you still need to allow Globalive in.

    All other new entrant business models have been sold to investors on selling as soon as possible to an incumbent.

    That’s a sad thing.

  • Overkill

    I don’t understand how people can stand up and say globalive must be allowed to enter purely because they will be a new national carrier and discounting anything else.

    They knew the laws when they signed up to be a national player. They knew they had to be canadian owned but they stood up with a cavalier attitude saying the crtc would allow them to go forward.

    The CRTC had 2 reasons to smash them down.
    1. globalive/wind is foreign controled, thus breaking the rules.
    2. they stood up and told the crtc that they wern’t going to do anything about it in an environment when many Canadians feel the CRTC is ineffectual.

    Well the CRTC showed how effectual they can be. They blocked a company from doing business.

    Like it or not they did apply a correct interpretation of the law.

    Globalive was the only party to decide the laws didn’t apply. If the other providers also didn’t meet the requirements of the law then we’d have a very different game going on. I’m not saying it would be better or worse but it would be very different. The others have not taken that route, and it’s an easier route if you open yourself up to the type of foreign investment that globalive did.

    I’d love for another national wireless carrier. I feel I’ve been personaly slighted by the big 3 and think clearnet and fido should never have been allowed to be purchased by the big 3. I think the big 3 engage in price fixing. But I do not think the rules should be overturned for one entrant as a special case.

    If the government wants to change the laws then that’s great. Go through the normal process of doing it.

    Also if they want to keep the laws the same then that’s fine. Just apply them consistently.

    All I’m saying is we know what to expect from the incumbants and as much as we don’t like it I don’t see how you can stand up and support a company that gives no details on how they will make things better and also says ‘the laws don’t apply to me’

    • mike

      No one says the rules should be different for WIND, I think that CRTC is controlled ( influenced ) partially by BIG three. The GOV. could allow WIND to proceed for now and comply within lets say 2 years. this has happened in other countries I believe.

    • Overkill

      Wait… so no one says the rules should be different.. just that the rules don’t matter? That’s the same thing.

      Globalive / wind has had more than a year to comply. And those rules didn’t change in that time. They knew all along that those were the rules. Honestly I would be one of the first in line for them or any other new national provider. I’ve been sitting in a pay as you go state for 4 months anticipating the wind launch but they have to follow the rules.

      I don’t know how they can expect people to believe in them if they can be so cavalier about these things. If they’ve shown now that they can’t pull it together to launch, a time when that’s all they have to focus on, then how can they be counted on to keep it together in the future?

  • Hugo Beaulieu

    Wind need to change their ownership structure or sell their spectrum… As simple as that.

    The ownership rules make sense, they are known and need to be the same for all.

    Suppose for a moment they were to relax the rules, and somebody like Verizon (or China Telecom!) bought Bell or Telus and all of a sudden owned the backbone of Canada’s telecom infrastructure? Would everyone be happy? Cheering for the newcomer, the underdog is good karma, but really, who are we kidding here…

  • shaun

    Public mobile, thank you for your input and your weak attempt to help canadians who have been begging for a fair shake at affordable wireless for some time now. Used to run bell eh? Wind actually takes a half decent stab at wireless and the gov’t turns around and stabs them.

    • Hugo Beaulieu

      Oh… Wind were naive and stupid to think they could get away with it. If anything, it might highlight the weakness of their management and legal team.

  • A Nonymouse

    So what do foreign ownership laws accomplish? I have yet to hear one cogent rational explanation of what the negative impact of allowing Wind mobile to enter the market with its current ownership structure is. The only thing I’ve heard so far is the usual refrain of “Rules is rules!”.

    • TNSF

      What the laws accomplish is irrelevant. They are the law and must be followed.

      If there is a desire to change the laws there is a process for doing that. Ignoring the laws is not the process.

  • Sameer

    Is it really that confusing? All Wind mobile/Globalive has to do is comply to the financing law. They have to sell the egyptian stake to canadians. Its very simple, get canadians to invest and start it up and run with it. I’m personally willing to invest some money in Wind/Globalive if they choose that path.

  • Clement

    Sameer it’s not just the financing. It’s the rules int the telecom act regarding defacto control and how there is no true measure of de facto control and it is really an opinion. even if the foreign financing is greatly reduced the incumbents would still complain of foreign control due to: 1, reliance of foreign technical expertise and 2, use of a foreign brand.

    and Hugo Beaulieu, I do believe that it would be beneficial if Vodaphone or verizon or T-mobile or another massive foreign wireless provider bought out the incumbents and moved into canada. All this protectionist drivel about keeping the industry canadian controlled does nothing but hurt consumers.

    if it’s a matter of national security simply legislate in new operating criteria like the do with regards to internet traffic and data transmission in the states.

    • hugo beaulieu

      First ownership rules make sense economically. It encourages local money to be put it and local investments which should also help the local industries. Few countries allow totally foreign entities within the Telecom realm… few countries have many significant players (i count 4 in the us with similar portraits in Europe…), why are so many complaining? Really? Cost?

      I would thaen ask why do Canadians pay more per.person for roads than Americans? Mostly the same reason we pay more for cellphones. We want the same quality everywhere but have a whole lot more ground to cover.with fewer people. Easy math.

    • Sid Ali

      Limiting ownership rules do not make sense economically. It simply amounts to protectionism. There is a limit to the amount of capital available for investment in Canada, when that dries up, there is little to no growth. If other countries have the capital to spare and want to invest in Canada, creating jobs and paying taxes, I really can’t think of any reason to prevent that.

      If you’re scared of a foreign company having access to an important part of our infrastructure, they have to abide by all of the same rules as any other Canadian company. If they break them, then fine throw them out.

  • Todd

    As much as I hate to say it, but he is absolutely correct. This can’t just change for Globalive, it would have to change for everyone.

    Competition is definitely needed, but they need to follow the rules like everyone else.

  • shaun

    Does anyone actually think that the crtc would let in viable competition. Crtc decides to say something weeks before globalive launches. I definitely think there’s more to this story. Can anyone not invest in globalive? Have they not heard that canadians are sick of getting ripped off by the big three? If I had the finances I would definitely get in on it. The current situation is like barrack and george bush. Wind being barack and telus, bell and rogers being bush. Wind has a lot of room to mess up considering canada’s unhappiness with the big three.

  • J

    Two sets of rule INTERPRETATION… oh…

    like the spectrum auction… oh…

    which was designed so new entrants might have a chance…. oh…

    against current media manipulating legal sleazy monopolies?

    OH!

  • telussucks

    If the CRTC was not controlled by the big three, the debate would be very different. What some people tend to forget is how the big 3 are funding the CRTC and that alone create a climate of suspicion around a government body who is supposed to show transparency and impartiality.

    The CRTC has proven it’s irrelevance among Canadians.

    The coming weeks will be crucial in determining the willingness of the Canadian government to put the interest of Canadians before those of coporations.

    As a poster mentioned in his comment, there are creative ways that Globalive can be allowed to go into operation while committing to comply with the rules. They could be given some time to change things around and be in full compliance within a set period of time.

    After all, this happens all the time when players are caught to be in contravention of the rules governing their industries. Why not in the case of Globalive?

  • Aj

    Well,2 negatives do make a positive….

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