Think Forward » CRTC

CRTC not doing itself any favours with Globalive Decision

brians — Sun, 01 Nov 2009 19:20:07 +0000

Last Thursday the CRTC came out with a decision on the whether the ownership structure of Globalive, who are in the process of building Wind Mobile, fill the requirement on Canadian foreign ownership restrictions. They aren’t doing themselves any favours.

I wrote earlier about how I thought that the CRTC was hampered in their decision by the Canwest – Alliance Atlantis merger decision from a couple years ago. The CRTC decided in this case that foreign money from Goldman Sachs as the debt and equity holder and controlling owner was preferable than having Egyptian owners, in the form of Orescom. (I’ve heard from CRTC people that national security is part of their decision process – so one wonders whether there was a bit of that here.)

Whether the CRTC was wrong or right in this decision, the CRTC hasn’t been coming off these days as the fearless supporter of the powerless Canadian citizen. Their recent decisions have generally been ones favoured by the lobbyists of the big telecom companies in Canada. A few weeks ago they decided, for the most part, to support the major carriers in a decision which put the burden of responsibility on the consumer to prove the carriers wrong in issues of network neutrality (and we how much know your average consumer knows about internet packet throttling). This week they supported the powerful lobbies of the carriers in the Globalive decision.

By an extension of their own logic, if the CRTC is not supporting and protecting consumers in providing them choice (or assuming that there is enough choice in the market for our consumers) then they have already come to the conclusion (aided by lobbyists) that the Canadian market for telecommunications services is highly competitive – that innovation and new product is high, barriers to entry are low, and prices are dropping and competitive. We, of course, know this isn’t true.

There is an undercurrent going on the techno-telecom crowd in Canada supporting a movement to disolve the CRTC. They better watch out, because it is getting very hard for average Canadians (not the super digerati or highly informed telecom geeks, but those that keep an eye on telecom) to understand the role of the Commission. To those watching from the sidelines, it looks like the CRTC is simply an extra arm of the major carriers to keep the barriers to entry high, competition low, and their cabal tight.

The Canwest/Globalive Ownership Dilemma

brians — Wed, 02 Sep 2009 02:36:48 +0000

Globalive, the wireless company launching soon under the brand name Wind Mobile, has been under some attack by the other carriers for it’s ownership structure. With significant investment by Orescom out of Egypt, our telecom and media ownership restrictions are coming under some scrutiny. The issue has become more complex for the CRTC because of a decision they made last year allowing Canwest, with a large investment from Goldman Sachs, to purchase specialty provide Alliance Atlantis.
Canada has restrictions and rules on foreign ownership of media and telecom companies. The essential rule (with a number of variations) is that no more than 20% of the voting shares of company may be owned by foreign entities, and ‘control’ must remain with Canadians. The restrictions apply to both telecoms and media companies equally, despite the differing goals of law within each vertical.
When the Asper family, the majority owners of Canwest, bid to purchase Alliance Atlantis in early 2007 they couldn’t raise enough money in Canada, so they solicited some help from New York bank Goldman Sachs, who loaned the company money (or the Aspers directly, or a subsidiary company – it is not clear) so they could complete the purchase. The CRTC decided at the time that the deal was kosher, likely looking both the media consolidation angle, as well as from a foreign ownership perspective.
Globalive, a feisty Canadian telecom startup, which had been chipping away in the Canadian telecom space for quite some time and made their big mark purchasing Yak Communications, decided they wanted to be in the running for last year’s spectrum auction. Looking for investors they found Orescom, another feisty and entrepreneurial company with a number of global wireless investments, based out of Egypt. Orescom decided Globalive, and its CEO Anthony Lacavera was the company in Canada to back and grow their international wireless investment portfolio.
Before the spectrum auction the CRTC (actually Industry Canada, which runs the auction process) requires quite minimal evidence that the ownership of the companies bidding do, in fact, abide by the ownership rules. They did require letters of credit ensuring that companies bidding could pay their bills after the bidding was complete. Globalive obviously satisfied these conditions.
Now that the bidding is complete and the specifics on Globalive’s ownership structure is still not clear, the other carriers are calling foul. Building a large Canadian wireless carrier is not cheap. None of the major Canadian investors (Teachers, CPPI, etc.) threw their money behind Globalive. Orescom is the big supporter and believes in the potential of the Canadian market, especially when combined with their other investments.
The CRTC has backed themselves into a corner. By allowing the Goldman Sachs investment in Canwest to go through, they are now tied to stick by the structure. Making an investment that large in Canwest obviously gives Goldman ‘control’ over the investment, if not on paper, but certainly de facto control. Orescom is likely in the same position with Globalive. If they aren’t, they can just ask the CRTC how that deal went through and mimic the structure.
If the other carriers wanted to complain about the ownership structure they should have said something at the time of the Canwest deal. That’s what set the precedent. But they wouldn’t have, because, in Canada, it’s not comfortable disturbing the family compact.
The CRTC is now compelled to approve the deal. The variations on ownership structure has become so convoluted that perhaps it’s time to reexamine the rules. We live in a global economy, and telecom, much more than media, is an increasingly global business. Isolating Canada from the ownership and innovation of foreign companies just limits the technology and economies of scale we could leverage to bring down our wireless and telecom prices.

Dissolve the CRTC? – Discussions for the Future

brians — Thu, 20 Aug 2009 17:37:19 +0000

There’s a lot of discussion on the internets this morning about an article Peter Nowak from the CBC has written about a petition and facebook group requesting the dissolving of the CRTC. Twitter users have taken a liking to this from a quick CRTC of the stream and the petition is gaining some steam, or seems like it is. Discussion on the CBC page is extensive and intense with over 220 comments since last night’s posting of the article.

Michael Hennessy has responded on his blog WhenDogsRunFree, with an unusual defense of the CRTC, although I love his admission in the head for his blog, that while he loves free market, he makes his income on regulation itself “I now work in an anti-regulatory occupation although without regulation I would be unemployed.Kinda ying yangish”

The interesting thing about this discussion is the fact that we can have it – and it is worth having. Questions like “Why does the CRTC exist?” are real questions worth answering. On the telecom side (we’ll leave it at that for now) we can ask such things as: Is it there to protect us from natural monopolies? To decide where towers should go? or where wires should be strung? how much we, as consumers, should pay for various services? how much companies should pay to each other? or, more broadly, to promote cheap and plentiful communication among Canadians.

The carriers all spend much of their regulatory money on folks like Michael, to promote the notion that the market is highly competitive. And in a competitive market, one assumes we don’t need a regulator. But on the flip side, that regulator ensure that the competition stays minimal. Regulators create nice barriers to entry for new market entrants. Keeping a tight rein on new telecom licencees, issuing tiny pieces of spectrum (yes, that’s Industry Canada, but it’s the same issue), and making sure new phone numbers don’t get too freely given to folks like Skype such that they might tread heavily into the carriers markets. This, for carriers, is highly important to protect.

Rather than get into the nitty gritty of whether the CRTC made a bad decision on wholesale tariffs for TekSavvy, we might stand back and ask broader questions like: What are we protecting? Culture, communications, or profits for an industry. That that’s a bad thing to protect – Bell and Telus employ many Canadians.

We can also ask the question. If we started a dissolving of the CRTC, what would happen? Would new entrants come? or would we revert to natural monopolies? would Global companies offer service at more competitive rates? what would be the downside?

All good questions to engage a discussion.