The Canadian Telecommunications Industry: Regulation and Policy

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STUDY: 2

THE CANADIAN TELECOMMUNICATIONS INDUSTRY: REGULATION AND POLICY

Government opens Telecommunication sector for new entrants

• Even after the impressive market penetration of the wireless communication technologies in Canada, the wireless industry was dominated by the three big players, Bell, Rogers, and TELUS and hence the government felt the need for competition. A Telecommunications Review Panel was appointed by Industry Canada to study the current telecommunication framework and recommend policy and regulatory changes. The panel found out that the Canadian Telecom sector was lagging in the telecommunication advances compared to other countries and came with some recommendations such as need for affordable, high-quality telecom services and suggested to design a regulatory model to provide more services more quickly, more cheaply and with greater flexibility. This initiated the thoughts of opening the sector for new entrants.

• After the first spectrum auction in 1983, the entry of new competitors like ClearNet, instigated the growth in number of wireless subscribers by 20% in 1984 and by 35% in 1985. The government (Government and Industry Canada define the same entity and hence will be used interchangeably in this text) then auctioned further spectrum in 1985 and introduced new entrants like Microcell Networks into the market. Due to these auctions and the results observed after the entry of few new players in market in terms of subscriber growth, the government felt the need for opening the sector for new entrants.

• As the new entrants entered the market, big players bought their stakes, Rogers purchased Microcell Telecommunications, Bell Mobility owned Virgin Mobile, Solo Mobile, PC Mobile, and Aliant Mobility. TELUS was created from the merger of BC Telecom and TELUS that later purchased ClearNet. The Canadian market continued to be dominated by three big players and hence the government decided to open the sector for new entrants and again held the wireless spectrum auction in May 2008.

Dilemma

• The entry of new telecom company Globalive Communication initiated the state of dilemma between regulation and policy.

As the case says, Canadian Radio-television and Telecommunications Commission (CRTC) accused Globalive Communication for being a company controlled by non-Canadian authority, Orascom Telecom in Egypt by providing the numerical data that, Orascom owned 65.1% of the Globalive’s equity to control the firm. CRTC concluded that, the ownership of Globalive was not satisfying Canadian eligibility criteria to operate in Canada.

• Whereas, Industry Canada helped the Globalive to restructure its ownership to satisfy Canadian eligibility requirements and allowed them to operate in Canada by stating that, de jure, Globalives Board of Directors is comprised of 80% of Canadian nationals and 80% of firm’s voting shares were with Canadian members.

• The background responsible for this situation started after the entry of Globalive into the Canadian market after the wireless spectrum auction in 2008. The ownership structure of Globalive was dubious and hence players in market Rogers, Bell, and TELUS requested a public review of Globalivs ownership structure. CRTC conducted a full-fledged public review for three days in Sept-Oct 2009 and after collecting the information announced its ruling that Gobalive does not meet Canadian ownership requirements and hence are not eligible to operate in Canada.

• The situation of dilemma occurred when government in Dec 2009 varied the CRTC’s decision and allowed Globalive to continue operation as Canadian entity and justified own decision by saying that Globalive is de jure eligible to operate in Canada.

• There was a difference in actual policy and the regulatory implantation of it and hence the dilemma faced by CRTC and Industry Canada.

General lessons learned

The Globalive case points out many varied important lessons to learn as listed below-

• The conflicts between CRTC and Industry Canada over the Globalive case tells us about the critical situations occur when two ruling authorities hone same case and work out case to give two completely opposite solutions and hence the situation of misunderstandings and it causes chaos. Instead it is good to have a single regulatory authority and hence such situations can be avoided.

• Next lesson is to be learned by companies. Companies should learn and understand the eligibility rules and regulations to operate in a country before investing into a firm and hence they can manage things to go well.

Avoiding conflicts in judgement

• The conflicts in the judgements could have been avoided if there was a single governing and regulating authority instead of two. Even if there happened to be two ruling authorities, they could have defined the area of jurisdiction, say one body making regulations and other implementing it, so that these bodies do not interfere in each other’s domain.

• Specifically considering the case, the conflict could have been avoided if the regulations were modified with the consent of both CRTC and Industry Canada to suite the market needs.

Issues/challenges that could arise in the event of differences in opinion

• It becomes difficult to reach single common judgement about the case when two bodies work on same case and have difference in opinion. Everyone tries to justify their own stand and it becomes impossible to land on a fair judgement.

• It becomes impossible for external advisors to solve the conflict as they may not be able to find solution that can satisfy both parties.

• If final decision taken does not satisfy any one of the party, the ego issues arise and then the things may go worse in future.