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Is Globalive truly a Canadian company? The minority Conservative Government says yes

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by John Geddes

Wireless WizardryTony Clement has done his best not to put himself at the centre of an uproar over Canadian ownership of sensitive parts of the economy. The industry minister announced that the federal cabinet was letting Toronto-based Globalive into the Canadian cellphone business, overturning the Canadian Radio-television and Telecommunications Commission’s earlier ruling that the Egyptian-financed company failed to meet Canadian control rules. But Clement insisted cabinet wasn’t “removing, reducing, bending or creating an exception to Canadian ownership and control requirements in telecommunications and broadcasting.” No matter how far he dug into his thesaurus, though, many expert observers weren’t buying it.

The potential implications of the decision, announced Dec. 11, were just too obvious to be smothered under even the wordiest denial. The CRTC had ruled in October that Globalive didn’t satisfy Canadian ownership requirements because Egyptian telecom giant Orascom holds almost all of its debt, owns most of its non-voting shares, and provides its technical expertise. But cabinet exercised its power to overrule the regulator, accepting Globalive’s argument that its corporate structure puts voting shares mainly in Canadian hands. Clement stressed that the decision was “based on the legal facts of the ownership, and not on the government’s position that there needs to be more competition in this marketplace.”

It was the prospect of another competitor, of course, that had led the big wireless companies—BCE, Telus, and Rogers (owner of Maclean’s)—to oppose Globalive’s bid to step onto their turf. The CRTC doesn’t see the Canadian wireless marketplace as too dominated by a few players: it says wireless prices in Canada are about in the middle compared with the U.S., Britain, France and Australia. But the Conservatives perceive a problem. Two blue-ribbon panel reports—one on telecom alone and another more broadly on the Canadian economy—have urged them to open up the industry. “We believe,” Clement said, “that when consumers have more choice, when there’s more competition, that lowers prices and increases quality.”

University of Ottawa law professor Michael Geist, an expert on telecommunications, said the Conservatives seemed more motivated by their desire to see another cellphone company vying for customers than by legal analysis of Globalive’s ownership. “The government has made it clear for a couple of years that they view wireless as an area where there’s not enough competition,” he said. And letting Globalive’s Wind Mobile brand compete fits with a pattern of Tory marketplace populism. “Their approach on this issue,” Geist said, “is consistent with their political approach more generally—do things that the broad public, the Tim Hortons people, can get and understand.”

If one more wireless company was the Conservatives’ sole goal, they might end up getting much more than they bargained for. Clement said green-lighting Globalive “is a specific decision that is pertinent to the specific facts of this case.” But Michael Hennessy, vice-president of regulatory and government affairs for Vancouver-based Telus, argues the decision opens the door to more foreign investment—not just in telecommunications, but also in other sectors where federal law requires Canadian control, like broadcasting, banking and airlines. “There is a bit of public-relations artifice to saying this is a one-off,” Hennessy said. “Politically they’re going to have great difficulty saying we have a unique and special rule for Egyptians only, when many of us in the industry might want to look at more European or American financing for certain activities.”

An obvious point of interest is the future of Canwest Global Communications, which owns the Global TV network, and filed for creditor protection for a portion of its troubled business earlier this year. Would the debt-burdened Winnipeg-based media conglomerate now be allowed to follow the Globalive model in seeking more foreign capital? “Canwest of course watched this very closely,” Hennessy said. Still, cellphones are one thing, TV quite another. “Broadcasting raises cultural issues that telecom just doesn’t,” Geist said.

Exactly how the government would respond to another company testing the Globalive precedent is impossible to predict. “As of this decision,” Hennessy said, “you cannot say with any certainty what the law of the land is or how it will be interpreted.” Clement said cabinet didn’t bend the rules. He didn’t say anything about not blurring them.

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Written by thecanadianheadlines

December 27, 2009 at 6:57 am

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