A battle over wireless upstart Globalive Communications Corp.’s ability to meet ownership and control requirements under the Telecommunications Act is headed to the Federal Court of Appeal.
In February, Industry Minister Tony Clement announced the federal government’s plans to appeal a controversial Federal Court ruling on that matter earlier that month.
The court overturned the federal cabinet’s 2009 decision to alter a Canadian Radio-television and Telecommunications Commission ruling on foreign ownership and pave the way for Globalive to launch its Wind Mobile wireless service in December of that year.
Clement maintained Globalive did in fact meet Canadian ownership and control requirements under the act and said its presence in the marketplace was good for Canada. He pointed out that cabinet has reviewed just 13 of the CRTC’s approximately 2,200 decisions since 2006 and has upheld seven of them.
“The policy of our government is to encourage choice and competition in wireless and Internet markets,” Clement said at the time. “Ours was the government that set aside spectrum during the 2008 auction to allow new entrants to compete. New entrants mean more competition, lower prices, and better quality services for Canadians.”
Globalive announced its own plans to appeal the Federal Court ruling days after Clement’s announcement. The company’s chairman, Anthony Lacavera, said “regulatory gaming by our competitors” is behind the ongoing court battle.
“The Federal Court decision is not about Globalive being ‘Canadian enough,’” said Lacavera. “The government and Globalive have always agreed that we are fully compliant with the existing rules, and the Federal Court did not suggest otherwise. The decision was about two ‘legal errors’ in the cabinet ruling, according to the judge.
We disagree and we fully expect to prevail at the Court of Appeal.”
The court has scheduled the appeal hearings for May 18.
The controversy over Globalive began when the CRTC released what many considered a surprising ruling indicating that the company didn’t meet requirements under the act. The CRTC said Globalive had failed to meet a requirement under the Telecommunications Act that Canadians effectively control common carriers.
In coming to that determination, it noted that Egypt’s Orascom Telecom Holding owned 65.1 per cent of Globalive’s equity. (Orascom’s parent company has since merged with VimpelCom Ltd., a major Russian wireless firm.) It also pointed out that Orascom owned and controlled the Wind trademark, was responsible for much of its technical knowledge base, and held 99 per cent of its debt.
Globalive was able to go ahead with its plans to launch Wind Mobile when cabinet overruled the CRTC. But another company that succeeded in the 2008 auctioning of radio frequency spectrum, Public Mobile, asked the Federal Court to overturn cabinet’s decision as it said the government had cast aside foreign-ownership rules in coming to its decision.
John Laskin of Torys LLP, who represented Public Mobile at the Federal Court, says his client initially expressed its opinion that it would be improper to set aside the CRTC’s decision.
“All of the telecommunications common carriers, all of the wireless companies, had in effect played by the same rules, and those rules had been applied by the CRTC,” he says. “So to make an exception in the case of Globalive would not be appropriate.”
The Federal Court seemed to agree, ruling that cabinet made a pair of legal errors in varying the CRTC’s decision. The court said the Telecommunications Act doesn’t contain any policy objective urging foreign investment, something cabinet had referenced in its rationale for the variance. The court also ruled cabinet was unable to include the caveat in its ruling that its decision didn’t apply to other common carriers.
“The intent of the act is clear that a situation such as this is to be determined in a manner so as to ensure that there is Canadian control,” wrote Justice Roger Hughes.
“Where there is a concern that foreign investment and other factors may put Canadian control at risk, then it is the promotion of Canadian control that is to be the essential criterion upon which the matter is to be determined. It is for Parliament, not the governor in council, to rewrite the act.”
Laskin says the main question the Federal Court of Appeal will have to address is the scope of cabinet’s ability to overrule a CRTC decision and whether the government can consider additional factors when weighing an application from a common carrier.
“The judge at first instance — Justice Hughes at the Federal Court — determined that the cabinet had committed a legal error in considering the question of access to foreign capital in determining whether to interfere with the CRTC’s decision that Globalive was in fact not Canadian owned and controlled,” Laskin explains.
“The central question on the appeal is whether that’s correct.”