New spectrum transfer rules not an extension of moratorium, government says

Industry Canada has not extended a five-year moratorium preventing Canada’s largest wireless providers from acquiring their smaller competitors’ airwaves, though it never said they would be able to obtain that “set-aside” spectrum after the moratorium expired, the federal government said in newly filed court documents. In a memorandum of fact and law filed with the Federal Court on Monday, government lawyers said the department “made no promise and gave no assurance” that incumbent providers Telus Corp., BCE Inc., and Rogers Communications Inc. could ever acquire airwaves that were set aside for smaller players in a 2008 auction without first gaining ministerial approval. “Further, the Minister expressly stated the contrary, reserving his authority to amend the terms and conditions of the AWS spectrum licences at any time,” the government said. Incumbent carrier Telus launched in July an application seeking a judicial review of the Industry Department’s new spectrum transfer rules — released in June — charging that the industry minister overstepped his authority when he imposed rules that will require companies to apply for ministerial approval of “deemed” spectrum licence transfers, which are those involving spectrum assets acquired through the purchase of a company. The company argued in its court application that it is outside the minister's legal powers to add a requirement for ministerial approval of all acquisitions of companies with spectrum assets. Such a provision, the company said, prevents incumbent wireless providers, such as Telus, from purchasing new-entrant competitors even after a five-year moratorium on them acquiring the smaller providers’ spectrum licences expires. It also interferes with their long-term business plans, which were developed under the assumption they would be allowed to acquire those smaller providers after the moratorium expires, Telus said. In its responding memorandum, the government said Industry Canada made it clear in the 2008 auction rules that companies would need to apply for ministerial approval to acquire the set-aside spectrum, including after the moratorium expired. It said Telus’ interpretation that it wouldn’t need to seek ministerial approval “ignores the clear statements … that all licence transfers must be approved by the Minister,” and is “inconsistent” with the AWS spectrum licence conditions, which say that the Industry Department’s approval “is required for each proposed transfer of a licence.” Stephen Lewis, Telus’ vice-president of corporate strategy, said in an affidavit filed with the court last month that the company’s understanding was that it would be able to acquire the new entrants and their spectrum following the five-year moratorium, which affected Telus’ bidding strategy during the auction. In a cross-examination by government lawyers, Lewis questioned why the moratorium was limited to a five-year term if the department would not let incumbents acquire the new entrants’ spectrum after it expired. “Why wouldn’t you have a permanent moratorium?” Lewis said in a Nov. 12 cross-examination by government lawyer Gregory Tzemanakis, according to a transcript obtained by The Wire Report this week. Lewis added that Telus was “told” the moratorium would only apply for five years. “So, therefore, it was very logical to us to conclude that after five years there would be no restriction,” Lewis said, according to a transcript obtained Tuesday by The Wire Report. In its response, the government said the industry minister has “abided” by the department’s “representation” that it would not extend the five-year moratorium, and noted that incumbent carriers are permitted to apply to acquire the new entrant spectrum licences once the moratorium expires. “ is free to apply for approval of a deemed transfer,” the government’s memorandum said. “Indeed, the Minister recently approved the deemed transfer of four AWS spectrum licences in Ontario and Quebec formerly owned by Public Mobile to ,” it added, in reference to Telus’ acquisition of the smaller competitor in November. Public Mobile’s spectrum was not part of the set aside bands in the 2008 auction and was not subject to a five-year moratorium. The moratorium on incumbents acquiring other new entrants’ spectrum licences expired in December 2013 in some cases, and will continue to expire in other cases between Feb. 10 and Sept. 1 this year. Industry Canada has said that the 2008 auction set-asides were designed to help foster increased competition in the country’s wireless industry, as were its new rules governing spectrum transfers. In its memorandum, the government rejected Telus’ argument that the minister’s job does not involve regulating wireless competition and that the responsibility to regulate the industry falls to the CRTC and the federal Competition Bureau. The minister’s authority, the government said, “is not constrained” by the federal Competition Act or the authority it grants to Competition Bureau, the commissioner of competition, or the Competition Tribunal. “The Commissioner and the Tribunal are concerned with corporate transactions, specifically mergers or proposed mergers, in any trade, industry or profession,” the memorandum said. “By contrast, the Minister’s focus … is on management of the spectrum and spectrum licensing, not the corporate transactions that may underlie an application to transfer a licence.” Parliament, the government added, has “specifically identified competition in the telecommunications industry” as an issue the minister can consider when managing spectrum licences. “The Minister is not assuming authority over competition matters; he is considering competition as a factor,” the government said. Telus’ challenge comes as industry players jockey to increase their spectrum holdings, in part to accommodate their subscribers’ increasing use of mobile data services on newer, high-end smartphones. Industry Canada rejected in June Telus’ bid to acquire new entrant carrier Mobilicity (formally called Dave Wireless Inc.), stating that it would not waive the five-year prohibition on incumbents acquiring the smaller competitor. The department again told Mobilicity in October that it does not want to see the company’s spectrum licences transferred to Telus due to concerns related to spectrum concentration. Rogers, another incumbent, also reached a deal last year that gives it an option to acquire Shaw Communications Inc.’s unused new entrant spectrum when its moratorium expires in September, as well a separate deal that gives Quebecor Inc. the option to sell Rogers its unused set-aside spectrum in Toronto. In documents filed with the court last week, Rogers argued that the court should dismiss Telus’ challenge of Industry Canada’s new spectrum transfer rules, because it’s not yet known whether the minister would reject requests for “deemed” transfers of the new entrants’ spectrum. In a separate memorandum filed with the court on Monday, Shaw said the court should be “mindful” that any decision it makes regarding Telus’ challenge does not affect other future spectrum transfer applications that do not result from a corporate acquisition and which are not deemed transfers. The Telus challenge is filed with the Federal Court under case number T-1295-13. — With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca Expiry of moratorium on transferring new entrant spectrum to incumbents (by new entrant) New entrant spectrum licence holder Licence issued Moratorium expires ALO Mobile Inc. April 30, 2009 Dec. 14, 2013 6934242 Canada Ltd. (Manitoba Telecom Services Inc.) Dec. 15, 2008 Dec. 14, 2013 Bragg Communications Inc. Dec. 15, 2008 Dec. 14, 2013 Celluworld Inc. Dec. 15, 2008 Dec. 14, 2013 Data & Audio-Visual Enterprise Wireless Inc. (DAVE) Feb. 11, 2009 Feb. 10, 2014 Globalive Wireless Management Corp. March 13, 2009 March 12, 2014 SaskTel Dec. 15, 2008 Dec. 14, 2013 Shaw Telecom Inc. Sept. 2, 2009 Sept. 1, 2014 Vidéotron Ltée March 30, 2009 Dec. 22, 2013 —Compiled by Nicholas Kyonka using Industry Canada data

New spectrum transfer rules not an extension of moratorium, government says

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