Quebecor’s spectrum winnings an ‘unfair cost advantage,’ Telus tells Federal Court

A Federal Court injunction stopping the Department of Innovation, Science, and Economic Development (ISED) from issuing licenses for set-aside spectrum won by Quebecor Inc. in this past summer's 3,500 MHz auction in western Canada is "not about preventing fair competition, it is about preventing an unfair cost advantage resulting from the auction rules not being applied as announced to bidders," a lawyer representing Telus Corp. told a Federal Court judge Tuesday. The Tuesday hearing concerned efforts by Telus and fellow incumbent BCE Inc. to stop Quebecor from acquiring the discounted spectrum in what Quebecor has said are efforts to expand into western Canada, beyond Ontario and its home province. In late August, both Bell and Telus filed parallel court challenges seeking to block Quebecor’s acquisition of bands of set-aside spectrum the Quebec-based company acquired in British Columbia, Alberta, and Manitoba. In the applications for judicial review, the incumbents ask for an order preventing ISED from issuing licenses for set-aside spectrum to Quebecor’s Vidéotron subsidiary, revoking any licenses that have been issued, and putting any bands of set-aside spectrum Quebecor won at auction in June and July back on the auction block. Spectrum auction rules, Telus and Bell argued in their applications for judicial review, restrict the discounted spectrum meant to entice competitors into the wireless sector and are reserved for companies offering facilities-based wireline services in areas where they are bidding on spectrum. Quebecor, the argument goes, only provides service through its wholesale-dependent Fibrenoire subsidiary. Taking the lead for the two companies Tuesday, lawyers representing Telus argued that the court also needed to place an injunction stopping ISED from issuing the spectrum, given that Quebecor has openly stated that it seeks to use the spectrum to expand nationally, including in a tweet from CEO Pierre Karl Péladeau Tuesday afternoon. In the absence of an injunction, Quebecor could deploy wireless service on spectrum before the outcome of the judicial review challenge to ISED's decision to award the discounted spectrum, Telus lawyers argued. "Consistent with Monsieur Péladeau's statements to investors that Vidéotron intends to take a disruptive marketing, promotional, and pricing approach in western Canada, as of yesterday -- if not, earlier -- they have already started advertising in Vancouver that they intend to enter the market and offer lower phone bills using both the Vidéotron and Fizz plans," Telus lawyer Catherine Beagan Flood told Judge Sébastien Grammond in the online hearing. The discounted spectrum purchased at auction by Quebecor amounted to a $1.1 billion cost advantage for Quebecor for which it was not eligible. "Those losses will not be recoverable from the Minister of Industry, which is the party responding to the judicial review," Beagan Flood argued, adding that Telus is not challenging spectrum set-aside policy broadly. Building on arguments made in an ISED affidavit by Daniel Anderson, a manager in ISED's Spectrum Licensing and Policy Branch, lawyers representing the Attorney General's office argued Tuesday that rather than preserving the status quo, the injunction sought by Telus and Bell would disrupt the status quo. Given that ISED will not delay the issuing of spectrum licenses from the 3,500 MHz auction even if the court grants the injunction against Quebecor's spectrum, an injunction would effectively alter the marketplace. "The status quo now is: nobody has licenses. If the injunction is granted, everybody will have a licence except Vidéotron, which was one of the auction winners," Sandy Graham told Grammond. Graham also argued that, quoting the Anderson affidavit, ISED is required under Section 7 of the Telecommunications Act to "to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications," and to "to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective." This obligation, Graham added, led to similar language around competition in the spectrum policy framework governing the 3,500 MHz auction. "The idea of this framework is everybody starts at the same time. The gun goes off, and off they go, whether its deployment, whether its transition, they all have the same opportunity," Graham said. Telus had previously argued that, partly because of the opportunities for mobile virtual network operator agreements with incumbents made possible by a CRTC decision in April and partly because of the various transition timetables set out for spectrum deployment by ISED, spectrum deployment dates are inherently variable as per government policy. Attention in the wireless sector has focused on Quebecor recently, especially given widespread speculation that Quebecor is the likeliest buyer for Shaw Communications Inc.'s wireless assets, should the Competition Bureau mandate divestment as a condition of approving that company's acquisition by Rogers Communications Inc. — Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca.

Quebecor’s spectrum winnings an ‘unfair cost advantage,’ Telus tells Federal Court

Broadcast | October 19, 2021

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Quebecor’s spectrum winnings an ‘unfair cost advantage,’ Telus tells Federal Court

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