ISED failed to show reasons for Quebecor’s set-aside eligibility in 3500 auction: Telus

When it assessed Quebecor Inc. as eligible to bid on set-aside spectrum in last summer's 3,500 MHz spectrum auction, the Department of Innovation, Science, and Economic Development (ISED) failed to follow its own rules around eligibility, failed to keep adequate records of its decision-making process, and unreasonably qualified Quebecor, Telus Corp. argued before the court. Tuesday, Telus counsel, Catherine Beagan Flood, told argued before Federal Court Justice Alan Diner that the decision to find Quebecor eligible for set-aside spectrum amounted to $2.4 billion in savings, "funds which could otherwise go into the consolidated revenue fund and be used for the benefit of Canadians." In the auction, Quebecor spent some $830 million on 294 licenses covering a population of just under 30 million in the 3,500 MHz band, including many in the western provinces of British Columbia, Alberta, and Manitoba – acquisitions aimed at rolling out a national wireless brand to compete with incumbent wireless telecom companies in the west. Telus, on the other hand, spent nearly $1.95 billion for 142 licenses covering a population of 24.9 million. In the court challenge, the disagreement comes down to whether or not Quebecor's wireless brand Videotron should have qualified for set-aside under the language of ISED's framework for the auction, which held that set-aside spectrum would be "limited to those registered with the CRTC as facilities-based providers that are not national mobile service providers, and that are actively providing commercial telecommunications services to the general public in the relevant Tier 2 service area of interest," according to the framework. In August, Telus and Bell both filed court challenges seeking to block Quebecor's purchases of the discounted spectrum, with Telus arguing that the acquisitions constituted an unfair cost advantage. A judge ultimately rejected Telus and Bell's request for an injunction against the transfer of spectrum licenses to Quebecor. There has also been 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. In court Tuesday, Flood honed in on the term "actively," as documents from ISED have revealed that Fibrenoire, a reseller that operates in the western provinces owned by Quebecor, only has what Flood called a "reactive" business model in which it does not market its services and only sells them when contacted by customers. Telus' argument in court centered on the nature of Quebecor's business through Fibrenoire in western Canada. It doesn't have transmission facilities, a retail network, and only has a relatively small number of customers (primarily business customers that are branches of Quebec-based companies and receive service from Fibrenoire through wholesale agreements with incumbent carriers). "The evidence does not support that fibrenoire is actively offering and providing telecommunications services in western Canada through a retail distribution network," Flood said. The Telus counsel argued that when ISED asked for information from Fibrenoire – including number of subscribers, the services being offered in B.C., Alberta, and Manitoba, evidence of the distribution network, and so on – these inquiries represented an investigative process about whether Quebecor was eligible for the set-aside. The lack of evidence on the record from those inside ISED in charge of assessing Quebecor's eligibility means "we can only speculate" about their approval, Flood said, and denies Telus a level of procedural fairness in the decision. Flood pointed to the 2019 establishment of a standard of review in a decision known as Vavilov. In Vavilov, Flood said, the Supreme Court of Canada “affirmed the need to develop and strengthen a culture of justification in administrative decision making,” a standard which ISED did not meet in assessing Quebecor's eligibility. Counsel for the Attorney General, Sandy Graham, – acting on behalf of ISED – told the court that ISED did not have to provide formal reasons for its eligibility decision. "It is a purely administrative process," Graham argued of the eligibility decision. "The minister is assessing each eligibility application on its own, and checking off who's in, who's out. So there's no competition, it's a one on one straightforward administrative determination, there's no adjudication. It's not like a judicial court process," Graham said. With regards to Telus' arguments over the definition of the services Fibrenoire was providing in western Canada – relied upon by ISED in assessing Quebecor's set-aside spectrum eligibility – Graham said that "any confusion or ambiguity has been introduced by Telus in its submissions." Fibrenoire, Graham said, was actively providing services "on a reseller basis, actively doing so," Graham said. Rather, Telus is engaging in a "purely semantic exercise introduced to try and inject some confusion into what, on the record, is a fairly simple and straightforward process." –Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca

ISED failed to show reasons for Quebecor’s set-aside eligibility in 3500 auction: Telus

News | February 23, 2022

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ISED failed to show reasons for Quebecor’s set-aside eligibility in 3500 auction: Telus

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