Telecom: BCE chief warns Ottawa to tread carefully on foreign-ownership reforms

By Jamie Sturgeon | National Post - CBC.ca | May 18, 2010

George Cope, chief executive of BCE Inc., cautioned yesterday that government should carefully weigh a decision to change or scrap foreign-ownership restrictions in the telecommunications sector, an area of the economy he says is already flush with investment.

This follows comments last week from Industry Minister Tony Clement further suggesting Ottawa is moving toward a policy shift to promote competition.

At a lunch speech in Toronto, the CEO of the country’s largest communications company said the Canadian market has become highly competitive in the two years since he took over, forcing BCE’s Bell Canada to pump $6-billion into new wireless and wireline upgrades through 2010 to stay ahead.

He pointed to Bell’s new, multibillion-dollar 3G+ wireless network jointly built with rival Telus Corp. as an example of how domestic needs are being met, and warned that allowing in firms from the U.S. and elsewhere may hinder future advancements.

“Do you think Summerside, P.E.I., would come up before Chicago? Not going to happen,” he said. “It happened in this case. So let’s be very, very careful about what we’re trying to solve in Canadian telecom rules because the investment is actually working.”

The network blankets 93% of the country.

Mr. Clement told a special parliamentary committee last week that restrictions could be lifted on the telecom sector by allowing key content assets owned by the biggest providers like Bell and Rogers Communications Inc. to remain in Canadian hands, while opening up distribution and network assets to foreign ownership.

The comments follow a pledge in the Throne Speech in March to liberalize the sector. “Our government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need,” Gov. Gen. Michaëlle Jean said at the time.

Ottawa’s move stems from two federal blue-ribbon reports completed in 2006 and 2008, that call for a relaxing of the rules as a way to spur more investment in economically important communications service.

This year however has seen three new entrants into the wireless market, in Wind Mobile, Mobilicity and Public Mobile, with cable giants Videotron Ltee. and Shaw Communications Inc. are on their way with wireless in Quebec and Western Canada.

Competition in broadband is also heating up as Bell and Telus Corp. invest billions this year overlaying copper networks with fibre, bringing alternatives to rival services provided by Rogers and Shaw. “What problems are we trying to solve, what’s the objective?” Mr. Cope said.

Still, the industry, especially in wireless, remains dominated by Bell, Rogers and Telus.

Some analysts suggest that without consolidation or access to more foreign capital (through a change in policy), the young startups face near-certain failure and a retrenchment in services in the market.

jasturgeon@nationalpost.com

Media: Regulator says cable viewers willing to pony up more for TV

J. Sturgeon | Vancouver Sun | 03.24.10

TORONTO - Cable subscribers have shrugged at rate increases in the past and may be willing to do so again if new fees are passed on to them, the national broadcast regulator suggested yesterday.

In a report submitted to the federal Cabinet, the Canadian Radio-television and Telecommunications Commission said it does not believe "significant affordability issues would be created" for consumers if a new compensation regime were introduced as early as 2011.

Called "value for signal" or "fee for carriage," the new system would see big cable firms such as Rogers Communications Inc. and Shaw Communications Inc. for the first time pay conventional TV networks such as Global and CTV Inc. a fee for station signals.

On Monday, the CRTC moved to adopt the controversial measure to help offset declining revenue at network TV stations and preserve the Canadian content they produce.

Yesterday's report stems from a rare order-in-council from Heritage Canada in September and a subsequent public hearing in December. The Harper Conservatives have been cautious to support a CRTC ruling that would raise consumer costs and create a potential voter backlash.

The regulator's recommendation would almost certainly do just that, causing "modest price increases" for cable.

But Canadians may be willing to eat the charge, the CRTC's submission suggests.

The average cable rate was $53.22 a month last year, CRTC figures show. That's up almost 50% since 2002 when rates were deregulated, representing an annual rise of 5.6% to the average bill.

"Such results do not seem to suggest a significant withdrawal of demand for [cable or satellite] television services when consumers are faced with rate increases," the CRTC said.

The rise has help lift revenue and profit at the major cable firms. Now, with the fortunes of networks dimming, the CRTC aims to buoy the entire system with a new negotiation regime similar to one that exists in the United States.

The CRTC has put the decision to the Federal Court of Appeal, which is to determine whether it has the jurisdiction to impose what some term a new "TV tax."

The move opens a new battleground on which the broadcast and cable-satellite consortiums will continue the years-long fight over fees for over-the-air station signals.

Mirko Bibic, senior vice-president of regulatory affairs at BCE Inc., which operates satellite service Bell TV, said the telecommunications giant is preparing its case. Phil Lind, vice-chairman of Rogers Communications Inc., the largest cable company in the country, also said the company would fight the decision in court.

CTV or Global could not be reached for comment. (Global is owned by Canwest Global Communications Corp., parent of the National Post.)

The most critical scrutiny, however, could come from the federal government, which has the option of overturning Monday's decision.

Prime Minister Stephen Harper reiterated his party's position during Question Period yesterday. The government, he said, is "concerned about anything that imposes fees on consumers without their consent."

The price tag on an individual station signal is anyone's guess. Specialty channels such as TSN and HGTV command upwards of $1 or more a month, a fee lumped into a customer's cable bill.

In previous proceedings, the CRTC has used a price of 50¢ per subscriber for local station signals. All in, estimates received by the commission during hearings last year ranged from as low as $1 per subscriber per month to as high as $10.

But "since any fee charged would be the result of a negotiation, there is no way to accurately predict what the ultimate charges would be for consumers," the CRTC admitted.

Telecom: Wireless startup shut out by regulator

J. Sturgeon | Financial Post | Oct. 1, 2009

Globalive Wireless's bid to become the country's fourth major cellphone provider was stopped dead in its tracks on Thursday after the industry's regulator said the company was controlled by its foreign backer and offside with Canadian telecom law.

The fledging Toronto-based carrier has been preparing for months to shake up Canada's staid wireless market, and was to introduce services in Calgary and Toronto within weeks.

Those plans have been in limbo for the last month as the Canadian Radio-television and Telecommunications Commission has deliberated on whether or not Globalive -- which is almost totally reliant on a Egyptian carrier Orascom Telecom Holdings (OTH) for its financing, technical expertise, even branding -- was in fact Canadian. Domestic ownership is a requirement under the current regulatory framework.

"The Commission considered whether non-Canadians do not own or control Globalive as currently structured. The Commission determined that Globalive does not meet that test," the regulator said.

The decision will surely be seen as shocking to Globealive and its backers, but a relief to the country's big wireless carriers.

Earlier this year, critics led by Rogers Communications Inc., BCE Inc. (Bell Canada) and Telus Corp. attacked Globalive's partnership with Orascom -- a wireless behemoth and the largest provider in the Middle East. They charged that the US$700-million Orascom pledged to the startup combined with its operational involvement handed the foreigner de facto control.

A lot is at stake for the incumbents who pull in hundreds of millions in profits annually selling wireless plans to Canadians that rank among the most expensive in the world. Globalive has vowed to offer cheaper services, presenting itself as the alternative for Canadian subscribers fed up with the established players.

In rare public hearings held last month at the behest of the incumbent carriers, CRTC chairman Konrad von Finckenstein seemed inclined to side with the them, blasting Globalive for tabling a proposal on its ownership structure that virtually split decision-making powers with the Middle East operator. The chairman also criticized certain rights Orascom held in connection with the US$508-million in loans the firm has already extended to Globalive.

In response, the startup carrier agreed to reshuffle and enlarge its Canadian board representation and amend its agreements with Orascom to give Globalive clearer operational control.

The commission ruled on Thursday that the amendments did not go far enough to bring Globalive in line, in part because Orascom, which holds a 65% overall equity interest mostly through non-voting shares, still held too much economic control.

"In circumstances such as the present, where a company is heavily debt financed, this opportunity can translate into significant influence," the CRTC found.

During last month's proceedings, Globalive's chairman Anthony Lacavera (left, photo above) as well as the head of Orascom, Naguib Sawiris, said their original plan did not call for a massive injection of capital solely from the foreign carrier.

However, the financial crisis that turned capital markets into a desert last year -- after Globalive had already committed $442-million to acquire airwave licenses from Ottawa -- required Orascom to extend almost complete start-up financing.

Mr. Lacavera said Globalive planned to pay back the loans or have institutional investors take portions when the firm was beginning to generate cash and could demonstrate its viability.

Yet the commission rebuffed that promise on Thursday, stating it "has no authority to issue a conditional approval on the basis that the carrier undertakes to bring itself into compliance in the future."

In a recent interview with the Financial Post, Mr. Lacavera said he attempted to find other sources of money but was turned down by domestic and international financial institutions. "This was the only way to do it, I believe. We looked inside Canada," he said. "Banks don't lend money easily into companies like this."

Most observers agree that a decision in favour of the would-be cellphone startup would have established a new precedent that undermined Canada's foreign-ownership rules for the telecom sector, which are designed to prevent international giants from overrunning the domestic market.

"The CRTC really had no choice," said Ken Engelhart, senior vice-president of regulatory affairs for Rogers, the country's biggest cellphone provider. "The facts in this case were just so overwhelmingly pointing to control by Orascom. I don't think the commission could have done anything else."

Two other wireless startups, DAVE Wireless and Public Mobile plan to launch within months after acquiring licenses of their own, but both lack the backing of a global wireless heavyweight.

The CRTC ruling flies in the face of an approval from Industry Canada in March that determined Globalive was Canadian-owned and controlled.

For its part, Globalive, which has hired more than 500 employees since last year and is rolling out its network now, said on Thursday it was determining its course of action, which could include returning to the commission with another proposal.

The decision must also come as a personal shock to Mr. Lacavera.

"I'm very confident we'll get a favourable ruling. We've fully cooperated and fully complied with all their concerns and made all the changes they've raised," he said last week.

"For us, it's about getting into the market."

Financial Post

jasturgeon@nationalpost.com

Feature: Helping get small business around big rules

By Jamie Sturgeon | Financial Post | 10.27.2008

If necessity is the mother of invention, regulation must surely be its unwanted sibling.

It was mid-September in a small boardroom on Bay Street when the thought occurred. Oscar Jofre (pictured, above),the 43-year-old chief executive of BoardSuite, had just run down a laundry list of requirements that new legislation introduced last spring had imposed on business.

In June, Bill C-25, a federally-mandated expansion of The Proceeds of Crime, Money Laundering and Terrorist Act, came into force, requiring banks to collect information on virtually every stakeholder, financial interest and transaction for every incorporated account holder.

"That touches six and a half million commercial accounts currently open with all major banks in Canada," Mr. Jofre said. "It doesn't matter if it's private or not-for-profit; every single one of these entities will have to adhere to the new banking laws."

The expansion was built on rules erected in the wake of the Sept. 11, terrorist attacks in the United States, as well as the accounting scandals of Enron in the United States and Nortel Networks Corp., to keep tabs on illicit bookkeeping.

It has become the latest regulatory cross all businesses big and small must bear.

That was in mid-September, when the towers a few blocks south were just beginning to feel the bite from the biggest failure in regulation in living memory. What will the fallout be from the current financial crisis? Even more rules, said Mr. Jofre, whose firm, BoardSuite (www.boardsuite.ca) aims to make corporate record-keeping more transparent and cheaper than ever before.

Through an easily navigable Web site, the firm has streamlined that process from the smallest tasks like tracking events on a calendar and maintaining the minute book, to mandatory obligations such as insurance reapplications and annual return filings.

Some company data must still be manually inputted into the system; however, once it's there, it stays on the record.

Concerned about complying with Bill C-25 at the risk of having an account frozen? "[BoardSuite] has all the data organized and sent to the bank rep without encumbering your business operations," said Dean Peloso, a former Toronto Stock Exchange regulator. "It's the institutional repository for all this information.

"All the elements you normally rely on your professionals to tell you to do, it's now telling you," said the 50-year-old career regulator who helped design Sedar, the electronic filing system for Canadian public companies.

Mr. Peloso's involvement with BoardSuite, where he's a director, is a testament to the rigorous planning that went into the product early on, Mr. Jofre said.

It was in 2003 when Mr. Jofre, an entrepreneur from Edmonton, learned his lesson in the regulatory pitfalls small businesses can stumble into.

A routine offering memorandum transferring assets from his company to another filed with the Alberta Securities Commission failed to disclose a bankruptcy of one of its officers.

The commission returned the filing and fined each director and Mr. Jofre $3,500, he said.

"It was in the minute book, the shareholders knew ... that wasn't the issue. Guess what the issue was -- one little line in the first page ... indicated no director or officer had filed for bankruptcy in the last 10 years. "The lawyer's backing away saying, 'It's not my responsibility,' but yet he's got the book. At the end of the day, I have to know exactly what I'm signing," he said. "The only way you can do that is by having access to information. That's the reason Board-Suite got started."

Of course, having the information on an encrypted Web site is another caveat of the service.

It's accessible around the clock anywhere there's an Internet connection. But perhaps best of all, BoardSuite is absolutely free. At least, it is to the company using it.

Through partnering with major service providers such as Aon Corp., the largest insurance broker in the world, BoardSuite can offer itself for free to clients. It generates income through service fees from Aon and other partners every time a company uses a partner's service.

Not that clients are compelled to use BoardSuite's sponsors, Mr. Peloso said, but "we think they will. It's easier, it's going to save them [time] and money and it's going to be that much more convenient."

"By helping your organization, we help the partners and everybody wins," Mr. Jofre said. Since mid-September, the financial crisis has deepened with the possibility of a recession looming. The talk of increased regulation has begun in earnest.

While it may be good news for BoardSuite, it likely means more red tape for businesses of all sizes.

"This will only impose more regulations," Mr. Peloso said. "Just like last time, the really big mistakes are made by the really big corporations, but the rules are made for all. The small guys end up having to live with the new rules. So you have to organize yourself better."

jasturgeon@nationalpost.com