Ottawa launches defence of plan to lure foreign telecom firms

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The Harper government is launching a counteroffensive to defend its plan to attract foreign telecommunications companies, in an attempt to blunt a multimillion-dollar advertising campaign by the three largest wireless players that attacks Ottawa's strategy.

Industry Minister James Moore is embarking on a cross-country speaking tour, beginning Friday in Vancouver, that he says will deliver the message that the government is standing by its policy of bringing more competition into the Canadian wireless market.

The government has created a number of incentives to lure foreign telecom companies such as Verizon Communications Inc. into setting up shop here.

This summer, the news that New York-based Verizon is considering expanding into Canada caused billions of dollars in losses for shareholders of BCE Inc., Telus Corp. and Rogers Communications Inc., which have funded a high-profile effort in recent weeks that warns Ottawa is risking Canadian jobs with rules that give unfair advantages to foreign companies.

In an interview with The Globe and Mail, Mr. Moore compared Canada's wireless players to North American auto makers of decades past that faced a wave of foreign competitors. "I am quite certain that in the 1980s, Chrysler and GM and Ford were making arguments that we don't need Hondas and we don't need Toyotas and we don't need BMWs, we don't need Audis in Canada," he said in an interview. "I think more competition has served us very well in the auto sector."

It is unclear, however, whether the government will get its wish. The Globe reported Wednesday evening that Verizon has pulled back on negotiations to buy two small Canadian wireless companies, the first indication in months that it may be cooling to the idea of spending hundreds of millions, perhaps billions, to get into the market.

The debate has become increasingly heated, and personal. Last week, Telus chief executive offer Darren Entwistle accused the government of "handing out favours" to a U.S. company at a time when Washington is holding up approval of a Canadian business proposal, the Keystone XL pipeline. This week, in a letter to Prime Minister Stephen Harper, BCE director Anthony Fell accused Mr. Moore and his department of arrogance and suggested the minister, who was only appointed to Industry last month, was not sufficiently knowledgeable about telecommunications policy yet.

In response, Mr. Moore publicly lashed out at the Big Three telecom companies' "Fair for Canada" advertising effort which is still trying to persuade Ottawa to alter course. He called it a "dishonest attempt" to skew public debate through "misleading campaigns."

Officials said that during his tour, Mr. Moore will meet with consumer groups, stakeholders and "ordinary Canadians" to explain Ottawa's wireless policy. They said the tour, over the next week, is still in development and will head eastward after Vancouver. The minister will also embark on a string of media interviews.

On Thursday, the minister played down the incumbents' criticism that Ottawa's wireless policy is overly generous to foreign newcomers. Among other things, the policy allows foreign carriers to bid on two blocks of "prime" spectrum in a federal auction of wireless licences in January, while major Canadian telecoms are limited to one prime block apiece. The auction is important because the winners will gain the right to use high-quality spectrum that can travel long distances and penetrate buildings easily, improving service for customers.

George Cope, chief executive officer of BCE, said in an interview that the auction setup is not only "unfair," but will also cost Ottawa money. "The government is giving up, in my view, well north of $1-billion" in auction proceeds, he said.

Mr. Moore rejected the view that the rules tilt the playing field. "If the rules were skewed in a way that was so advantageous to a foreign player, why is it that it is only Verizon that has thus far made any public comments about coming to Canada, potentially?" said Mr. Moore.

"AT&T hasn't. Vodafone hasn't. Other companies haven't. Because it's not quite so skewed."

Mr. Moore said he sees a secondary motive in continued calls by major Canadian telecom companies for Ottawa to change course: He said it is an attempt to sow uncertainty in the marketplace and scare off potential new investors.

"When it's argued the government should send signals that they are going to change their policy, that the government should send signals that they are unsure about their policy, what the effort there is to do is to send messages of uncertainty to the marketplace and deter anybody from thinking that the Canadian environment is a good environment in which to invest – which of course helps the incumbents," the minister said.

"This is a strategy and I understand it and I'm not blind to it."

Mr. Moore said the Conservative government remains convinced its plans to attract a fourth player in every regional wireless market will result in better cellular service and lower prices for consumers and expects Canadians agree with them.

A speaking tour of Canada will help explain to consumers why Ottawa's not giving in to calls by the incumbents to delay the auction and rethink the policy.

The "Fair for Canada" advertising campaign features clips of Canadian telecom employees lamenting how the federal government is "selling us out" to a "big U.S. cellphone company."

Mr. Moore said the campaign invites a rebuttal from Ottawa. "Those who are involved in the debate so far are companies who have defined what they think is in the public interest – through the eyes of their companies' interests. That's their job. That's understandable and I respect that.

"My job as Minister of Industry is to make sure that Canadians understand that our policy ... will serve the interests of Canadian consumers."

The minister suggested the Big Three telecom players are trying to convince Canadians they can provide everything that wireless consumers in this country need.

"I think those who are currently in the marketplace, those who are currently in the business, are I think, presenting a false argument that only they can provide services that Canadians would enjoy. And I think that's obviously not true."

He said Canadians still pay too much for cell phone bills. "We also know that in regions of the country where there is an effective and aggressive fourth player, that more competition has resulted in lower prices and better services for Canadians."

Mr. Moore called Anthony Fell's letter "an interesting approach to government relations" and rejected the notion he's in unknown territory. "As the Minister of Heritage I was responsible for CRTC. I was responsible for broadcast policy," he said.

"I know their arguments. I knew their arguments when we were developing the spectrum auction rules. I knew their arguments when we delayed the auction rules twice. I knew their arguments from their public campaigns. I knew their arguments from the letters they've written to me and [former Industry Minister] Christian Paradis."