In defence of foreign telecom players

Dear reader, have I got a proposition for you. Let's open a widget factory together. We'll upset the Canadian widget oligopoly, which has controlled the widget market in this country for far too long.

If it works, we'll eventually sell out to the highest bidder and get stinking rich. If it doesn't, we'll sell our widgets at a loss just to be a nuisance until one of our competitors buys us out to get rid of us, in which case we'll get stinking rich. Either way, we win. Unless we go broke first, which is a distinct possibility. But why focus on the negative?

There's a hitch, though. I don't have much experience making widgets. Any, really. We also need startup money, in vast quantities. We need a plant, a distribution network, a marketing plan, an IT system, working capital. And I don't have much spare cash. Any, really.

So here's the plan. In the absence of a federal stimulus program for Righteous Breakers of the Evil Widget Oligopoly like us, you'll have to contribute the money. You'll own most of the shares and take seats on the board. You also get a veto over any expenditure that's larger than a roll of postage stamps. But I must have control, officially. Why? Because the Government of Canada says it must be so.

Shall I have my lawyers call your lawyers and set up lunch?

If this proposal seems preposterous, then so is the farce playing out right now in front of the federal telecommunications regulator in Ottawa. Globalive Wireless, run by Toronto entrepreneur Anthony Lacavera, has paid handsomely for wireless spectrum to compete against Bell Canada, Rogers Communications and Telus. The unholy trinity say Mr. Lacavera and Globalive are little more than a front for an Egyptian telecom outfit that's putting up most of the cash and making a mockery of foreign ownership limits.

On the first round of evidence at the CRTC this week, they're probably right - which is a perfectly good reason to root for the newcomer. Canada's ancient telecom ownership rules need an overhaul. A regulatory victory for Globalive might be the catalyst. At the very least, it would wake up the slumbering folks in Ottawa who run our communications policy.

The country's medieval attitude to foreign money in telecom goes back decades. In 1987, the Mulroney Tories - you know, the same government that still gets accused of selling Canada to the Americans - officially decreed that non-Canadians should keep their grubby hands off Ma Bell and her sisters. In 1993, the policy was clarified in law. It has remained that way ever since.

But in telecomland, 1993 might as well be 1953. A few important things have happened in the intervening years - the popularization of the Internet, for example, and the invention of a mobile phone that weighs less than a small child. Meanwhile, Canada fell far behind places like Hungary and Slovakia in wireless usage. We're still behind. In 2007, among the 30 countries in the OECD, Canada ranked dead last in percentage of the population with a mobile phone. That's partly because of high prices, which is why the Tories decided to tilt the rules of last year's spectrum auction to ensure that new wireless companies would get started. Globalive, backed by Egypt's Orascom Telecom, was one.

Orascom got more than it bargained for. It says it had to lend its progeny hundreds of millions to pay for the spectrum and startup costs because the credit markets were so messed up. Now it's taking a battering at the CRTC. It also owns 65 per cent of the equity of Globalive, which has twisted its corporate structure into a pretzel to maintain the appearance of Canadian control. Just follow the money, says Bell, and it's clear that Orascom has de facto control.

Yep. But telling Orascom and Globalive to give up the spectrum and go home isn't the answer. It's to ask what exactly Canada has to fear from Egyptians - or Chinese, or Americans, or Germans - bearing large cheques and cellphones.

Less parochial industrialized countries have already decided the answer is, "not much." The No. 1 wireless operator in the U.K. is Telefonica, a Spanish company. In the United States, Deutsche Telekom is a huge player, operating under the T-Mobile banner. In Australia, Austria, Denmark and Italy, among other places, consumers can buy wireless services from Hutchison, a Hong Kong conglomerate. Romania's leading mobile provider is France Télécom.

Is the national fabric of Canada going to be ripped apart because some guy from Cairo wants to offer you a deal on an iPhone? If you believe that, I've got a pro hockey team in Phoenix to sell you. But the tragedy is that it takes an event like the Orascom controversy to force the issue. It's a half-assed, improvised way of opening a market.

A better idea would be to take a radical approach to policy. Canada needs a national champion or two. It needs a Telefonica or a France Télécom. So let Bell merge with Telus, let Shaw merge with Rogers. That would give both companies the bulk to expand abroad. But also open the gates, let the foreigners in, and allow a dozen telecom companies to bloom. The Oligopoly has ruled for long enough.