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Harper and wireless: Is it Lost or Breaking Bad?

15 Jan
Is Stephen Harper really Walter White?

Is Stephen Harper really Walter White?

This past weekend, Breaking Bad cashed in big time at the Golden Globe awards with wins for both best drama and lead actor, with the inimitable Bryan Cranston finally getting accolades at the annual event for his fantastic portrayal of anti-hero Walter White. Anyone who has watched the show, which wrapped up last year, probably felt the kudos were well deserved – it truly was one of the best series to ever grace the airwaves.

What I liked most about Breaking Bad were how seemingly minor details were introduced in one episode, only to be revisited in later ones to further flesh out and illuminate the ongoing plot. It was these sorts of things – like Walter spelling out his birthday numbers with bacon – that really impressed upon viewers that the writers knew exactly what they were doing all along.

On the flip side, there’s the Canadian wireless market. In discussing the federal government’s long-running quest to bring more competition to the industry, most pundits – regardless of what end of the spectrum or ideology they subscribe to – have generally agreed that there’s been little rhyme or reason coming out of Ottawa. By all accounts, Prime Minister Stephen Harper and his crew have been making things up as they go, as the current disarray seems to prove. Rather than Breaking Bad, it’s been more like Lost – a show that didn’t really make sense but promised an epic resolution, yet failed to pay off in the end.

But what if everyone is wrong and the government’s plot really isn’t like Lost? What if, like Breaking Bad, the whole situation really has been meticulously planned and crafted, and is in fact playing out perfectly?

I know it sounds crazy, but hear me out.

Back in 2006, the lobbying over the upcoming auction of Advanced Wireless Services spectrum was running hot and heavy. The main agitators for changing the status quo were Manitoba’s MTS and Quebec’s Videotron, owned by Quebecor. The two companies were seeking so-called set-asides, or a portion of licenses reserved solely for new players looking to enter the market, which Bell, Rogers and Telus could not bid on. Speculation was rife that the two companies would join forces and create a fourth national wireless company to take on the Big Three.

In 2007, then industry minister Jim Prentice granted the two companies’ wishes with an announcement that a big chunk – 40 per cent – of the airwaves would in fact be reserved for new entrants. Industry insiders at the time attributed the set-aside largely to the efforts of one man: Luc Lavoie, chief lobbyist and spokesman for Quebecor, who also represented and was a friend of former Conservative prime minister Brian Mulroney. If anybody was able to bend Harper’s ear about the need for more wireless competition – and therefore a set-aside – it was him.

When the auction finally took place in 2008, a number of new companies emerged as big winners: Videotron in Quebec and (strangely) in Toronto, Shaw in Western Canada, the entities that would eventually become Wind and Mobilicity in a number of big cities, as well as Public Mobile in Toronto and Montreal. MTS won licenses in Manitoba, where it already had network, but somewhere along the way things changed and it decided against expanding outside its home province.

Prior to the auction, Videotron was reselling Rogers wireless service in Quebec to complement its own television and internet offerings. The company very much wanted to control its own destiny – not to mention its own cash cow – with a network of its very own, so its desire for spectrum was understandable. But it also mysteriously bought that block of spectrum in Toronto…

I remember asking Videotron executives about it at the time and they nonchalantly said it was a way to keep their options open. It could have been an inexpensive way to give Quebec customers free roaming in Toronto, a threat to wave over Rogers’ head while Videotron got its own network up and running, or at the very worst, it would have been a valuable chunk of real estate that could later be resold to a needy buyer. Like the birthday bacon, we’ll get back to this in an episode… er, a paragraph or two.

Meanwhile, strange things were afoot in Western Canada. Shaw, fresh off having bought a whack of spectrum licenses and shortly after the passing of Rogers cable magnate Ted Rogers, did the unthinkable – it bought Mountain Cable, right in the heart of Rogers’ Ontario territory.

Rogers was very worried that this was the start of something bigger. “Mountain isn’t a one-off deal,” a lawyer for the company said. “Shaw intends to acquire further assets in eastern Canada.”

Rogers countered with a move that was even more unthinkable – it sued Shaw, claiming the Western company was violating a non-compete agreement the two had to carve the country in half. Lawyers for Shaw incredulously responded by saying that no such deal existed, and that if it had it would have been illegal.

The courts eventually rejected Rogers’ lawsuit, but then Shaw decided to scrap its plans to launch a wireless network. The company also then decided to sell Mountain Cable and its spectrum to Rogers for $700 million, although the spectrum part of that deal is currently in limbo because of the government’s refusal to allow transfers to the Big Three. But clearly, any initial thoughts Shaw had about encroaching on its frenemy’s territory – be it geographical or market – were quickly reversed, the detente resumed.

Rogers then struck a deal with Videotron to buy that bacon… er, Toronto spectrum for $180 million, but that agreement is also currently on ice because of the same government moratorium.

And now we come to the mid-season plot twists…

After years of recommendations from nearly all comers, the government finally loosened foreign ownership restrictions on telecom companies in 2012. One of the first takers on the new rules was Vimpelcom, which sought to establish full ownership and control of Wind. However, the Russian company eventually withdrew that request last year, reportedly because it was facing a rejection by the Canadian government on national security grounds. It seems the feds weren’t (and still aren’t) comfortable with a Russian company controlling a Canadian telecom concern – especially one that is using Chinese-built equipment.

And then, last fall, the government rejected a deal between MTS and Accelero Capital Holdings to buy Allstream, the Winnipeg-based company’s national business lines unit. Industry Minister James Moore cited unspecified national security concerns were behind the rejection, but observers think it had more to do with the government’s distaste for Naguib Sawiris, the billionaire Egyptian investor behind Accelero and who helped to originally start Wind. Sawiris also helped launch mobile service in North Korea, which could have been part of those national security concerns.

Throughout all of this, the government has maintained a desire – and belief – that a sustainable fourth national wireless player would emerge to challenge Bell, Rogers and Telus.

There are now rumours that Videotron may indeed be mulling a national expansion, perhaps by buying Mobilicity or purchasing spectrum across the country in this week’s auction, or both. The question thus arises: given their past ties, what if the Quebec company has been the government’s favoured fourth-player-in-waiting all along?

Perhaps MTS and Shaw caught wind of this long ago, which is why they gave up on their own wireless aspirations. Perhaps Wind and Mobilicity were set up as patsies who could build some networks and acquire some customers, to eventually be acquired cheaply by Videotron. Perhaps the 2008 auction was merely a stepping stone to get Videotron up and running. Perhaps the company’s attempted sale of spectrum to Rogers was just a ruse that it knew would be rejected (wink wink). Perhaps the government – even though it was desperate for someone to come along and assume that fourth carrier role – axed the only real efforts to do so because they didn’t go along with the preordained script. Perhaps even U.S. giant Verizon was somehow scared away by the possibility of this plot existing.

In a nutshell, perhaps everything that has happened over the past seven years has been specifically set up to clear the way for Videotron to go national.

The benefits would be obvious and numerous: the government would get its desired fourth player, and even better, it would be a home-grown Canadian one that would not just keep jobs in Canada, but also likely create them. The Conservatives would also get a nice political bump in Quebec, where they need it most, for elevating one of the local companies. Consumers in the rest of Canada, meanwhile, would get the benefit of a new player known for being an aggressive competitor within its home market. It would be a win-win for everyone. Of course, if Videotron did go national it would likely face serious retaliation from the others (Rogers cable in Quebec? Sure, why not), but that could be a minor plot point in this award-contending drama.

Such intricate and borderline genius schemes are obviously more the domain of highly proficient TV writers and definitely not governments, which is why this is all admittedly highly unlikely. Then again, in the battle between the government and the industry so far, the feds have been doing all they can to reassert their power, so anything – even in retrospect – really is possible. The only thing the Conservatives haven’t done so far is appropriate White’s most-famous quote, uttered in his own moment of puffery: “A guy opens his door and gets shot and you think that of me? No. I am the one who knocks.”

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4 Comments

Posted by on January 15, 2014 in bell, government, mobile, rogers, telus, wind

 

4 responses to “Harper and wireless: Is it Lost or Breaking Bad?

  1. Marc Venot

    January 15, 2014 at 1:41 am

    If it’s such a game of cloak and dagger maybe Paradox Interactive can create a DLC of Europa Universalis IV like the one released today on the aboriginals or add a character into the game “Tiny Epic Kingdoms” at kickstarter.

     
  2. Adam

    January 16, 2014 at 10:57 am

    How does Videotron and Rogers signing a 20-year agreement to share their LTE network in Montreal/Ottawa/Quebec City factor into all of this? Why would Videotron sign such a deal if they intended to compete with Rogers nationally all along?

     
    • Peter Nowak

      January 16, 2014 at 12:43 pm

      It actually fits nicely because it lowers both companies’ costs. Don’t forget, Bell and Telus share a network.

       
 
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