Public Mobile Inc. has filed a lawsuit in a Federal Court against a Cabinet decision allowing Wind Mobile to launch its national cell phone network overturning an earlier prohibition by the Canadian Radio-television and Telecommunications Commission (CRTC) over Wind Mobile’s foreign funding.
It is seeking clarity on foreign ownership rules in the wake of the decision, and has compelled Canada’s big three incumbent carriers to testify before the federal court on the matter.
“The Cabinet reaches its conclusion that Globalive is not controlled by non-Canadians in a perverse and capricious manner,” states Public Mobile’s notice of application to the Federal Court. “Cabinet erred in law by applying the Telecommunications Act for an improper purpose, mainly to enhance competition.”
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The notice also lists Globalive, Bell Mobility, Telus Mobility, Rogers Wireless and Shaw as respondents. That automatically involves them in the court proceedings.
Industry watchers expressed confusion about what Public Mobile was trying to accomplish with the lawsuit. Wind Mobile CEO Anthony Lacavera also questioned the motive behind the action.
“If you’re an incumbent, you have to be sitting back now and saying this is fantastic,” he says. “Already we’re fighting each other instead of tackling the incumbents.”
Cairo-based Orascom Telecom has a two-thirds equity stake in Wind Mobile. The company’s ownership structure was approved by Industry Canada when it spent $442 million in the 2008 Advanced Wireless Spectrum auction. But the CRTC expressed concerns about Orascom’s debt financing and asked for some changes last September.
Cabinet overturned that decision, saying no changes were needed. Wind Mobile launched in December.
Public Mobile also faces an upcoming ownership review by the CRTC.
In a public letter from Secretary General Robert Morin to Bob Boron, vice- president of legal and regulatory affairs at Public Mobile, attention is drawn to the firm’s foreign equity.
“The ownership structure of Public Mobile is of a complex nature and could hold precedential value for the industry and the general public,” Morin writes. No letters of input will be collected for the hearing, and it will be held in private.
Public Mobile’s largest investor is the Ontario Municipal Employees Retirement System (OMERS) with a $50 million stake. But it also has U.S. investors including Columbia Capital and M/C Venture Partners.
The court challenge is a long shot, says Lawrence Surtees, principal analyst at IDC Canada.
“It’s appealing to the court because it thinks the Cabinet decision is unlawful,” he says. “That’s a stretch. The Cabinet had the power to do what they did.”
The law protects Cabinet’s right to vary any decision of the CRTC. The Federal Court doesn’t often intervene by hearing such appeals, and success is even more unlikely, Surtees adds.
Globalive has an 11-year track record running a business in Canada with existing customers, Lacavera says.
That is enough to offset the foreign influence of Orascom. But Public Mobile may not be in the same situation with its investors.
“I would argue their control and ownership structure should be very closely reviewed,” he says. “They don’t have a track record of operating in the country.”
Public Mobile isn’t trying to stop Globalive from competing in the marketplace, Alek Krstajic, Public Mobile’s CEO says in a press release. It just wants a level playing field to compete on.
The decision “has made two sets of rules – one for Globalive and its Egyptian owners and one for everyone else,” the statement reads. “We are simply asking that all wireless providers be treated equally and given the same access to capital.”
Public Mobile plans to launch its network in Ontario and Quebec. It is advertising a $40 per month unlimited talk and text plan.
ITBusiness.ca attempted to reach Public Mobile for comment, but it was unable to respond before deadline.
With files from Howard Solomon
Follow Brian Jackson on Twitter.