Big telcos are now prime regulatory targets, says Terry Corcoran.

When your political ship is sinking, it’s time to get out the populist lifeboats and fire the anti-corporate torpedoes. Attempting to save themselves from going down in an ocean of sleaze, the Trudeau Liberals this week launched their first lifesaving strategy: Shoot the telcos.

On the eve of former attorney general Jody Wilson-raybould’s devastating testimony before the Commons justice committee, Innovation Minister Navdeep Bains sent out a surprise announcement of plans to torpedo Bell, Rogers, Shaw and Telus, favourite targets of the anti-corporate consumer movement.

And, in what appears to be a staged follow-up move, the CRTC announced Thursday it has “launched a review to examine the state of the mobile wireless market and whether further action is required to improve choice and affordability for Canadians.” The telcos are now prime regulatory targets.

Bains’ proposal carried a big, wordy headline: “Proposed Order Issuing a Direction to the CRTC on Implementing the Canadian Telecommunications Policy Objectives to Promote Competition, Affordability, Consumer Interests and Innovation.” In content, it was filled with the kind of econo-blather and regulatory wonkery that appeals to those who believe that government diktats can produce what the market cannot. The core objective is to force the CRTC to order the large telecommunications firms to turn over part of their networks to local “entrepreneurs,” “innovators” and “competitors” for cheap. Then these smaller champions of state-mandated telco-asset seizures will be able to offer wireless services to consumers at “affordable” prices.

The main immediate beneficiary of the Bains directive — if it gets implemented before the election — would be Iristel, a Markham, Ont. firm controlled by Toronto entrepreneur Samer Bishay. Iristel owns Ice Wireless, which in turn owns Sugar Mobile. Sugar and Ice operate wireless and landline services in the Yukon, Northwest Territories and Nunavut. To promote their services, Iristel signed a deal with Rogers that allowed its northern clients to roam using Rogers’ networks in Vancouver, Toronto and elsewhere.

Okay so far. But being keen innovators with other people’s assets, the Bishay companies decided they should also be able to sell their Sugar and Ice wireless services directly to residents of Toronto — even through Iristel has no working telecom facilities there. It would “innovate” by using Rogers facilities. Rogers balked, and in 2017 the CRTC ruled in favour of Rogers and against Iristel.

As we described in this space last year, that should have been the end of the great Sugar “innovation.” It wasn’t. Somehow, Bishay’s strategy infiltrated the federal Liberal cabinet. Two months after the CRTC issued its decision against Sugar, the commission received an order-in-council telling it to “reconsider” its decision to prevent Sugar from freeloading off Rogers facilities.

The CRTC came back with a reconsideration that essentially failed to give Sugar what it wanted. Uproar ensued among consumer groups because, in effect, the CRTC turned down the cabinet order. And so the cabinet is back with another plan, this time for a directive that would change the CRTC’S policy options and force it to accommodate Sugar. And so is the CRTC. In its announcement Thursday, it seemed to backtrack on its earlier decision. While the commission recently ruled against “wholesale roaming” by operators that do not own facilities, a.k.a. “mobile virtual network operators” (MVNOS), it now says there is “a larger problem … that a sustainable retail MVNO market has failed to develop on its own.”

Do all these demands for special accommodation for favoured players sound kind of familiar as a Liberal government process?

The Bains order, by shifting the CRTC’S objectives, would cover more activity than wireless resellers. More generally, it would undo a 2006 directive issued by the then Conservative government, when its industry minister, Maxime Bernier, delivered a mandate to the CRTC to foster competition among the major telecom companies. He called it “facilities-based” competition, a plan grounded in the logical market idea that innovation and competition only really occur when real companies compete by managing massive investments in the facilities and technologies that drive wireless and telecom service growth. In the telecom industry, the investment runs into the billions of dollars annually and will be even more intensive with 5G networks.

The case for facilities-based investment was forcefully made last year when Bell Canada CEO George Cope wrote a strongly worded letter to Bains. Scrapping the Bernier facilities-based mandate, said Cope, would open the door for resellers to skim the market and undermine the ability of the major telcos to invest. As the CRTC had concluded, Cope wrote, favouring resellers posed a threat to telco investment decisions. “The government should not want Canada to replicate the unfortunate situation in Europe, where similar policies promoting resale hampered innovation and investment — turning what was once a world leader into a laggard confronting an estimated €150-billion investment gap.”

The Cope letter, obtained by Ottawa law professor Michael Geist through the Access to Information Act, has been dismissed by Geist as corporate disinformation. Geist scoffs that the letter “implausibly argued that more competition would harm consumers.” But there is nothing implausible in Cope’s claim. The wireless resellers are not competitors. They are freeloaders. They would pay below-market prices for access to telco facilities and grab market share at the expense of the telcos who funded their development.

The real implausibility in the Bains plan is the Liberal belief that governments — by constantly issuing calls for innovation, competition, and affordability — can actually foster innovation and competition. Market-based investment drives the tech revolution, bringing lower prices and a constant stream of new products and services to consumers. Governments issuing directives do the opposite.