Canadian Prime Minister: There aren't 'special loopholes' for Verizon

Canadian Prime Minister Stephen Harper said that his government's rules on the wireless market do not aid foreign competitors, contrary to the claims of leading Canadian operators.

Incumbents Telus, Bell Mobility and Rogers Communications, which dominate around 90 percent of the market in Canada, have waged an extensive public relations campaign to argue against letting Verizon Communications (NYSE:VZ) enter the Canadian wireless market. Reports emerged this summer that Verizon might do so.

"The reality of the situation here is there is no special rule or special loopholes for foreign companies," Harper told reporters in Toronto on Thursday, according to Reuters. "There are rules that assist all new entrants, whether they be Canadian or foreign, to enter the marketplace and provide competition that will be in the interest of Canadian consumers," he added.

Canada's government last year relaxed restrictions on foreign ownership in small telecom companies with market share of 10 percent or less, in the hopes of increasing competition for incumbent carriers. The government also released new rules that will require all spectrum transfer requests to be reviewed.

Further, under current rules, Verizon or any other new entrant could potentially bid in January's 700 MHz spectrum auction for two of four prime blocks of the spectrum up for bidding, while the incumbents can only bid for one block each.

"As I've said before, I understand full well the desire of the major incumbent telecommunication companies to protect their bottom line. They have every right to do that," Harper said. "But the responsibility of the government is to act in the broader public interest." Harper and Industry Minister James Moore have said they will not change the rules.

Canadian carriers have said they may be forced to cut jobs or scale back rural wireless coverage if Verizon enters the market. One full-page newspaper ad from this week compared the country's spectrum to precious natural resources: "If the government let a giant foreign corporation buy up half of Canada's water, you would be outraged," it said, with a photograph of a lake and mountains, according to Reuters. The ad said foreign companies were getting "special treatment."

For its part, Verizon is putting on hold potential deals with fledgling Canadian wireless carriers Wind Mobile and Mobilicity, according to a Globe and Mail report from earlier this month. Instead, the company is deciding whether it wants to participate in the 700 MHz auction. The report, citing unnamed sources, said that Verizon has decided to delay pursuing any Canadian acquisitions until after the auction in January. If Verizon participates in the auction and wins the highly coveted airwaves, deals with the two companies might come back into play next year, the report said. Verizon declined to comment on that report.

Canada's 700 MHz auction is not set to start until Jan. 14, though carriers must apply by Sept. 17 and submit a refundable deposit. However, after that point potential bidders cannot negotiate with other bidders until 2014.

During Verizon's second-quarter earnings conference call in July, Verizon Communications CFO Fran Shammo said that Verizon is interested in exploring options to enter the Canadian wireless market, but he stressed that it is "really an exploratory exercise for us." He said most of Canada's population is between Toronto and Quebec, and that aligns with Verizon's coverage. He also said Canada's 700 MHz spectrum auction will auction off licenses that align with Verizon's own 700 MHz holdings.

For more:
- see this Reuters article
- see this Canadian Press article

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