As I indicated yesterday, there are a number of touch points for government review in a transaction like buying a phone company.

Regardless of who acquires BCE – even if it is a private equity firm – there will need to be an application to the CRTC for approval of the transaction, under the Telecom Act, Broadcast Act and Bell Canada Act.

It appears that the time pressures for the CRTC could be considerable. Under the Bell Canada Act:

Unconditional approval shall be deemed to be given under subsection 11(2) thirty days after written notification of a proposed transaction to the Commission, without prejudice to the exercise of the Commission’s powers under the Telecommunications Act.

That seems to mean that the CRTC has only 30 days under the Bell Canada Act, but perhaps more time under the Telecom Act. [Lawyers, can you help us here?] As we saw in the CRTC’s review of the CTV/CHUM transaction, the CRTC can be very responsive, but even that determination still took 6 months from the date of the original application in order to allow oral hearings.

The CRTC would be guided in its review the transaction by assessing the consistency with the objectives of the Telecom Act:

1. to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions;
2. to render reliable and affordable telecommunications services of high quality accessible to Canadians in both urban and rural areas in all regions of Canada;
3. to enhance the efficiency and competitiveness, at the national and international levels, of Canadian telecommunications;
4. to promote the ownership and control of Canadian carriers by Canadians;
5. to promote the use of Canadian transmission facilities for telecommunications within Canada and between Canada and points outside Canada;
6. to foster increased reliance on market forces for the provision of telecommunications services and to ensure that regulation, where required, is efficient and effective;
7. to stimulate research and development in Canada in the field of telecommunications and to encourage innovation in the provision of telecommunications services;
8. to respond to the economic and social requirements of users of telecommunications services; and
9. to contribute to the protection of the privacy of persons.

The Broadcast Act will also come into play because of broadcast licenses held by Bell.

On top of these CRTC review points, there is also the Competition Bureau that will need to assess whether a substantial lessening of competition is expected to result, substantial being the operative word.

With TELUS saying that it is no longer pursuing its bid, it may plan to pick up assets expected to be divested after a private equity acquisition. Depending on the pieces, the entire review process may start all over again!

Today is the day that reply comments are due for the Industry Canada consultation on the advanced wireless spectrum auction rules.

The process was started in February and the first round of comments came in last month. The issues were canvassed in an exciting debate on the final afternoon of The 2007 Canadian Telecom Summit.

Of course, a big question mark out there is how will TELUS address its comments. It had been opposed to new entrant concessions other than during its 4-day flirtation with the idea of acquiring Bell, when TELUS said:

Should Telus’ acquisition of BCE proceed, we believe that new wireless spectrum should be set aside for new entrants to ensure that Canada continues to have a third wireless network competitor.

We would also agree to certain other areas of support … to ensure that any emerging third player within the wireless industry was allowed to gain access to some of our tower infrastructure and was allowed to roam on favourable conditions.

We believe there are clear remedies to ensure vibrant and sustainable competition without divesting the mobile networks of either company.

Will TELUS revert to its former position? Has the prospect of wireless consolidation irreparably damaged the prospects of an unfettered auction?

My view is that Industry Canada should stay the course and avoid the temptation to tamper with an open auction. As a wise man once said to me, government has to stop trying to do indirectly what it can achieve directly.

A tangential approach to a problem only leads to a hypothetical solution. If there are concerns about possible industry consolidation, about lack of competitive behaviour, there are tools for direct intervention.

We’ll look at the instruments of government review in tomorrow’s posting.

The Government of Ontario has released details on its Rural Connections program: The Ontario Municipal Rural Broadband Partnership Program Guidelines.

The description of the program is somewhat confusing, leading me to wonder if the province is being advised by an agenda seeking to introduce symmetry into rural broadband connections when most urban customers seem to do just fine with asymmetric access. Citing the 2001 Report of the National Broadband Task Force, the preamble for Ontario’s program says

Based on today’s technology and applications, high-speed broadband is defined as a high-capacity, two-way link between end user and access network suppliers capable of supporting full-motion interactive video applications. A minimum symmetrical speed of 1.5 megabits per second per individual user is currently required to support these applications

The actual program requirements only require a minimum 1.5Mb download speed. Municipalities have until July 13 to get their applications into the province. The province will fund up to $1M of the project, as long as the money can be spent this fiscal year – by March, 2008.

The Ontario Municipal Rural Broadband Partnership Program will develop broadband infrastructure to provide connectivity to residents, businesses, and public institutions in rural areas that currently do not have access to high-speed Internet services, providing a foundation for growth and innovation. The infrastructure tendering process must be technology neutral, require open access, have a minimum download speed of 1.5 Mbps, and must be scalable.

If this program is truly technology neutral, I wonder how can any area be considered to lack access to broadband defined as 1.5 Mbps service?

As I have written before, my friends at Barrett Xplore have put all of Canada within reach of this kind of connectivity.

In interviews, Darren Entwistle has been waving the flag of Canadian nationalism and national security to help sell his plan to keep the whole shooting match of a merged Bell and TELUS entity. I find it interesting that other suitors, made up primarily of capital from Canadian and government employee pension plans are being characterized as “foreigners”.

In a call last Thursday with industry analysts, Darren referred to the high proportion of northbound connectivity that is controlled by foreign carriers, the number of countries with national scale incumbents, the fear of Canada’s national security assets falling under control of foreign investment or foreign carriers. He raised the threat of AT&T; and Verizon controlling Canadian telecom.

But at the end of the day, those aren’t reasons for TELUS to acquire Bell. Shareholders, Bell and TELUS alike, expect the deal to be good for them – in fact, they expect it to be the best deal for them. If it happens to be good for Canada too, that is serendipity, not a reason to do the transaction.

There is an interesting take on the issues from Derek DeCloet in the weekend’s Globe and Mail.

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