Telus fights 700 MHz spectrum cap at Federal Court

The federal industry minister has no right to determine the “eligibility criteria” for companies to participate in spectrum auctions in the absence of formal rules from cabinet, lawyers representing Telus Corp. argued in Federal Court on Tuesday. “There is no squatters’ right,” said attorney Michael Ryan, who represented Telus at a one-day Federal Court hearing of the company’s challenge, which targets the minister’s ability to restrict how much spectrum Telus can acquire during an upcoming auction. “There’s no doctrine of squatter’s rights whereby if something isn’t done … the minister can intervene.” The 700 MHz spectrum licences Industry Canada will auction off in January are considered some of the best wireless airwaves ever made available to wireless carriers in Canada due to their ability to travel over long distances and through walls and other objects. Four of the seven spectrum blocks available in each region of the country are considered “prime” blocks because they support the latest next-generation LTE wireless devices. Telus said in its July application to the court that the industry minister, as head of the Industry Department, overstepped his authority when he imposed rules that would limit large wireless providers like Telus from acquiring more than one prime spectrum block during the auction, while allowing other bidders to acquire two of the four premium spectrum blocks in each of 14 licence areas across the country. The authority to restrict companies’ ability to bid on those spectrum blocks, the company said, falls to the governor-in-council, which is tasked with issuing orders and decisions from the federal cabinet. At the court hearing in Ottawa on Tuesday, Ryan said Section 6 of the Radiocommunication Act gives cabinet the “express” authority to determine who is eligible to hold spectrum licences, by issuing formal regulations through the governor-in-council. The fact that cabinet hasn't created detailed criteria that outlines who is eligible to hold those licences, he said, doesn't mean the minister can step in to do so. “That power is expressly given to the governor-in-council, it is not given to the minister of industry,” said Ryan, a partner with Arnold & Porter LLP based out of London. “Regulation hasn't been made because the governor-in-council hasn't seen fit to make one, but that doesn't mean there's a vacuum of power. The power is clearly the governor-in-council's.” Ryan said the rules will effectively render Telus and other large providers ineligible to bid on a second prime block in any region of the country. “If you hold the first licence, you are ineligible to hold the second,” he said of the rules. Government lawyer Sandersen Graham said at the hearing that the minister's authority to establish spectrum auctions and their rules is unrelated to cabinet's ability to establish rules about who can hold spectrum licences. Graham said that the Radiocommunications Act gives the minister the power to hold auctions to determine who receives licences to the most sought-after airwaves, while Section 5(1.1) of the act says the minister may consider the government's policy objectives when exercising his powers to regulate the telecom industry. The decision to restrict how much prime spectrum the large providers can obtain, Graham added, was designed to ensure that smaller players would not be shut out at the spectrum auction, and supports telecom policy objectives relating to the competitiveness and affordability of Canadian telecommunications. “This is not a general power that is devoid of any substance,” Graham said. “Parliament has very clearly conferred on the minister the power to do particular things—to promote the national interest and the public interest.” Graham said the auction rules that restrict Telus’ ability to acquire more than one prime block don’t restrict the company’s ability to take part in the auction or to hold spectrum licences in general, and should not be considered an eligibility criteria, as defined in the Radiocommunication Act. “The spectrum cap has nothing to do with eligibility,” Graham said. “It has to do with allocating spectrum to eligible bidders. It's a form of quota.” Cabinet’s power to determine eligibility criteria, Graham added, relates to the “characteristics” individuals and companies must possess to obtain spectrum licences. The spectrum cap, he added, “is about what they want to acquire.” Stephen Lewis, Telus’ vice-president of corporate strategy, said in an affidavit filed with the court this fall that Telus needs unfettered access to the prime 700 MHz spectrum blocks to support its subscribers’ increasing use of wireless Internet services. Ryan said Tuesday that the minister’s decision to limit large providers’ ability to acquire the prime spectrum blocks will have “significant ramifications” on the telecom industry as that consumer demand continues to grow. “Spectrum is in short supply and there are several companies, including Telus, who want to acquire the right to use the 700 MHz band,” he said. Much of the hearing Tuesday focused on the question of whether Telus had missed its window of opportunity to challenge the spectrum auction rules, which Industry Canada first released in March 2012. Section 18.1(2) of the Federal Courts Act says that government decisions and orders can be challenged “within 30 days after the time the decision or order was first communicated.” Christopher Rootham, a partner with Nelligan O'Brien Payne LLP in Ottawa who is representing Telus in the case, said during the hearing that the “final decision” relating to the government’s spectrum auction won’t come until next year, when Industry Canada announces the auction winners and rewards them with spectrum licences. Telus could have challenged the auction rules within 30 days of the release of the auction results, Rootham said, though it chose not to because that would have thrown the auction results into question. By filing its challenge before the auction, he added, the company was seeking to “provide certainty” about the auction process. “ could have waited until the final decision was made … and raised all of these arguments at that time,” he said. Graham noted that Industry Canada consulted with Telus and other industry players when developing the auction rules, and that the department informed those companies when the rules were released 18 months ago. “All parties knew from that time what the rules were,” he said. “There’s no reason why this challenge could not have been brought .” Federal Court Judge Cecily Strickland, who heard the case, said Tuesday that she was not yet prepared to rule on the Telus motion and will reserve her decision. “I know there is a timeline issue so you'll want a submission as quickly as possible and I'll accommodate that,” she said, in reference to the Jan. 14 auction start date. The challenge is filed with the Federal Court under case number T-1405-13. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly identified Michael Ryan's firm.

Telus fights 700 MHz spectrum cap at Federal Court

News | December 3, 2013

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Telus fights 700 MHz spectrum cap at Federal Court

News | December 3, 2013

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