Canadian Court Overrules Ottawa's Telecom Policy

Push by Canadian government to relax foreign ownership rules on domestic entertainment companies thrown into doubt.

TORONTO -- The Canadian government’s push to relax foreign ownership limits on domestic entertainment companies has hit a major roadblock.

The Federal Court of Canada on Friday quashed a 2009 decision by Ottawa to overturn a CRTC regulatory ruling that denied a license for an Egyptian -owned wireless telecom company, Globalive Communications, to operate here.

The uncertainty over Canada’s telecom sector, and its foreign ownership rules and regulation, comes a day after the federal cabinet forced the CRTC to reconsider its rules on usage-based billing for Internet users.

Justice Rogers Hughes of the federal cabinet in a written decision said the ruling Conservative government made two errors when it made the 2009 decision, which must be struck down.

The federal court reserved the judgment for 45 days, allowing Globalive to continue operating in the Canadian market, at least for now. Current Canadian foreign ownership rules demand that operational control of domestic broadcasters, phone companies, cable and satellite TV operators reside in Canadian hands.

The original decision to deny a mobile carrier license to Globalive, and Friday’s federal court decision, marked a victory for incumbent mobile players Rogers Communications, Telus Corp. and Bell Canada, who contend that an Egyptian-controlled company should not be allowed to operate in Canada.

Ottawa, in originally overruling the CRTC and OKing the entry of upstart Globalive into Canada’s mobile phone market, for its part signaled a phased liberalization of foreign ownership rules for domestic telecom and satellite companies.

That move was likely to have a knock-on impact on Canadian cable and broadcast players. Globalive in a statement expressed disappointment at the federal court decision, and reiterated support from the federal cabinet for its Canadian business.

“This court decision does not suggest that cabinet got it wrong, only that cabinet made two errors in explaining their rationale and characterizing the decision,” Globalive chairman Anthony Lacavera said.