Every so often a technology comes along that marks an evolutionary leap in commerce, communication, even culture. At the beginning of the last century, it was the transcontinental railway, which sewed together a nascent nation and threw open the frontiers to trade. It was a massive exercise that we could not have realized on our own. The government sold bonds in London to finance construction, hired an American contractor to build it and recruited another, Sir William Van Horne, as president of the so-called National Dream.
Today, the “integrated transportation and communications” system that Van Horne envisioned for rail has been superseded by a system of a different kind: broadband. The very spine of an innovative, interconnected economy, it not only links Montreal with Vancouver, but Saint John with Chongqing, in real time. Yet strangely, this new world is governed by archaic laws that insist these new tracks, at least in Canada, must be controlled by Canadians.
In a ruling this month, the Canadian and Radio-television Telecommunications Commission found that Globalive Communications, the wannabe mobile provider, does not meet Canadian ownership requirements. Egypt’s Orascom Telecom, while not the controlling shareholder in name, owns 65% of Globalive’s equity and almost all of its $500-million debt. If there’s one thing we know about Canadian telecom law, it’s that “infrastructure is key, and Canadians have to own it,” says Marianne DeMonte-Whelan, a consultant with Delan Group.
And infrastructure is precisely what Globalive is looking to build. With Canada facing a shortage of bandwidth, Globalive plans to build the “first national cellular infrastructure in a decade,” says CEO Anthony Lacavera. It won’t be cheap, with the rollout expected to cost $1.8 billion over next 10 years.
And therein lies the rub. Like the great train-building project of a century ago, deep-pocketed foreigners are the only ones either willing or able to bankroll such an endeavour. “Canadian capital markets don’t want to finance a wireless startup – there isn’t the capacity to finance robust competition,” says DeMonte-Whelan. There were as many as four foreign players, she says, who would have entered the fray along with Globalive if not for the Canadian-content rules.
Foreign operators were also willing to shell out for Nortel, the faded Canadian tech icon. Ottawa was blasted for allowing the bankrupt equipment maker’s wireless division to be sold to Sweden’s Ericsson instead of finding a “made in Canada” solution. A lot of reasons were given, but ultimately, the decision came down to an abiding belief, according to a high-ranking government official, that foreign investment and competition is good for Canada.
The benefits to Globalive’s entry onto the Canadian cellular scene are many. The most obvious is the boon to consumers – another well-financed competitor would surely reduce Canada’s wireless costs, which are some of the highest in the world.
But another, less-appreciated perk is what Globalive’s rollout could mean for the country’s homegrown wireless technology suppliers. Made up of some 400 small and medium-sized companies, many of them world class, the burgeoning cluster is the fastest-growing segment in the Canadian IT industry, and employs about 21,000, most of whom garner a salary 30% above the Canadian average.
One company, Ottawa-based Dragonwave, won a multimillion-dollar contract in July to supply Globalive with its wireless Ethernet equipment. “This is an important showcase network for us,” CEO Peter Allen said in a press release. It represents the company’s biggest network to date in Canada. Too bad it might not happen. Wayne Gudbranson, CEO of Bransom Group, can hardly believe it. “Wireless is very much top of mind, and we get this kind of cog in the wheel when we should be leveraging the spectacular talent we have in Canada.”
To be fair, Sir John A. MacDonald, the founding father of the trans-Canadian railway and the successive governments that followed, also believed that so vital a network should be owned by Canadians. That conviction almost bankrupted the government and led to the railroad’s eventual nationalization. For decades, CN Rail wandered in the wilderness of bureaucratic bloat and inefficiency. Finally released from its shackles in 1995, it expanded into the U.S. and has flourished as one of the continent’s best-run railroads.
The CRTC, in ruling against Globalive, called Canada’s centuries-old bluff of putting a Canadian stamp on the ingenuity of others. Now it’s time to drive home the final spike. In this century, it’s not about who owns the tracks. It’s about who harnesses their awesome potential.
Andrea Mandel-Campbell is an author and host on Business News Network.