June 20, 2012

VIA ACCESS KEY

John Traversy Secretary General Canadian Radio-television and Telecommunications Commission Ottawa, Ontario K1A 0N2

Subject:

Part 1 Application Re: Ownership Review of TELUS Corporation and TELUS Communications Inc.

1.

Pursuant to Part 1 of the CRTC Rules of Practice and Procedure and section 16 of the Telecommunications Act, Globalive Wireless Management Corp. (doing business as WIND Mobile) submits the attached application.

2.

A copy of the attachment has been provided to TELUS.

Yours truly, [Original signed by Simon Lockie]

Simon Lockie Chief Regulatory Officer

Attachments

c.c.:

TELUS

Globalive Wireless Management Corp. 207 Queens Quay West, Suite 710 Toronto, ON M5J 1A7 slockie@windmobile.ca Tel: 416.204.0263 Fax: 416.640.1089

Before the Canadian Radio-television and Telecommunications Commission (the Commission)

Pursuant to Part 1 of the CRTC Rules of Practice and Procedure

Between: Globalive Wireless Management Corp., carrying on business as WIND Mobile (WIND) (Applicant) - and TELUS Corporation and TELUS Communications Inc. (collectively, TELUS) (Respondents)

June 20, 2012

Introduction and Relief Requested 1. This application is made pursuant to Part 1 of the CRTC Rules of Practice and Procedure. WIND requests that the Commission immediately initiate an open and transparent public process to review whether TELUS is carrying on business in contravention of the Canadian ownership and control regime (the Ownership Rules) established under section16 of the Telecommunications Act (the Act) and the Canadian Telecommunications Common Carrier Ownership and Control Regulations (the Regulations). The same rules apply to entities governed also (or instead) by the Broadcast Act (Canada) (the Broadcast Act) and references in this application to the Ownership Rules are also to the rules set forth in the Broadcast Act, where applicable. 2. This application is brought because, as detailed more fully below, TELUSs complex and rarely used measures for controlling the level of foreign ownership of its publicly-traded voting securities, along with its recent proposal to restructure its share capital by converting its non-voting shares into voting shares, raises complex and novel issues that have not been dealt with by the Commission in a public proceeding to date. These facts, together with strong prima facie evidence that TELUS is currently in breach of the Ownership Rules (evidence which includes TELUSs own public statements and is corroborated by the attached reports prepared by Broadridge Financial Solutions, Inc. (Broadridge), an independent investor communications services company) raises issues of importance to all actual and prospective telecommunications and broadcasting market participants, and should be dealt with by the Commission in an open and transparent regulatory process in accordance with the Commissions guidance set forth in Telecom Regulatory Policy CRTC 2009-428 (the Review Policy). 3. Only by doing so, and establishing whether TELUS is in compliance and whether it is or is not what is acceptable to the Commission in this regard, will the Commission create an informed substantive precedent and a level of much needed certainty to all industry players. [A] public decision would afford industry players and the general public with a better understanding of the Commissions interpretation of the [Ownership Rules].1 As TELUS wrote when it successfully persuaded the Commission to undertake a full public review of WINDs compliance with the Ownership Rules in 2009, [f]airness dictates that all market participants have the benefit of knowing what corporate, capital and debt structures, as well as ancillary arrangements and agreements, are permissible under section 16.2

1 2

Review Policy, paragraph 11. Paragraph 17, TELUS submission to the Commission, June 8, 2009, in response to the Commissions Call for comments Canadian ownership and review procedure under s. 16 of the Telecommunications Act. See:

2 4. The Broadridge reports, in aggregate, provide a geographical breakdown of virtually all beneficial holders of TELUS Corporation voting and non-voting shares, based on the shareholders addresses as maintained by their financial intermediaries. Whether the addresses to which TELUS sends its shareholders important documents such as dividend payments and proxies, etc., are in Canada or not, would appear to bear a very strong correlation to whether those shareholders are Canadian or not. This is relevant, of course, because the Ownership Rules require that a qualified corporation that acts as a holding company for a Canadian carrier such as TELUS Corporation must have at least 66 2/3% of its outstanding voting shares beneficially owned and controlled by Canadians.3 And thus, of course, compliance with the Act requires that no more than 33 1/3% of the voting shares of TELUS Corporation may be held by non-Canadians. 5. It is interesting, therefore, that the Broadridge reports show that approximately 48% of the beneficial holders of the voting shares of TELUS Corporation are located outside of Canada. (There is also evidence on the public record that at least a substantial portion of TELUSs voting shares is not widely held. For example, an American hedge fund, Mason Capital, is apparently shopping its 19% voting share interest in TELUS.4) 6. While the information described in the Broadridge reports is not, in and of itself, dispositive evidence of TELUSs non-compliance, it is nonetheless compelling prima facie evidence of such noncompliance (and also makes clear that the directors of TELUS should not be relying on their share register as the sole means of determining whether the beneficial owners of its voting shares are considered to be Canadian5). At a minimum, and especially in the context of its proposed equity capital restructuring (as described below), it raises important questions as to how TELUS is in compliance and the effectiveness of TELUSs complex measures for controlling the level of foreign ownership of its
http://www.crtc.gc.ca/public/partvii/2009/8657/c12_200907751/1219797.pdf . This Call for comments was initiated by the Commission after TELUS requested a public hearing into WINDs compliance with the Ownership Rules. 3 The 66 2/3% rule is set out in the following definition included in s. 2 of the Regulations. It states that a: qualified corporation means a corporation in which those of its shareholders who are Canadians beneficially own, and control, in the aggregate and otherwise than by way of security only, not less than 66 2/3 per cent of the issued and outstanding voting shares, and which is not otherwise controlled by non-Canadians;. TELUS Corporation must remain a qualified corporation in order for its subsidiaries, including TELUS Communications Inc. to carry on business as Canadian carriers under the Telecommunications Act. Similarly, TELUS Corporation and its subsidiaries would lose their eligibility to hold broadcasting licences under the Broadcasting Act and Industry Canada spectrum licences under the Radiocommunication Act if more than 33 1/3% of TELUS Corporations voting shares are beneficially owned or controlled by non-Canadians. Moreover, TELUS has an obligation under its AWS licenses to notify the Minister of Industry of any change which would have a material effect on its eligibility. Such notification must be made in advance for any proposed transaction within its knowledge. Similar pre-notification requirements exist under the Broadcast Act. 4 http://www.theglobeandmail.com/globe-investor/telus-wont-concede-defeat-on-plan-to-consolidateshares/article2427293/ 5 Pursuant to s. 4(3) of Regulations, TELUSs directors have a responsibility to investigate further, and where they decline to act, the Commission may step in and exercise the powers of assigned to the directors pursuant to s. 16.

3 publicly-traded shares. The answers to these questions are very relevant to all actual and potential telecommunications and broadcast industry participants, and even the general public. 7. Moreover, this apparent breach of the Act seems to have continued over an extended period of time, which in WINDs submission is not only evidence of TELUSs non-compliance with this bright-line element of the Ownership Rules, it is also suggestive of a cavalier disregard by TELUS of the importance of the Ownership Rules and of having processes in place to ensure ongoing compliance. 8. As we make clear in this application, this information should clearly trigger a full public review by the Commission of TELUSs compliance with the Act. 9. The facts set forth in this application became known to WIND as a result of publicity surrounding a TELUS management plan to restructure the companys share capital by converting its non-voting shares into voting shares. In reviewing published information about the introduction of that plan and its failed execution to date, WIND became increasingly of the view that the measures implemented by TELUS aimed at ensuring compliance with the Ownership Rules either before or after its share restructuring plan is implemented were likely ineffective. That TELUS seems to be taking no action to ensure compliance, and also that the Commission does not appear to be taking any action in this regard, is confusing. 10. WIND, like all actual or potential participants in the broadcast or telecommunications industry, is very interested in what the Commission considers acceptable in respect of the Ownership Rules, so WIND dug deeper. While what WIND found upon further review and inquiry (in the Broadridge reports and in TELUSs public statements and filings) was dramatic, we are no further along in our objective of understanding how TELUS and the Commission consider TELUS to be in compliance with the Ownership Rules, much less how TELUS intends to remain so in connection with its proposed capital restructuring. 11. TELUSs own words make it clear that an open and transparent public review of TELUSs compliance is now required. As TELUS submitted to the Commission in 2009: Fairness dictates that all market participants are treated in an impartial manner by the regulator. Fairness dictates that all market participants have the benefit of knowing what corporate, capital and debt structures, as well as ancillary arrangements and agreements, are permissible under section 16. It is clearly in the interest of actual and prospective telecommunications and broadcasting market participants to understand the Commissions regulatory approach to TELUSs compliance and to

4 TELUSs voting share ownership, ancillary arrangements regarding share registration, verification of ownership, and so on. The Commissions reaction and approach to TELUSs apparent non-compliance, to the apparent ineffectiveness of TELUSs measures aimed at controlling foreign ownership of its publicly-traded securities, and to TELUSs share restructuring proposals which appear only to exacerbate what is already an issue, will set important precedents for other market participants. 12. In the 2009 proceeding to develop the Commissions current procedures for reviewing compliance with the Ownership Rules, TELUS submitted to the Commission that: Bell, Rogers, Shaw and TELUS support having open and transparent public processes when reviewing the ownership and control of telecommunications common carriers in certain circumstances.6 TELUS then went on to clarify what TELUS considers those certain circumstances to include, stating: TELUS request for public reviews is focused on two situations: (a) for new entrants, and (b) for carriers undergoing significant restructuring.7 {emphasis added} As described in this application, it appears that TELUS is in the process of implementing a significant restructuring of its share capital. Accordingly, based on TELUSs own submissions (and even disregarding TELUSs apparent non-compliance with one of the fundamental bright-line tests of the Ownership Rules), the Commission should now initiate an open and transparent public review of TELUSs current and ongoing compliance with the Ownership Rules. 13. For the reasons set out below, WIND submits that this public review should take the form of either a Type 3 or a Type 4 review pursuant to the procedures set out in the Commissions Review Policy. Background 14. As the Commission and TELUS are aware, WINDs own compliance with the Ownership Rules was a matter of substantial controversy8 in recent years, after Industry Canada, the Commission and ultimately the Governor-in-Council and the courts reviewed WINDs compliance. Most recently, the

Paragraph 4, TELUS reply submission to the Commission, June 15, 2009, in the proceeding referenced in the previous note. See: http://www.crtc.gc.ca/public/partvii/2009/8657/c12_200907751/1226180.pdf 7 Ibid, paragraph 18. 8 Though it should be noted that all parties, including the Commission and TELUS, acknowledged that WIND complied with the bright-line legal requirements such as the one at issue in this application; the only controversy was whether WIND complied with the subjective control-in-fact test.

5 Supreme Court of Canada dismissed an application for leave to appeal to that Court (with costs awarded to WIND), definitively ending a protracted and costly process. 15. In the interim, WIND has continued its avid pursuit of financing on reasonable terms, and WIND has accordingly developed a keen interest in the ownership and share capital structures of other Canadian telecommunications and broadcast companies, in order to better understand which types of structures and ancillary compliance mechanisms are required or permissible under Commission enforcement of the Ownership Rules. 16. Accordingly, WIND reviewed the media reports and documentation published by TELUS and other parties related to TELUSs proposal to restructure its share capital. In addition to obtaining the Broadridge reports, WIND has reviewed documentation related to the TELUS share restructuring plan filed on the SEDAR web site.9 17. It appears from documentation filed on SEDAR that TELUS Corporation currently has two classes of shares, a class of voting shares and a class of non-voting shares. On February 21, 2012, TELUS issued a news release announcing that it was proposing to convert its non-voting shares into voting shares.10 The release indicated that TELUS shareholders would have the opportunity to decide whether to eliminate the Corporations dual class share structure at TELUS upcoming annual and special meeting of shareholders to be held on May 9, 2012. Under the terms of TELUS proposal, each Non-Voting Share would be converted into a Common Share on a one for one basis. 18. The details of TELUSs proposal to restructure its share capital (through a Plan of Arrangement under the Business Corporations Act (British Columbia)) are summarized in TELUSs 2012 Management Information Circular and in six appendices to that document.11 A perusal of the Plan of Arrangement makes clear that TELUS is proposing a complex and novel plan to restructure its share capital. Curiously, however, the Management Information Circular does not contain any information on foreign ownership levels, how the proposed restructuring will impact permitted levels of foreign investment, the extension of the foreign ownership and control measures to the non-voting shares or how such
9

TELUS documents disclosed pursuant to Canadian securities laws that are referred to in this application are publicly available on SEDAR (the System for Electronic Document Analysis and Retrieval) used by Canadian companies. These documents can be accessed at www.sedar.com, under TELUS Corporation. 10 TELUS News Release: TELUS Proposes Converting Non-Voting Shares Into Voting Shares, 21 February 2012. Posted on SEDAR. 11 See TELUS 2012 Management Information Circular, posted on SEDAR 13 April 2012. See particularly s. 5 of the circular, entitled Approval of the Arrangement, and Appendix C: Arrangement Resolution, Appendix D: Interim Order [of the Supreme Court of British Columbia], Appendix E: Notice of Petition [In the Supreme Court of British Columbia], Appendix F: Plan of Arrangement, Schedule A: Form of Notice of Alteration [to the Companys Articles of Incorporation], Appendix G and Appendix H.

6 measures work, or how TELUS would exercise its powers in the event that permitted foreign ownership levels were exceeded. All of these are complex and relevant issues, especially in light of the foreign ownership concerns announced by TELUS on March 22, 2012. 19. The February 21, 2012 TELUS news release stated that it is estimated that less than 20 percent of TELUS shares are currently held by non-Canadians. The release went on to state that if TELUSs share restructuring proposal is approved, the Common Shares will be dual-listed on the Toronto and New York stock exchanges for the first time. The release does not indicate how TELUS would ensure that it would maintain compliance with the Ownership Rules if its share restructuring proposal were to be approved and if the shares were to be dual-listed on a non-Canadian exchange (let alone how TELUS currently maintains compliance). 20. The proposed restructuring encountered strong and vocal resistance from some of TELUSs shareholders, in particular a New York hedge fund, Mason Capital, who expressed the view that the historically higher value of voting shares should be taken into account in the share restructuring plan. There was a proxy contest conducted related to this issue, and a rather public controversy and dispute between TELUS management and Mason Capital. On May 8, 2012, TELUS announced that it was temporarily withdrawing its proposal to convert its non-voting shares into voting shares.12 21. In its May 8, 2012 news release, TELUSs Chief Executive Officer Darren Entwistle was quoted as saying that TELUS remain[s] committed to a one-for-one share conversion.13 The next day, TELUS issued another release, in which it stated that it plans to reintroduce a new proposal in due course.14 22. WIND notes parenthetically that TELUS has consistently lobbied to reduce or remove the Ownership Rules that apply to it, and so it is somewhat surprising, since pursuant to those rules non-voting shares may be owned by non-Canadians, that TELUS is so actively seeking to eliminate its class of non-voting shares even though the Ownership Rules remain applicable to TELUS. Simply and straightforwardly, the TELUS share restructuring plan will significantly reduce the number of its shares that could be

12

See TELUS News release: TELUS Withdraws Share Conversion Proposal, dated May 8, 2012; posted on SEDAR May 9, 2012. 13 Ibid, paragraph 5. 14 See TELUS News release: TELUS Reports 3rd Quarter 2012 Results, dated May 9, 2012; posted on SEDAR May 9, 2012. See page 5, third paragraph from bottom.

7 owned by foreign investors.15 It is puzzling to WIND why TELUS would propose (and actively pursue) a plan to effectively reduce its access to foreign capital. 23. WINDs already burgeoning concern with respect to TELUSs compliance was piqued even more when, on March 22, 2012, TELUS issued a news release on its compliance with the Ownership Rules. The release stated that on March 21, 2012, the non-Canadian ownership level of its Common [voting] shares was believed to be approximately 24 per cent. Notwithstanding this, when including approved and pending reservation applications for the purchase of Common Shares by non-Canadians, this level increases beyond the 33 1/3 per cent foreign ownership restrictions.16 {emphasis added.} 24. TELUSs reservation system for controlling purchases of Common Shares by non-Canadians apparently works in conjunction with underlying structural measures implemented with respect to its publicly-traded securities. Under its Articles of Incorporation (its Articles), TELUS has only one class of voting shares which can be owned by Canadians or non-Canadians, subject to aggregate ownership limitations established under the Ownership Rules. Within this single class of voting shares, however, TELUS appears to have established two separate securities within the CDS beneficial ownership system for purposes of public trading: (i) CUSIP 8791M103, which is designated for Canadian shareholders ( the Canadian CUSIP); and (ii) CUSIP 87971M996, which is designated for shareholders who have declared themselves non-Canadians (the Non-Canadian CUSIP). It appears that under TELUSs procedures, non-Canadian investors may apply for a reservation number from TELUSs transfer agent which entitles the investor to settle acquired shares under the Non-Canadian CUSIP. TELUS states in its annual report for 2011 that no requests have been turned down in the past eight years. 25. It is unclear what proportion of TELUS shareholders are even aware of the scheme or understand how it is supposed to operate, or why. It is equally unclear what is supposed to happen to a non-Canadian who, innocently or otherwise, buys TELUS shares on the open market without complying with the ownership tracking scheme and thereby causes the company to breach the Ownership Rules. 26. However, on the basis of TELUSs public statements, the Non-Canadian CUSIP now appears to be full. That is, it appears that reservation numbers have been issued for, and voting shares have been registered
15

Under s. 2 of the Regulations, 66 2/3% of the shares of a Canadian carriers holding company must be held by Canadians, but neither the Act nor the Regulations impose a similar restriction on non-voting shares. Therefore many Canadian carriers use a dual class share structure, as TELUS currently does, in order to increase access to foreign investment (i.e. in non-voting shares) while maintaining compliance with the Ownership Rules. 16 See TELUS News release: TELUS provides update on non-Canadian ownership levels, dated 22 March, 2012; posted on SEDAR March 22, 2012.

8 under, the Non-Canadian CUSIP for nearly 33 1/3% of the total outstanding voting shares of TELUS, and that applications for additional registrations have been made. 27. TELUS suggests in its public statements that by limiting the further issuance of reservation numbers, it is able to prevent non-Canadians from purchasing voting shares in excess of permitted levels. But this does not appear to be accurate. The Broadridge reports, as discussed below, suggest there are in fact very substantial numbers of non-Canadian shareholders who have acquired TELUS voting shares under the Canadian CUSIP (and who, presumably, were not aware of or did not bother to obtain a reservation number). 28. The Ownership Rules clearly require that Canadians beneficially own, and control at least 66 2/3% of the TELUS Corporation voting shares.17 They do not limit foreign ownership only of voting shares for which shareholders happen to have applied for a reservation number and registered them in a separate Non-Canadian CUSIP. They limit foreign ownership of all outstanding voting shares. A system that permits this limit to be significantly exceeded does not work. A system that has mechanisms to remedy issues but which is not enforced also does not work. It is TELUSs onus to comply and it would appear that TELUS is not meeting this onus. 29. Since this matter is of considerable interest to WIND and other actual and potential participants in the Canadian telecommunications and broadcast industries, WIND obtained Broadridge reports to attempt to assess whether TELUS currently complies with the Ownership Rules. The results were impressive. The Broadridge Reports 30. The Broadridge reports attached show the geographical breakdown of the beneficial owners of each of the Canadian CUSIP voting shares, the Non-Canadian CUSIP voting shares and the TELUS Nonvoting shares, based on the addresses of the beneficial owners maintained by the intermediaries. There are a total of four Broadridge reports attached: three reports from Broadridge Canada showing the geographical breakdown of beneficial owners of each type of share who hold their shares through Canadian brokers, dealers, and other financial intermediaries, and one report from Broadridge U.S. showing the geographical breakdown (by U.S. State) of the beneficial holders of each type of share who hold their shares through U.S. intermediaries.

17

See s. 2 of Regulations; definition of qualified corporation.

9 31. The total non-Canadian holdings of voting shares reflected in the Broadridge Canada and Broadridge U.S. reports, relative to the total number of shares reported, indicate that the beneficial holders of approximately 48% of the TELUS voting shares have non-Canadian addresses. 32. While WIND understands such reports may reflect instances of double-counting of certain shareholdings due to the Broadridge reporting system, increasing somewhat the total number of shares reported, such instances of double-counting are generally expected to be neutral with respect to the proportional geographical breakdown of the beneficial owners, and thus the 48% figure is still expected to be accurate. While the 48% figure does not constitute dispositive evidence of a breach of the Ownership Rules, it certainly provides a prima facie indication that the number of TELUS voting shares beneficially owned by non-Canadians substantially exceeds the permitted level of 33 1/3%. 33. In fact, the Broadridge reports for the Canadian CUSIP alone are convincing evidence that the TELUS foreign ownership control measures are ineffective. If such measures were effective, one would expect that all non-Canadians would hold their shares solely through the Non-Canadian CUSIP and that there would be no non-Canadian holders in the Canadian CUSIP. The Broadridge reports for the Canadian CUSIP, however, show that approximately 25 million Canadian CUSIP voting shares are in the hands of shareholders located outside of Canada. In circumstances where the Non-Canadian CUSIP is apparently full, such a large number of apparently non-Canadian holders in the Canadian CUSIP is clear cause for concern. Issues Related to TELUSs Compliance and Restructuring Plan 34. A number of complex and novel regulatory issues arise from TELUSs apparent non-compliance with the Ownership Rules, its plan to restructure its share capital, and its existing and planned compliance mechanisms. The Commissions regulatory approach to issues is of general interest to actual and potential telecommunications and broadcasting industry participants, and in some cases, to the general public. 35. It seems extremely likely that TELUS management is perfectly aware of TELUSs apparent breach of the Ownership Rules. TELUSs March 22, 2012 news release all but concedes that there has been a breach, and since that time it has conspicuously not made any public statements with regard to the levels of foreign ownership of its shares. Even the circular for its recent shareholder meeting was backdated to March 22, 2012 presumably to avoid having to include any disclosure on the issue. The evidence WIND has assembled and reviewed suggests that the apparent breach has been continuing for at least three months and perhaps much more. Such reports would likely have been regularly

10 obtained by TELUS (especially during the lead-up to its contested shareholder meeting) and it would be interesting to know what they reflect. 36. Given the existence of these serious foreign ownership concerns, it is curious that TELUS has so aggressively pursued, and continues to pursue, its announced restructuring of capital to eliminate its non-voting shares and move to a single class of voting shares. One consequence of eliminating the non-voting share class is that the maximum permitted level of total equity ownership of TELUS will be effectively reduced from over 60% of outstanding shares (i.e., 33 1/3% of the voting shares and 100% of the non-voting shares) to only 33 1/3% of the outstanding shares. This would not only reduce the potential for foreign investment in the future and increase the likelihood of future foreign ownership issues arising, but would also have an immediate impact of actually worsening the current apparent non-compliance by TELUS with the Ownership Rules. The Broadridge reports for TELUSs nonvoting shares show that approximately 36% of such shares are owned by shareholders outside of Canada. As such shares will effectively become subject to the 33 1/3% limit upon conversion to voting shares, TELUS would apparently be even further offside as a result of the attempted (and planned) share reorganization. 37. A second consequence of the conversion to a single class of voting shares is that TELUSs apparently ineffective foreign ownership control measures, which currently do not apply to the non-voting shares, will need be extended to all of the shares of the company. 38. It is not clear exactly how TELUSs current scheme for maintaining compliance with the Ownership Rules operates in practice. What is clear is that, however it operates, it is apparently not working. The scheme, even without its apparent inadequacy, is complex and novel. It involves the establishment of two separate publicly-traded securities for Canadians and non-Canadians (even though these classes are not reflected in its Articles). How the trading and settlement of the two securities work in practice is unclear. The mechanics of the reservation number application and issue process is also obscure. Purchasers of TELUS voting shares are apparently expected to report themselves as Canadian or nonCanadian. However, based on the Broadridge report, it appears (unsurprisingly) that many nonCanadian shareholders are either unaware of or simply do not comply with this ownership tracking scheme.

11 39. Canadian carriers have ample powers under the Regulations to enforce compliance with the Ownership Rules.18 For example, section 10 of the Regulations permits the board of a Canadian carrier to issue a notice that excess voting shares are held by non-Canadians. Section 11 provides for the sale, repurchase or redemption of excess shares. It is not evident to WIND that TELUS has used any of these powers, notwithstanding the prima facie evidence of a breach of the Ownership Rules. It is also not clear how such powers would be used in relation to the TELUSs ownership control scheme, or applied through the beneficial shareholder system. TELUS does not appear to have provided any guidance to its shareholders as to how this would work. 40. The issues related to the application of these enforcement powers, including the application through the beneficial shareholder system, and those related to structural and procedural measures that may be implemented to control levels of foreign ownership of publicly-traded securities, have not been dealt with by the Commission in a public decision. There are significant numbers of companies in the Canadian telecommunications and broadcast industries which may face these same issues. WIND and other actual or potential telecommunications and broadcast market participants have an interest in ascertaining not only whether TELUS is in compliance with the Ownership Rules, but whether such ownership tracking schemes relating to publicly-traded securities are sufficient to ensure compliance with the Ownership Rules from the perspective of the Commission. 41. Since this scheme does not appear to work, market participants, particularly publicly-traded market participants or ones considering an initial public offering, will also be very interested in what the TELUS response to this apparent regulatory breach has been (or should have been), and what the Commissions response will be (or has been). This is particularly so in light of the Commissions TELUS-instigated public review of WINDs compliance with the Ownership Rules, and its subsequent clear direction on the matter of when such reviews are appropriate and how they will be conducted. Indeed, in light of the Review Policy and the information in this application, it would be extremely surprising to WIND if the Commission did not subject TELUS to an open and transparent review in accordance with its clear direction on such matters. 42. It appears from the Plan of Arrangement filed by TELUS that TELUS plans to amend to its Articles to provide it with significant additional powers to deal with compliance with the Ownership Rules.

18

For example, s. 7 of the Regulations empowers directors of Canadian carriers to obtain affidavits or declarations to determine whether shareholders of voting shares are Canadians, and related matters. S. 8 provides Canadian carriers with powers to refuse subscription, issuance, transfers or acquisition of voting shares. S. 9 provides for suspension of voting rights. S. 10 permits the board of a Canadian carrier to issue a notice that excess voting shares are held by nonCanadians. S. 11 provides for the sale, repurchase or redemption of shares.

12 TELUS may be motivated to do this because its existing compliance mechanisms do not work. As one might expect from a company who appears to be in regular and institutional non-compliance with the Ownership Rules and who has consistently lobbied to have those rules not apply to it, it is not clear that TELUSs proposed amendments would be any more successful than the current state. In any event, the nature of the provisions a publicly- (or privately-) held company should have in its Articles to maintain compliance with the Ownership Rules is a matter of importance to all industry participants. TELUS has not disclosed how the proposed new provisions of the Articles would and should work; nor has the Commission considered whether such provisions are sufficient. At least, not publicly. Another position taken by TELUS in its 2009 submission on WIND is particularly relevant on this point: Since 1996, Canada has made commitments and has become a signatory to the fourth protocol of the World Trade Organizations (WTO) General Agreement on Trade in Services (GATS) which presumes, among other things, timely, transparent government processes as well as non-discriminatory treatment of market participants. In TELUS view, secret, bilateral proceedings culminating in decisions that are never disclosed to the public and therefore never come to form part of the countrys known body of law fall far short of the commitments that Canada has made to its trading partners.19 43. WIND adopts and agrees with the foregoing TELUS position, and submits that the Commission should act in accordance with TELUSs view in this regard. WIND and other actual or potential

telecommunications and broadcast industry participants, as well as the Canadian public, also have an interest in knowing how compliance with the Ownership Rules would be enforced when TELUS reintroduces its share restructuring plan, as it has publicly announced that it intends to do. What mechanisms will the Commission require to ensure compliance under such a plan? What is the Commissions general regulatory approach to compliance by public issuers such as TELUS that plan to trade on foreign as well as Canadian stock exchanges? These are important issues of concern not only to TELUS, but to all actual or potential telecommunications and broadcasting industry participants.

19

Paragraph 9, TELUS submission to the Commission, June 8, 2009, in response to the Commissions Call for comments Canadian ownership and review procedure under s. 16 of the Telecommunications Act. See: http://www.crtc.gc.ca/public/partvii/2009/8657/c12_200907751/1219797.pdf.

13 The Regulatory Approach to Compliance with the Ownership Rules 44. In 2009, the Commission substantially changed its regulatory approach for monitoring compliance with the Ownership Rules. Prior to that time, the Commission had conducted reviews of compliance with the carriers concerned, on a bilateral and largely confidential basis. However, on April 20, 2009, the Commission received a request from TELUS that it initiate an open and transparent process to review whether WIND complied with the Ownership Rules. 45. Responding to the TELUS request, the Commission launched two proceedings. The first established the Review Policy and the second resulted in a decision on WINDs compliance. This Review Policy established the current Commission procedures for conducting reviews of compliance with the Ownership Rules. The basic elements of these procedures are set out below: Background 4. While the Ownership and Control Regime details the eligibility rules with respect to what constitutes Canadian ownership and control, the Regime does not set out the procedure to be followed in conducting a review of a carriers eligibility. In the past, the Commission has generally conducted ownership and control reviews on a confidential, bilateral basis, between the carrier under review and the Commission. This type of review has normally not resulted in a public record or the release of public reasons Commissions analysis and determinations 11. The Commission considers that where a review pursuant to the Ownership and Control Regime involves complex or novel ownership or governance structures, particularly those involving complex or novel financing arrangements, the public interest may be served in some instances by conducting that review via a public, multi-party process or a process that results in a public record and public decision. While the Commission is under no legal obligation to conduct such reviews, it considers that doing so may in some instances provide substantive precedents and a level of much needed certainty to all industry players. For example, a public decision would afford industry players and the general public with a better understanding of the Commissions interpretation of the Ownership and Control Regime. 13. Based on the foregoing, the Commission considers it necessary to establish a flexible framework that is consistent with the above-mentioned obligations set out in the Policy Direction and the industrys need for precedents. The Commission

14 considers that a review framework, consisting of four types of ownership and control reviews, would provide a differentiated scheme that would allow the Commission to discharge its duties under the Ownership and Control Regime as a function of the characteristics of a carriers ownership or governance structure. The Commission therefore establishes the following ownership and control review framework, consisting of four types of reviews: Type 1: Confidential, bilateral review Type 2: Written, bilateral review, resulting in the release of a public record and decision Type 3: Written, public, multi-party proceeding Type 4: Oral, public, multi-party proceeding

Oral Component

Multi-party

Public Record

Public Decision No Yes Yes Yes

Type 1 Type 2 Type 3 Type 4

No No No Yes

No No Yes Yes

No Yes Yes Yes

14. The Commission is of the view that the approach of conducting reviews on a confidential, bilateral basis (Type 1 review) will continue to be the process most often employed. This type of review provides the appropriate balance between efficiency and sufficient thoroughness for reviews of routine ownership or governance structures that offer little in precedential value, as the issues raised are neither complex nor novel. Under this type of review, the Commission will simply review a carriers documentary evidence and make a confidential determination. 15. A written, bilateral review resulting in the release of a public record and decision (Type 2 review) will be undertaken where an ownership or governance structure is of a complex or novel nature, such that in the Commissions view its determination will hold precedential value to industry players and the general public. This type of review will be carried out in the same manner as a Type 1 review, with a public decision and examination file released upon the conclusion of the Commissions review. 16. A written, public, multi-party proceeding (Type 3 review) will be undertaken where an ownership or governance structure is of a complex or novel nature, such that in the Commissions view its determination will hold precedential value to industry players and the general public and the Commission further considers that the evidentiary record would be improved by third-party submissions. Under this type of review, documentation filed by the carrier under review will be available for

15 public comment. At the conclusion of the review process, a public decision will be issued. 17. Finally, in exceptional circumstances, the Commission will hold an oral, public, multi-party proceeding (Type 4 review) where an ownership or governance structure is of a complex or novel nature, such that in the Commissions view its determination will hold precedential value to industry players and the general public, where the Commission considers that the evidentiary record would be improved by third-party submissions, and the Commission further considers that the appearance of parties would more easily allow the Commission to complete and test the evidentiary record. Under this type of review, documentary evidence filed by the carrier under review will be available for public inspection. Third parties will have an opportunity to file written submissions and request to provide oral submissions on that evidence. At the conclusion of the review process, a public decision will be issued. Which Type of Review is Appropriate in this Case? 46. WIND submits that TELUSs apparent non-compliance with the Ownership Rules (as well as its plan to restructure its share capital through its proposed Plan of Arrangement) clearly raises issues of a complex and novel nature, as discussed above. 47. The issues related to TELUSs application of (or failure to apply) the compliance enforcement measures set out in the Regulations are also both complex and novel. To the best of WINDs knowledge, the application of these remedial measures has never been addressed in any published Commission decision. 48. A Commission decision (on TELUSs compliance with the Ownership Rules, on a TELUS-type share restructuring proposal, and on the application of remedial measures) would clearly have precedential value for all actual or potential telecommunications and broadcasting industry participants. Thus, under the Commissions policy, a Type 1 review would be inappropriate; a Type 2, 3 or 4 review is required. 49. WIND further submits that the issues raised by the proposed TELUS restructuring, its apparent compliance problems, and its use (or non-use) of remedial measures, are matters where the evidentiary record before the Commission would clearly be improved by third-party submissions. The precedential value of an open proceeding aside, these issues are complex and novel enough that the Commission would benefit from having a range of submissions and perspectives and not just TELUSs confidential and bilateral submissions.

16 50. In addition, many of the issues relevant to TELUSs current situation affect other actual or potential telecommunications and broadcast industry participants. Any decision by the Commission would have obvious precedential value for the whole of both industries. Thus, such a decision should only be made on the TELUS case after hearing submissions of other industry participants on all documentation related to TELUS compliance, on its use of remedial compliance measures, and on the details of its restructuring proposal. 51. Accordingly, based on the Commissions Review Policy, a Type 3 or Type 4 review of TELUSs compliance is required. While a Type 3 review would be more expeditious than a Type 4 review, and would permit all other interested parties to participate in an open and transparent review (while at the same time assisting the Commission in understanding the existing TELUS measures to ensure compliance), WIND is strongly of the view that an oral hearing, with the opportunity for interested and informed participants to make oral submissions and respond to Commission inquiries, is fully justified in the circumstances. We would accordingly submit that a Type 4 hearing would be merited if the Commission agreed its additional cost and complexity is not undue in the circumstances. Regulatory Even-Handedness 52. In light of the extensive media publicity surrounding TELUSs share restructuring plan, it is possible (and even likely) that TELUS has already engaged in some bilateral confidential discussions with the Commission regarding its compliance with the Ownership Rules. 53. In this respect, TELUS is in a similar position to that of WIND in the Spring of 2009. WIND had engaged in bilateral discussions with the Commission and submitted its documents to the Commission for review of its compliance with the Ownership Rules on April 3, 2009.20 Subsequently (on April 20, 2009), TELUS requested that the Commission initiate an open and transparent proceeding to review the ownership and control of [WIND].21 The Commission then promptly terminated its confidential bilateral review of WINDs compliance and, as indicated above, launched two proceedings. The first culminated in the Review Policy which, as indicated, made clear that reviews of complex or novel ownership structures would be conducted in a public process, rather than a confidential bilateral

20 21

See Telecom Decision CRTC 2009-678, paragraph 6. Ibid, paragraph 7.

17 process. The second was a very public Type 4 review of WINDs compliance (the first such review of any telecommunications company), which resulted in Telecom Decision CRTC 2009-678.22 54. WIND respectfully submits that the Commission must demonstrate even-handedness in its regulation of new entrants and incumbent carriers such as TELUS. It would be grossly unfair to hold an open and transparent review of a new entrants compliance at the request of an incumbent carrier (without any indication of actual non-compliance) and then fail to conduct a similarly open and transparent review of that same incumbent carriers compliance (with actual strong prima facie evidence of non-compliance). While WIND has no doubt of the Commissions lack of bias in this regard, the appearance of a twotrack system (and the attendant appearance of influence and impropriety) must be avoided. What is good for the goose is good for the gander. 55. Unlike TELUS (which insisted upon a full Commission oral public hearing into WINDs compliance, as well as requesting and obtaining the right to appear at the Commission hearing to argue against WIND), upon reflection and given that WINDs goal is not to be unduly disruptive to TELUS, WIND would be satisfied by a Type 3 public review process. 56. To be very clear, WIND is of the view that a full oral public hearing (a Type 4 process) such as WIND underwent, is merited in these circumstances. However, WIND is sensitive to the fact that a Type 3 process would be less costly and less disruptive to TELUS (considerations that TELUS obviously did not have in mind when it participated in WINDs Type 4 process), which could justify a Type 3 process being used instead. WIND is confident that the Commission would conduct a thorough review by means of a Type 3 process, and that it would issue a public decision following this process which not only rules on TELUSs compliance, but which provides clarity and guidance to industry participants on the complex and novel issues raised by TELUSs case. The sole issue is whether the Commission believes that oral submissions and the ability to ask questions would be of use to it in making its determination.

22

This decision was that WIND was then not in compliance with the Ownership Rules. This determination was subsequently varied by the Governor-in-Council, which determined that the Commissions decision was wrong, and that WIND was in fact in compliance with the Ownership Rules. However, the above-noted Commission public review processes and the subsequent litigation by TELUS (and Public Mobile Inc.) to challenge the Governor-in-Councils order varying the Commissions determination cost WIND enormously. Millions of dollars were spent in legal and other litigation fees, not to mention that the process created extensive regulatory and legal uncertainty and associated costs to WINDs market reputation and financing efforts. WINDs repeated requests that the Commission deal with its compliance concerns using the confidential bilateral procedures that the Commission had always used prior to TELUSs request, and WINDs stated openness to finding an acceptable resolution of these concerns, were rejected by the Commission for the same reasons we now submit are applicable with equal (or greater) force to the TELUS situation.

18 57. Unlike TELUS in 2009, WIND is not proposing to put TELUS out of business. WIND believes that if TELUS is out of compliance, as appears to be the case, it can take steps to return to compliance if it is motivated to do so. WIND does, however, submit that the Commission must not hesitate to review the facts of TELUSs apparent non-compliance in a transparent and open manner in order to provide guidance to industry participants on the Commissions approach to compliance. RELIEF SOUGHT For all of the reasons set out above, WIND requests that the Commission initiate an open and transparent review of TELUSs compliance with the Ownership Rules. WIND submits that the Commission should undertake a Type 3 or Type 4 review in accordance with the Commissions Review Policy.