By Alastair Sharp and Euan Rocha
TORONTO (Reuters) - Canada's three biggest wireless companies plan to attack Verizon Communications Inc's role in the U.S. government's electronic spying scandal, as they scramble to force Ottawa to rethink rules that encourage Verizon to set up in Canada, according to four sources.
The Canadian government has so far spurned an intense lobbying effort from the trio - Rogers Communications, BCE Inc and Telus Corp - by insisting its policies will cut Canadians' wireless bills.
The planned campaign, which has yet to get a final green light, will focus on how Verizon's entry into Canada could open the door to overreaching surveillance and a loss of privacy for Canadians, said the sources, who declined to be named as the plans are not yet public.
If the companies sign off on the proposals, the ads will start appearing in newspapers, online and on radio next week in the hope that they will swing public opinion behind the three players and persuade the government to change its mind.
Telus, BCE and Rogers declined to comment on any changes to the campaign.
Under current rules, new entrant Verizon could bid in a 2014 auction for two of four prime blocks of the spectrum that wireless companies need to operate mobile services, while the existing big players can only bid for one block apiece.
Verizon can also buy one or more of the smaller telecom firms, an option that is not open for the three Canadian firms.
Sources told Reuters in June that Verizon had offered between $600 million and $800 million for newcomer Wind Mobile and was in talks with another upstart, Mobilicity.
Verizon has said only that it is exploring the possibility of a Canadian entry.
FOLD OR WIN
Lobbyists, advisers and insiders at the three big firms concede that their current blitz of ads about the need for a "level playing field" in the spectrum auction has not convinced Ottawa to change its mind.
"They're either going to have to fold their tents and live with this, or win the fight," said a source familiar with the new campaign. "If they are going to win the fight they obviously need much more aggressive tactics."
The three firms between them control 90 percent of the Canadian mobile market, and they struggle to win sympathy from consumers looking at often lower U.S. costs.
"There's enough negative feedback about the campaign coming in that they're scrambling for new messages," said a second source close to one of the established operators.
Verizon was named in documents released by fugitive former U.S. spy agency contractor Edward Snowden that detailed electronic spying operations by the U.S. National Security Agency, including a vast log of phone calls by its customers.
The Canadian government says it will stick with its rules, which it says are designed to ensure that there are four major wireless operators across Canada.
On Friday the ruling Conservative Party launched www.consumersfirst.ca website to press its case and push back against the telecom companies' own site www.fairforcanada.ca.
With a potentially grueling election campaign ahead for the Conservative Party in a year or two, lobbyists and lawyers believe the government could back down if it senses public opinion is moving away from it.
But a fiercer bidding war could also boost the government's take in the spectrum auction, making it easier for Ottawa to balance its books ahead of the October 2015 federal election.
The deadline for bidders to register for the auction is September 17, and the auction is due to start on January 14 next year.
(Additional reporting by Randall Palmer and David Ljunggren in Ottawa; Editing by Janet Guttsman and Phil Berlowitz)