The Communications, Energy and Paperworkers Union of Canada is also calling for Ottawa to rescind what it perceives as advantages for Verizon Wireless, which has expressed interest in entering the Canadian market.
The union has thousands of members at BCE Inc.'s Bell Canada (TSX:BCE), one of Canada's largest wireless carriers and a leading force behind a high-profile campaign to get the Harper government to change its current telecom policy.
"To get out of a crisis it's important for a government to be able to think 'outside the box' and setting up a public telco company would be a smart way to do just that," union president Dave Coles said.
"If the government is intent on providing consumers with a fourth major carrier in each market it should acquire one of the struggling small telcos, reserve some of the available 700-megahertz spectrum for public use and establish 'Canada Wireless' as a Crown Corporation," Coles said.
The Conservative government has shown no interest in changing its policy of more competition in the wireless industry and launched a website on Friday aimed at winning over consumers.
"We're putting consumers first and standing up for choice in Canada’s wireless industry — are you with us?" the website asks.
The government website said it has a policy of "pro-competition" and noted since 2008, the average cost of wireless services for Canadians has decreased by nearly 20 per cent.
Telecom analyst Troy Crandall called the public duelling "a bit ridiculous."
"I don't know who's worse — the telecom companies or the government," said Crandall, of investment firm MacDougall, MacDougall and MacTier in Montreal.
"It's unsettling to investors and that's where our concern is," he said, adding that foreign investors will be encouraged to stay away from investing in Canadian telecoms with these public battles.
Crandall said the idea of the government setting up a wireless Crown corporation would also be met with raised eyebrows by the international financial community.
"Perhaps one of the reasons Canada is having so much trouble getting foreign entrants into our wireless space is maybe because they're not so happy with the political or policy changes that have been going on in Canada."
Meanwhile, Reuters news agency reported Friday that Bell, Rogers and Telus are planning to attack Verizon's role in the U.S. government's electronic spying scandal.
The reputed plans for the campaign, which Reuters attributed to four sources, would focus on how Verizon's entry into Canada could open the door to excessive surveillance and a loss of privacy for Canadians. If the campaign goes ahead, the ads will be in newspapers, online and on radio next week, in hopes of swaying public opinion to their cause, Reuters said.
Coles' CEP union expressed concern last week that Verizon would pass Canadians' personal data to U.S. intelligence agencies.
Bell, Rogers (TSX:RCI.B) and Telus (TSX:T) and the unions representing their workers say Verizon would gain an upper hand in Canada's wireless market through existing rules for new players that would give the U.S. giant an unfair advantage in the upcoming wireless spectrum auction.
Under the current rules, Verizon would be able to buy two of the four prime blocks of spectrum — radio waves that operate cellphone networks — that are up for auction while Bell, Rogers and Telus can buy only one each.
The Globe and Mail has reported that Verizon is putting off a potential acquisition of Wind Mobile and Mobilicity and contemplating participation in the next auction for wireless spectrum.
Coles said other governments have taken ownership roles in telecom companies.
He said New Zealand's government bought a small Internet provider in 2007 to help strengthen that country's telecom sector and Saskatchewan's SaskTel is a Crown corporation.
Coles also said a Crown telecommunications company would hire Canadians, continue to build out the industry and return the surplus to the public.
If Verizon decides to participate in the auction, rules prevent it from continuing to negotiate acquisition deals until after the January auction.