Canada needs foreign investment in telcos: Expert

Foreign ownership restrictions in telecommunications impede investment by limiting the pool of interested investors, according to a senior federal policy advisor.

Industry Canada Director of Telecommunications Larry Shaw warns that when government precludes foreign investment, it impedes new capital, new technology, and the new services that investment would bring.

“It only stands to reason that (restrictions) will slow down investment,” Shaw said, of the $30 billion-a-year telecom sector. “Restricting foreigners’ investments may be limiting competition, which has a negative influence on innovation.”

Shaw said there is pretty strong support for getting rid of foreign ownership regulations in telecommunications — support that comes from several members of the industry and from the cable companies, such as Rogers Communications Inc. and Shaw Communications.

But there is also resistance.

“The broadcasters, specifically the content producers, are supportive of maintaining the current foreign ownership rules for broadcasting,” Shaw said.

The current convergence of broadcasting and telecommunications pits content against service delivery.

Presently, Industry Canada governs phone companies under the Telecomunications Act, and Heritage Canada polices cable companies under the Broadcasting Act.

For example, Shaw notes, BCE Inc. owns Bell Canada, a phone company, and it also owns Bell ExpressVu, a broadcast distribution undertaking, so BCE is regulated under both Acts. Rogers, primarily a telecommunications company on the Rogers Wireless side, and Rogers Cable, when it is offering broadband services, is a broadcast company for that purpose.

And that is where things get tricky, according to Denis Carmel, spokesperson for the Canadian Radio-television and Telecommunications Commission (CRTC).

“Cable has a dual function. Cable is used to carry video content on one hand, but [increasingly] it is used to carry phone signals,” Carmel said. “When cable operators are carrying phone signals, they are governed by the Telecommunications Act.”

Foreign ownership rules are governed by both the Telecommunications Act and the Broadcasting Act; the CRTC enforces the federal directive on both.

But the rules are not always hard and fast and Industry Canada has found support, if only theoretical, in CRTC precedent.

The CRTC’s aim is to have as much competition as possible in broadcasting and telecommunications because increased competition would allow CRTC to pull back regulations, according to Carmel.

“We have to pull out of regulation if we determine the market can fulfill the objectives of the Acts, meaning affordability, quality of service and deployment,” Carmel said. “When Bell ExpressVu came into the market cable operators dominated it. Federal rules were lenient [enough] to give (Bell) a leg up.”

Carmel said it is CRTC policy to give a break to new entrants. He stated that in the phone market, cable operators are new entrants, and the traditional phone companies like Bell and Telus, are dominant in their local markets.

“There needs to be a lighter regulatory burden on the new entrants,” Carmel said.

As for the present day, Shaw said, in the last 18 months virtually all the existing foreign investment in Canadian telecommunications industry has evaporated.

“SBC Communications had a 20 per cent interest in Bell Canada that BCE acquired last year. Rogers just recently bought out the AT&T share of their wireless business, and Telus also recently bought out Verizon’s share of the company,” Shaw said.

There is no significant foreign investment in the industry anymore, Shaw said.

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