New foreign investment rules must be fair, MPs warned


Some of the country’s biggest telecommunications companies have made sure the Harper government understands they are flatly against the apparent plans to change foreign ownership rules for only part of the industry.

Executives emphatically told the Commons industry committee Thursday any new rules must be the same for phone, wireless and cable companies of all sizes.

Any liberalized investment regulations that favor startups over incumbents or only apply to one type of carrier would be unfair and discriminatory, they said. And limited liberalization would only limit foreign investment, they added.

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“Fairness requires equal treatment for all Canadian carriers,” said Michael Hennessy, senior vice-president of regulatory and government affairs for Telus Corp., the incumbent phone company in B.C. and Alberta.

It would be “better to do nothing,” he added, than to tilt the investment rules.

“There’s no rationale for erecting barriers to the investment and foreign players we require to achieve our own ambitions,” said Chris Peirce, chief corporate officer of Winnipeg-based telco MTS Allstream.

Ken Stein, senior vice-president of corporate and regulatory affairs for Calgary-based cableco Shaw Communications Inc. noted his company competes in B.C., Alberta, Manitoba and Ontario against other telephony, cable, satellite and Internet companies [and, next year, wireless].

“In this converged environment it would be unacceptable to lift ownership restrictions in only one sector, or for the benefit of only one group of competitors,” he said.

“Bell is not opposed to relaxing the foreign ownership rules – provided any new rules apply symmetrically as between large and small carriers, and as between carriers who have broadcasting assets … and those who do not,” said Mirko Bibic, senior vice-president for government and regulatory affairs for BCE Inc, which owns Bell Canada, the incumbent phone company in Ontario and Quebec.

“It makes no sense to allow large global players to enter the Canadian market and to buy and sell their assets to anyone on the planet without allowing Canadian companies to do the same thing,” said Ken Engelhart, senior vice-president of regulatory affairs at cableco Rogers Communications Inc.

“The government needs to decide whether telecommunications networks can be foreign owned, and if they can all of the networks should have the same rights.”

The committee is holding hearings after the government said in last month’s throne speech that it plans to“open the doors” to foreign investment in the telecom sector.

On Tuesday the chairman of the federal telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) testified. Globalive Wireless Management Corp., the holding company that owns Toronto-based startup Wind Mobile, will testify on April 20. Globalive couldn’t have paid $442 million for spectrum licences and built its network without the backing of Egyptian based Orascom Telecom Holdings SAE. Also to testify will be executives of Public Mobile.

The vagueness of the government’s intent has many in the industry irritated. It has said it only wants to change the Telecommunications Act, which regulates phone and wireless companies, and not the similar foreign ownership restrictions in the Broadcasting Act – which regulates cable companies. The Broadcasting Act gives the CRTC power to impose Canadian content rules, a controversial issue the minority government doesn’t want to go near. So changing only the Telecommunications Act would mean cablecos wouldn’t get the benefit of any foreign investment liberalization.

Lurking in the background is the exemption Globalive got in December from the Harper cabinet when it over-ruled the CRTC, which said the startup isn’t Canadian controlled. Incumbents were aghast at the cabinet ruling, which it said was made to foster wireless competition. That led to speculation the changes the government is thinking of would only apply to startup wireless companies that, like Globalive, bought spectrum in 2008. They would include the yet-to-launch Public Mobile and DAVE Wireless’ Mobilicity.

Calls for liberalizing foreign ownership restrictions to increase competition go back several years. Several reports recommend increasing foreign ownership in small carriers for up to five years to boost competition against incumbents, before opening investment up for larger carriers.

The corporate environment is also complex. No longer are there simply cable companies and phone companies. Rogers, for example, is a content creator that owns regulated TV and radio stations and cable channels. Carriers compete against each other in some areas of the country and not the other. For example, Rogers, Bell and Telus have national wireless networks, but Telus only has a phone and home Internet network in the west, while Bell’s is in the east. A foreign investment change that affects only wireless tilts one technology against others.

Meanwhile, those who fear Canadian communications companies will be scooped up by  international giants like Deutsche Telecom, or who want to protect minimum Canadian content levels on commercial cable and wireless networks, are girding for a fight.

It’s against that background that the five incumbents let fly for two hours at the industry committee.

By insisting the government deal with both phone, wireless and cable carriers equally, the five may have complicated any government strategy to deal with liberalizing telecom foreign ownership quickly.

However, they almost unanimously agreed that any Canadian content concerns over increased foreign investment in the sector could be easily dealt with. “I often hear people saying that it would be too complicated to liberalize foreign ownership rules for cable television, and not to do so for radio and TV stations,” Rogers’ Engelhart testified. “I disagree … The Broadcasting Act could be amended to say that BDU licencees (broadcasting distribution undertakings licenced by the CRTC, such as cablecos) can be foreign owned, and that programming licencees (such as TV and radio stations or cable channels such as HBO Canada) cannot.”

Rogers made the proposal even though it owns broadcasting station. Effectively, Engelhart said, it would mean Rogers couldn’t sell those stations and cable channels directly to a foreign company.

While investment liberalization was applauded, only Bell proposed a limit. It agreed with the CRTC chair that foreign companies shouldn’t be allowed to own more than 49 per cent of voting shares of Canadian carriers, up from current limit of 20 per cent.

The hearing was also marked by a number incumbents boasting of the billions they’ve put into their wired and wireless networks. That could have been interpreted as a suggestion that more foreign investment isn’t needed.

Engelhart stressed that Canada has three “big healthy” telecommunications companies [meaning Rogers, Bell and Telus] that are “knocking each other over the head” competing for customers.

They also praised the way their networks stretch into rural areas, where locals complain broadband access isn’t as good as the carriers offer in the nation’s biggest cities. Several insisted foreign carriers won’t invest in rural networks, but in cities.

“Canadian (telecom) companies are doing a phenomenal job” in outlying areas, said Shaw’s Stein. “In terms of rural broadband, Canada is doing much better than most countries,” said Engelhart.

Bell’s Bibic said there’s a perception that the cost of wireless in this country is too high compared to other nations. “That is not correct,” he said, “and this should not drive [government] policy.”

“We lead the world in wireless technology today,” he added, with four carriers offering HSPA+ networks. “The U.S. in fact lags behind us.”

[Right now only one U.S. carrier has an HSPA+ network, which offer maximum download speeds of up to 21 Mbps under ideal circumstances. However, Verizon Wireless is testing the next generation of wireless, LTE, and says it will launch commercial service in 25 U.S. markets by the end of the year. AT&T will start deploying its LTE network next year.]  

When Conservative MP Michael Lake noted a report from the Organization for Economic Development and Co-operation (OECD) said Canadians pay more for wireless than most industrialized companies and get less, Engelhart retorted that most OECD studies “have a lot of malarky in them.” He prefers a World Economic Forum study that ranks Canada 7th in the world in broadband.

Still, Allstream’s Peirce, who represented the smallest of the incumbents at the hearing, spoke of the need for relaxed foreign investment rules for companies of its size. He also acknowledged there’s a rural-urban broadband divide.

There were also shots at the Harper cabinet for its Globalive ruling. Engelhart said “it was pretty clear Orascom was running it,” and that the government “made a mistake.” Hennessy said the cabinet’s interpretation of the Canadian control rule was “a departure” from other CRTC precedents.

In an interview after the hearing, Hennessy said the fact that the Harper government is in a minority situation complicates its strategy.

“The will is there to do something,” he said. “The concern is they don’t want to go too far unless they can get support from another party.”

So far, he added, the government is signalling it doesn’t want to open the Broadcasting Act.

There is a growing recognition among members of parliament that any changed law has to treat all telecom carriers equally, he said.

But he said MPs are also concerned that with the convergence of Internet and video over wired and wireless networks it’s difficult to separate carriage from protecting Canada content.

Hennessy also wonders if the government wants to push through foreign investment liberalization before the upcoming 700 Mhz wireless spectrum auction, which might be held in two years. That spectrum is particularly enticing for carriers because it is more efficient for carrying rich media over high speed networks such as LTE. With existing carriers boosted by extra investment, cellphone company competition will be high and there won’t be a need to set aside spectrum for newcomers, as the government did for the 2008 AWS-PCS auction.

That move, the incumbents feel, artificially pushed the cost of spectrum up by $2 billion.

Regardless, “the sense of many people is we need this [investment liberalization] to move on, to remove impediments to capital, to get increased scale [in the size of carriers] … and lower prices, and I think a lot of people are willing to make the trade-off, even for head office (jobs) to see lower prices.”

The government’s vagueness isn’t helping.

“People have great difficulty at the political and bureaucratic level in saying exactly want and expect from a liberalization of the rules.


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