Opposition may derail telecom ownership reform

The Harper government’s plan to increase foreign investment in the telecom industry is in jeopardy after opposition parties signaled in a parliamentary committee they want the issue studied more.

Liberal, New Democrat and Bloc Quebecois members of the House of Commons Industry committee this week studying liberalizing the country’s telecom foreign ownership restrictions each issued minority reports calling for delay.

If the government wants to push the matter, it could fall and there could be an election over foreign investment.

Last week Industry minister Tony Clement put out three options for Canadians to consider for opening up foreign investment in telecom and broadcasting carriers. The deadline for submissions is July 30, with the government’s intention to introduce legislation in the fall.

But the opposition parties are balking.

In their minority report, the Liberals said Option 1, increasing foreign ownership limits to 49 per cent for telecom and broadcast carriers, would be acceptable, but only if after a “thorough review” of the implications of any changes and of the impact of the convergence of the telecom and broadcasting entities.

The New Democrats say that, with new wireless companies entering the market, the laws shouldn’t be changed for two years. “To change the present regulatory regime during this period is unfair and discriminatory to those who complied with rules,” the party’s report said.

Besides, it added, removing telecom foreign ownership rules completely will lead to takeovers and the cutting down of competitors to only two or three. Like the Liberals, the NDP members also want more study on the impact of media convergence and the impact on Canadian sovereignty.

The Bloc Quebecois called for maintaining the existing foreign ownership regime and called for the government to pass legislation giving Quebec power over broadcasting and telecommunications within the province.

When the government introduces legislation, it always goes to a committee for study, which could meet the demands of the Liberals and the Bloc. However, it could also be a place where they could stall.

Simon Doyle, editor of The Wire, an Ottawa news service that follows government moves in the telecommunications industry, believes the committee split likely means any ownership reform legislation is dead.

“If it was tabled right now, I’d say yes,” he said, although admitting that anything can happen between now and the fall.

On the other hand, he wonders how much heart Clement in the issue now. Earlier in the year, Doyle said, when the minister spoke of wanting to open up foreign investment in telecommunications, he also talked about taking responsibility for the sector from the Telecommunications Act and putting it under the Investment Canada Act. That legislation has looser Canadian control requirements than the Telecom Act.
Effectively that would be the same as Option 3 of the government’s proposals, which is to remove all ownership restrictions from the Telecommunications Act.

“I don’t know how much they [the Conservatives] want to delve into this,” Doyle added, “because it’s not an easy policy file to tackle in a minority government when you have so many stakeholders going after you.”

The committee members did agree, however, that Canada’s telecommunications industry isn’t serving the country well and that foreign investment in the sector could turn that around.

“The recent performance of the Canadian telecommunications industry is, on the whole, unsatisfactory,” the committee’s joint report said. “In particular, the committee considers that the relatively low level of wireless phone penetration and the disappointing progression of broadband penetration in recent years are symptomatic that all is not well in Canada’s telecommunications industry (in terms of pricing, services offered, and the competitive environment in general).”

But the parties could only agree on two recommendations: that the government clarify the legal test in the Telecommunications Act that telecom companies have to meet to prove they are Canadian-controlled, and to remove all foreign ownership restrictions for satellite operators.

The Harper government has already promised to help satellite owners such as Telesat.

In the three options Clement put forward last week there is no mention of the so-called “control in fact” test of the Telecommunications Act, although the interpretation of that test led to a confrontation between the federal cabinet and the telecommunications regulator, the Canadian Radio-television and Telecommunications Commission (CRTC) on whether Globalive Wireless Management Corp. is Canadian-controlled.

The commission looked at the ownership structure and company’s financing from Egyptian-based Orascom Telecommunications Holding SAE and found it didn’t meet the test.

But last December the cabinet over-ruled the CRTC and said Globalive, the parent of startup wireless carrier Wind Mobile, is controlled by its majority Canadian shareholders.

A number of industry analysts have said clarifying how the act should be interpreted is vital to avoiding another clash between the government and the regulator.

However, the three options Clement put forward only deal with changing the present percentage limit on foreign investment for the broadcast and telecom carriers.

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