Report: Lift foreign ownership requirements

A list of recommendations handed down this week by the House of Commons Standing Committee on Industry, Science and Technology could pave the way for future changes in ownership restrictions in the telecommunications sector in Canada.

The Committee was assembled in late January to address the current 30 per cent limit allowed in foreign investment in a Canadian telecommunications company. In its report, the Committee is now asking the Government of Canada “to entirely remove the existing minimum ownership requirements, including the requirements of Canadian control, applicable to telecommunications common carriers.”

The process to review foreign restrictions began last November when Industry Minister Allan Rock asked the Chair of the House of Commons Standing Committee Walt Lastewka, MP for St. Catharines, Ont., to undertake an evaluation of the current system. Part of the process was to see if Canada could secure a larger capital pool without compromising its national interest, an aspect yet to be determined.

It was well over a decade ago in 1987 when the Government of Canada argued the need to impose foreign ownership restrictions, saying it was to ensure Canada’s national sovereignty and cultural well-being. In the report issued by the Committee, it now says that Canada’s “regime is too restrictive when compared to other Organization for Economic Cooperation and Development (OECD) member countries,” and is having a negative impact on the Canadian telecommunications industry.

Brian Sharwood, principal at the SeaBoard Group Ltd. in Toronto said the argument the government made back then “really doesn’t hold as much weight as it did back in the day.” What fuels the debate today around foreign ownership restrictions is the content and data and not who owns the infrastructure, he noted.

Yet, as telecom spending isn’t likely to increase this year – nor is a firm decision expected to be made anytime soon changing the laws – if the government does make a final decision, it probably won’t have a major impact in the sector in the near future, Sharwood noted.

“It’s a process. It’s going in the right direction and it’s a good idea. However, the hoards are not knocking at the door getting their cheque books open for when this happens. There’s not much of an appetite right now for Canadian assets,” he said.

The only local carrier that could benefit right off the bat is Microcell Telecommunications Inc., which could get another cash injection by carrier T-Mobile USA Inc. Verizon Wireless, which already owns 20 per cent of incumbent carrier Telus Corp., won’t be rushing out to invest any additional money, he added.

One of the loudest proponents demanding changes was carrier AT&T Canada, although even it conceded that the recommendations made, while significant, still have an enormous hurdle to jump to make an impact.

“It’s good news that the government can get it right. The next step is the government needs to pick up these recommendations and take action and that’s the next chapter,” said Chris Peirce, senior vice-president, regulatory and government affairs for the telco in Ottawa. Ultimately, Peirce said the company is satisfied that the government is making provisions to ensure that the company has a fair shot at profitability and growth.

The Committee’s report is available at