Telcos reject call to study foreign investment

Telcos and broadcasters generally agree that loosening Canada’s foreign investment rules will be good for their industries, but that didn’t prevent them from sparring at a conference on convergence and communications.

On one side were two startup wireless companies and Manitoba’s MTS Allstream, who called on Ottawa to quickly ammend the Telecommunications Act so at least telcos with a small percentage of the market can get more foreign investment than allowed now to compete with large incumbent carriers.

On the other were two executives representing Canadian content producers, who urged more study before changing legislation.

“This should be examined more carefully,” John Riley, president of Astral Television Networks, told the Toronto conference. Astral owns 19 specialty TV channels and 83 radio stations.

Some argue that investment rules can be changed for those who transport media, such as wired and wireless carriers, as opposed to content creators like broadcasters and broadcast distributors, he said. They would be overseen by regulators so Canadian content won’t be diluted, with foreign ownership rules under the Broadcasting Act left unchanged.

But with cableco Shaw Communications buying the CanWest Global TV network and the proposal by Bell Canada’s parent BCE Inc. to take over the CTV network, the separation between between carriers and broadcasters has been changed, Riley said.

As a result any changes to the Telecommunications Act may have implications on broadcasters and distribution companies, he said.

Similarly, Jay Thomson, vice-president of regulatory affairs at the Canadian Media Production Association, which represents some 400 independent producers, noted that recent licencing changes adopted by the Canadian Radio-television and Telecommunications Commission (CRTC) mean broadcasters and distributors will be able to shift money around among their channels or cable packages in ways that aren’t fully understood yet.

In addition, he said, while some wireless companies may be pure-play businesses, the odds are in the not to distant future they will broaden their platforms and buy Internet service providers. That could get complicated if the Supreme Court of Canada overturns a CRTC ruling that Internet service providers aren’t broadcast distributors, making them identical to BCE and Shaw.

However, Andrea Wood, chief legal counsel for Wind Mobile, said calls for more study were “extremely frustrating.”

“We have studied the topic at great length,” she said, referring to several federal studies on the telecom industy, plus a public consultation and parliamentary hearings on the Harper government’s three proposals to change the Telecommunications Act.

“How much more study is needed?”

Wireless telecommunications is a capital intensive business, she said. But unlike incumbent carriers such as Bell or Telus Corp., startups can’t raise debt financing because they don’t have a track record. Wind itself is unable to get debt financing “on any terms“ and relies on its foreign partner Orascom Telecom (which is about to be taken over by VimpelCom).

Wood said she “salivated“ on hearing Telus was able to raise $1 billion by offering five per cent interest to bond holders, which is impossible for a startup.

She was backed by Bob Boron, vice-president of legal affairs at wireless startup Public Mobile, who said new companies have an “accute need“ for foreign capital.

Among other things it would help get affordable, innovative and advanced telecommunication services to more Canadians, he said.

Chris Peirce, chief operating officer for MTS Allstream — the incumbent telco and broadcast distributor in Manitoba, and a competitor for busines services to Bell and Telus everywhere else — noted that since Ottawa limited foreign investment in telecommunications in 1993, outside money has dried up. AT&T, Verizon, Sprint and British Telecom were among the investors here. Not any more, he said. No one says its a good thing we chased them out, he added.

Generally, Peirce, Wood and Boron said their companies believe the government can separate increased foreign investment for carriers and keep broadcasters and distributors Canadian-controlled and regulated. At worst, they suggested, carrier-broadcasters may have to restructure so not to fall afoul of the suggested Harper government proposals. The Conservatives said at the time they only wanted to change investment rules for carriers, not broadcasters, as a way to protect Canadian content creators.

However, Riley said he isn`t calling for a broad study of foreign investment, just on the consequences on broadcasters and distributors of changes to telecom carriers.

The Conservatives proposed three options: a complete open door to foreign investment in telecom, lifting restrictions only on carriers with a small per centage of the market, or lifting the maximum equity investment foreign companies could hold in a Canadian carrier to 49 per cent from 46 per cent. 
With the calling of the federal election, the fate of those options will be in the hands of a new government.

The conference was organized by Insight Information