With the federal government wrestling behind closed doors on how to liberalize investment in the telecom industry, a consultant is urging Ottawa to let foreign investment pour in “unabated and without restriction.”
“If Canadians deserve the best telecommunications industry in the world, a goal many incumbents have heralded, the only sure way of accomplishing this is to allow foreign companies to invest in Canada and to bring with them the capital, ideas and know-how needed to keep the competitive flames burning brightly,” says the report issued Monday by the Montreal-based SeaBoard Group.
The report comes as Ottawa is mulling over almost 100 submissions from industry and citizens to three options put out in June by Industry Minister Tony Clement.
At the time Clement said the government’s intention is to chose one of the options for the fall sitting of Parliament:
–What SeaBoard calls making minor adjustments to the current law allowing more foreign investment but ensuring Canadians maintain control of telecoms;
–Removing restrictions on all but the largest telecom companies;
–Removing all barriers.
For years the country has limited foreign control in telecommunications, but the report says “the time has some to put our xenophobia behind us.
“It is time to welcome foreign participation in the Canadian telecoms marketplace. The benefits would be many, the drawbacks few. Moreover, we urge the government to move quickly. The debate on the merits of foreign ownership in telecommunications has gone on too long, and key innovations in the sector – and the smaller companies that might benefit from the easing of
the conditions of investment – have been hampered both by the current rules and by the uncertainty.”
The uncertainty was created last fall after the Canadian Radio-television and Telecommunications Commission (CRTC) ruled Toronto-based Globalive Wireless Management Corp., the parent of Wind Mobile, was controlled by its largest investor, Egyptian-based Orascom Telecom Holdings.
In December, 2009 the federal cabinet over-ruled the commission, but said the decision wasn’t a precedent. Nevertheless, it ordered a review of the telecom foreign ownership and control rules.
Meanwhile startup Public Mobile launched a Federal Court challenge, arguing the cabinet decision is unfair to other wireless carriers. A hearing date hasn’t been set.
Under the Telecommunications Act, foreign companies can only hold 20 per cent directly of a telecom operator and no more than 33 per cent of the holding company, effectively a maximum of 46.7 per cent.
But, SeaBoard argues, while the policy has created a stable industry, it is also one close to atrophy.
“Without the hot, competitive breath of external interests, Canada’s marketplace is being managed for income and market share stasis amongst the incumbent Canadian interests, rather than for the rewards that innovation could bring,” the report argues.
“We wrap ourselves in the Canadian flag and proclaim communications a national asset — and then make pragmatic exceptions as needed,” complains the report. BCE Inc.’s Bell Canada, BCTel (the forerunner of Telus Corp.) and Quebec Tel benefited from such exceptions, the report notes.
Some carriers object to changing the Telecommunications Act, and not the Broadcasting Act, which also has foreign ownership limits for broadcasters – that would include BCE, with its impending purchase of CTV, cableco Shaw Communications Inc. with its impending purchase of Global TV, as well as Rogers Communications Inc., a cable company that also sells landline and phone service.
Bringing in the Broadcasting Act is a stalling tactic, retorts SeaBoard.
The report looks at other objections raised in the submissions to the government.
There are arguments that foreign-dominated telcos will prefer to invest in urban areas, leaving less populated regions of the country behind in technology. “Codswallop,” answered SeaBoard. Companies don’t invest because they want to help people, but to make a return. What rural coverage we have now is because Ottawa gave telcos incentives, the report says. Therefore, a foreign-controlled telco would do the same.
SeaBoard is headed by managing director Iain Grant.
It is believed the government wants to have any foreign control changes in place before the next wireless spectrum auction, to make it easier for smaller wireless companies to raise money for bidding.
The auction for spectrum in the 700 MHz bands, will be hotly contested because those frequencies are ideal for the next generation of wireless technology called LTE.
That spectrum, mostly held by conventional TV broadcasters, won’t be freed until at least Aug. 31, 2011, when they have to shift to digital. However, the CBC has already said it won’t meet that deadline.