Debate but no news on foreign telco ownership

OTTAWA – The delegates were nestled all snug in their convention-centre chairs while visions of liberalized telecommunications regulations danced in their heads. But Santa Claus didn’t come to the International Institute of Communications Canada conference Tuesday.

Rumours had circulated that Industry Minister Christian Paradis would announce relaxed restrictions on foreign ownership of telecommunications companies during his end-of-conference speech. Some news reports said the restrictions would be lifted for companies with less than 10 per cent of the market, and the upcoming spectrum auction would cap the amount of spectrum any participant could buy.

But Paradis’ brief speech offered no policy announcements. “Some of you may have been looking for an early Christmas present today,” he acknowledged, “but I am afraid I am going to be a bit of a grinch.”

Paradis (pictured) said decisions on several issues, including foreign ownership, allocation of 700-megahertz and 2,500-megahertz spectrum for the auctions, tower sharing and roaming rules, are complex and interrelated and the government wants to take time to get them right.

The government has taken long enough to make up its mind, retorted Amit Kaminer, analyst at telecom industry research firm SeaBoard Group. “It’s about time to make a decision already.”

Kaminer said in an interview the government has two realistic options: remove foreign ownership restrictions on companies that hold less than 10 per cent of the market, or remove them altogether. A third option that has been discussed – raising the limit on how much of a Canadian telecom company may be foreign-owned from 46.7 to 49 per cent – isn’t a serious option in Kaminer’s opinion because it would not really change anything.

Opinion on the foreign ownership limit is divided, though, as a debate earlier in the day at the IIC conference showed.

Hank Intven, leader of  law firm McCarthy Tétrault telecommunications practice, who acted for the parent company of cellular startup Wind Mobile during the CRTC review of its Canadian ownership status, argued that support for Canadian content and culture depends on a web of regulations, including foreign ownership restrictions.

Intven was one of a three-member Telecommunications Policy Review Panel the government set up in 2006. He presented that panel’s position, favouring a phased approach.

Access to foreign investment could help smaller Canadian telecom competitors stay in business, Intven said, and,
and as the Telecom Policy Review Panel recommended, foreign ownership of telecom companies with less than 10 per cent market share should immediately be presumed to be in the public interest. But any change to the limits for larger carriers should await a broadcast policy review.

It would be difficult to change foreign ownership rules for large telecommunications companies while leaving them as they are for broadcasting distribution companies because the two groups increasingly compete with each other, said Intven, But foreign ownership of broadcasting companies might endanger the success of Canadian broadcast production.

Ottawa should consider all of Canada’s interests, he said, not just the prices of telecommunications services.

Lawson Hunter, A former senior official at Bell Canada and now counsel for law firm Stikeman Elliott LLP, where he heads the competition and antitrust group, argued existing restrictions are “way too protectionist” and contribute to a shortfall in Canadian productivity versus other countries.

He added that removing specific restrictions on foreign ownership of telecom firms would not necessarily offer foreign investors unlimited freedom to buy up Canadian telcos. “Even removing restrictions does not mean that Investment Canada would not continue to apply to this sector,” he said, referring to the review mechanism that this year blocked a foreign takeover of Potash Corp. of Saskatchewan.

Hunter believes Canadian companies can and must compete in world markets and Canada cannot continue to protect them. But Intven noted that major Canadian telecom companies have retreated from some foreign ventures and said Ottawa should first “increase competitive intensity” in Canadian telecom before encouraging national champions to pursue world markets.

Paradis’ talk of getting the decisions right suggests the government is being cautious. But Kaminer believes a decision has to come soon, and will probably mean at least some loosening of the foreign investment limits. It may not come in time for Christmas, though.


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Jim Love, Chief Content Officer, IT World Canada

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