Canada’s foreign ownership restrictions on telecommunications carriers are hurting Canadian satellite firms, according to the head of the company that operates the Anik and Nimiq satellites.
Dan Goldberg, chief executive officer of Telesat Holdings Inc., testified last week before the House of Commons Standing Committee on Industry, Science and Technology. He complained his company must compete with foreign firms who are not subject to the same rules as Telesat.
This, he said, is because Telesat must comply with the Telecommunications Act, which stipulates that Canadians must own at least 80 per cent of voting shares of facilities-based carriers.
Telesat operates 12 satellites including the Nimiq fleet, which is used by Bell Canada Enterprises (BCE) Inc.’s for its direct to home television service. It also operates the Anik series, first launched in 1972. In addition to Bell, Telesat also provides broadcasting services for Shaw Communications Inc.
In March, the government said in the throne speech it intends to allow more foreign ownership in telecom carriers but did not get into specifics. So the Commons industry committee has been hearing from witnesses over the past few weeks and plans to write a report on foreign ownership.
Industry Minister Tony Clement is scheduled to testify Thursday.
Goldberg testified last week that his firm competes in Canada with three foreign companies: Intelsat SA, Worldwide Inc.’s Satellite communications Systems unit and Eutelsat Communications SA.
Industry Canada, Goldberg said, has authorized more than 75 foreign-owned satellites to provide service from and within Canada.
“With exception of undersea telecom cables no other telecom service in Canada is subject to foreign competition from foreign carriers,” Goldberg said.
But it’s hard for Telesat to expand because it would have to borrow money and does not have the option of acquiring other firms through a share swap.
“Ownership restrictions impede our ability to grow through acquisition,” Goldberg said. “If we issue shares to acquire someone else we dilute our Canadian owners and place ourselves in violation of the ownership rules.”
Telesat was owned by Bell Canada Enterprises Inc. until 2007, when it was sold to a group of investors led by the Canada Pension Plan Investment Board, now Telesat’s principal shareholder. Telesat’s other main shareholder is Loral Space and Communications Inc.
Larger satellite firms have advantages because they can offer more geographic coverage, more capacity and are more likely to offer redundancy if one satellite fails, Goldberg said.
Several members of the Commons Industry Committee had questions for Goldberg.
Mike Wallace, the Conservative Member of Parliament representing the Ontario riding of Burlington, asked Goldberg to explain the rules Telesat has to follow versus those the foreign competitors must follow.
“Our competitors come in, they don’t have to pay Canadian licence fees, they don’t have to cover all of Canada, they’re not subject to the same rules we are at the CRTC,” Goldberg said.
Wallace interrupted him and asked: “They don’t face any of that?”
Goldberg replied: “Zippo. For a decade now, they’ve been authorized to come in and compete with us. We have 12 satellites. Industry Canada has licensed 75 foreign satellites.”
Also testifying was André Bureau, chairman of Montreal-based Astral Media Inc., which operates several radio and specialty television stations.
Bureau said the rules that apply to telecommunications carriers should also apply to broadcast distribution undertakings, or BDUs, which include cable and satellite television signal distributors.
Bureau said BDUs influence the content available to consumers because they decide which channels they will promote and offer.
“BDUs are not just pipes,” he said. BDUs make programming decisions.”
Other witnesses have made similar arguments.
Von Fickenstein also recommended the limit on foreign ownership be increased from 20 to 49 per cent. But he argued that having one rule for carriers and another for broadcasters is a bad idea because companies like Rogers Communications Inc. are carriers, BDUs and broadcasters.
But officials from two of the new wireless entrants argued in favour of easing the restrictions.
Alek Krsatajic, CEO of Public Mobile Inc., testified that allowing more foreign capital into the Canadian wireless industry will result in more competition. Public Mobile plans to launch this month.
Simon Lockie, chief legal officer of Globalive Communications Corp., agreed and said he was not recommending changes of the broadcasting act, because he described Globalive as a “pipeline.” Globalive owns Wind Mobile, which operates cellular service in Toronto, Ottawa, Calgary and Edmonton.
Globalive’s carrier licence was initially turned down by the CRTC due to the influence of its minority shareholder, Orascom Telecom Holding SAE.
DAVE, Globalive and Public Mobile were among the new entrants who bought spectrum in the Advanced Wireless Spectrum Auction in 2008.