Plan to loosen foreign ownership for satellites to benefit investment, innovation

The Conservative government’s plan to remove foreign ownership restrictions for the Canadian satellite sector will help Canadian companies compete internationally, but the policy change isn’t likely to impact consumers, telecom experts say. The federal government announced in its 2010 budget last week its intention to remove foreign ownership restrictions for the satellite sector. The government has not clarified its precise plans, but a Finance Canada official told The Wire Report that the change will affect companies that own and operate satellites at a Canadian-licensed orbital position. Legislative changes to remove the foreign ownership restrictions for the sector are expected to be included in the government’s budget implementation legislation, which could be introduced in Parliament the week of March 15. Canadian satellite companies are currently subject to the Telecommunications Act and the Radiocommunication Act, and the same rules as telecommunications companies such as Rogers Communications, BCE Inc. and Telus Corp. The satellite services market has been open to foreign competition since Canada signed the 1998 WTO Agreement on Basic Telecommunications. As a result, non-Canadian companies can offer satellite services to Canadian companies seeking to provide television, radio, telephone or broadband satellite products. But foreign companies still cannot obtain spectrum licenses to launch and operate satellites in Canadian orbital slots, or provide satellite-based carriage services to Canadians through direct-to-home technology. “We have competitors that are not Canadian companies, whose satellites are licensed by other countries—licensed by the United States, by Luxembourg, by France—but those satellites licensed by non-Canadian entities are absolutely free to sell satellite services in Canada,” Telesat president and CEO Daniel S. Goldberg said in an interview. “Our market is the only telecom market in Canada that has been open to foreign competition.” Lynn Meahan, a spokeswoman for Industry Minister Tony Clement, told The Wire Report in an email that Industry Canada will be announcing plans to remove the restrictions in the satellite sector as a first step toward a broader liberalization of the foreign ownership laws for the telecom sector. Satellite service consumers are unlikely to see a shift in pricing or product offerings. Removing foreign ownership restrictions for Canadian satellite owners does not affect programming such as Canadian content because companies like Bell ExpressVu or Shaw Direct, that offer satellite distribution services, must obtain broadcasting licences. The objective is instead to allow Canadian satellite owners to expand their domestic and international business with the help of foreign capital. “The first step is only for satellite services. The consumer won’t necessarily directly feel the impact of that necessarily, nor will the major content providers or telecommunications providers be hit by it,” Maher Yaghi, a telecom analyst at Desjardins Securities, said in an interview. The large satellite television distributors he has contacted do not expect the removal of foreign ownership restrictions to affect their services in the short-term, Yaghi said. “I would not just conclude this is only about satellite changes,” Yaghi added. “I think the government is going at it step by step. Further down the road we can see implications for other sectors like cable, wireless and telephony,” he said in an interview. Goldberg said the government may have eased the rules for satellites before proceeding with the telecom sector because satellite owners are not responsible for the content they broadcast. According to the Satellite Industry Association’s (SIA) submission to the 2008 Competition Policy Review Panel, removing the remaining foreign ownership restrictions will require both policy and legislative changes. “SIA … recommend immediate removal of all remaining citizenship, ownership and control restrictions found at sections 9 and 10 of the Radiocommunication Regulations and section 16 of the Telecommunications Act. Consequential amendments and/or repeal of section 10.1 of the Radiocommunication Regulations, subsection 22(1) of the Telecommunications Act and the Canadian Telecommunications Common Carrier Ownership and Control Regulations would also be required, since the legislative foundation underpinning these provisions will have been eliminated,” the submission said. In its submission, the SIA said removing foreign ownership restrictions is likely to result in “increased competition across all segments of the satellite industry,” “maximizing the availability of capital sufficient to foster increased investment in the Canadian satellite industry,” and “increasing the efficiency, productivity, innovativeness, and competitiveness of the Canadian economy in general, as a result of the availability of alternative suppliers of satellite services.” Goldberg said the current foreign ownership restrictions put Canadian satellite companies on an uneven playing field with foreign companies. “ completely unfair. To its credit, the government has recognized this and I hope it will take action,” he said. “We’re competing with satellite operators from all around the world, including within Canada. It’s really important that our regulatory framework be no worse, at a minimum, than the regulatory framework our competitors are subject to, and they are not subject to these sorts of restrictions in terms of who their owners can be.” Goldberg said competition ultimately benefits consumers, and removing this last barrier for Canadian satellite companies will encourage innovation. “If you place us on a level playing field, we’ll be able to grow and attract capital in the same manner as our foreign competitors, which will make us more competitive in the market,” he said. “This means we’ll be able to make additional investments in our satellite fleets, and we’ll be able to innovate more. At the end of the day, by having newer, higher-power satellites and more innovative services, I believe Canadian consumers will benefit.” Canadian satellite operator Ciel Satellite Group and mobile satellite communications services developer and supplier SkyTerra (Canada) Inc. declined to comment for this article. kfournier@thewirereport.ca ---- CORRECTION: Due to an editing error, an earlier version of this story incorrectly attributed a quote to Mark Goldberg of Mark Goldberg and Associates. Mark Goldberg was not interviewed for this story.

Plan to loosen foreign ownership for satellites to benefit investment, innovation

Broadcast | March 12, 2010

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