Opening foreign ownership for integrated telecom sector will impact broadcasting, Morrison tells committee

OTTAWA--The Friends of Canadian Broadcasting warned the Commons industry committee Tuesday that loosening the foreign ownership restrictions in a vertically integrated telecommunications sector would have adverse ripple effects on the Canadian broadcasting sector. “In this integrated communication business, changing the foreign ownership requirement for one sector—telecom—can be expected to impact the other sectors,” Ian Morrison, a spokesman for Friends of Canadian Broadcasting, a watchdog group for Canadian programming, told the House Standing Committee on Industry, Science and Technology. Morrison said all of Canada’s major telecommunications companies hold assets that are directly tied to broadcasting and Canadian culture--and made a detailed presentation of the vertical integration within Canadian telecom companies. Rogers Communications Inc., he noted, operates cable television, local and long distance telephone, Internet, wireless, broadcasting, and publishing services—as well as the professional baseball team Toronto Blue Jays. Shaw Communications, he said, operates cable and Internet services and will soon enter the wireless sector. The Shaw family’s common ownership and control also holds a voting majority in Corus Entertainment, which owns radio and specialty television services. Québecor Inc., Morrison added, controls the cable and internet provider Videotron, television station TVA, and is the publisher of Sun Media. BCE also controls Bell Canada, Bell Alliant, Bell TV, and has a 15 per cent stake in the major broadcaster and publisher CTVGlobemedia. “If BCE were foreign owned, it would become ineligible to control Bell TV,” Morrison said, referring to the foreign ownership restrictions in the Broadcasting Act. “Rogers would have to dispose of Rogers Media, and Rogers Cable, and so on. Disposing of these key broadcasting assets would destabilize the Canadian broadcasting system by reducing the investor pool, as well as ending synergies between the component parts.” The House industry committee is studying the potential impact of opening up foreign ownership in the telecom sector following the Conservative government’s throne speech commitment to “open the door” to foreign investment for the sector. The federal government is planning consultations on issue, but has not yet announced them. Steven Globerman, Kaiser professor of international business at Western Washington University, who also appeared before the committee Tuesday, said he agrees with the government’s intent to open up foreign ownership in the sector, but noted the implications for the broadcasting sector. “I agree completely with the panellists that it is very hard to arbitrarily separate discussions of the telecommunications industry from the broadcasting sector,” Globerman said. “I’m not sure unique in the sense that it obviates the basic wisdom that an open market with free-flowing capital, labour, and inputs of other sorts, is good for the industry in terms of improved efficiency, and ultimately good for consumers.” Richard Paradis, president of Le Groupe CIC, told MPs on the committee Tuesday that there is already enough competition in Canada’s telecom sector. He said government should do more to protect consumers in the face of the “excessive” profits made by incumbents like Rogers and Bell. “When you think about Rogers, think that every month they get $100 million in profit from their business operations,” Paradis said. “As any observer can see, except for the banks this is one of the most lucrative industrial sectors in the country, even during an economic downturn.” Paradis said more foreign ownership would benefit a handful of senior management officers and leave consumers out in the cold. “Would you put a major part of your personal wealth in the hands of foreign managers who have no legal obligations towards you?” he asked the committee members. But Rogers, Bell and Telus say they are spending significant capital investing in telecommunications infrastructure. Ken Engelhart, Rogers' senior vice-president of regulatory, recently told The Wire Report that "we've been investing like crazy." He said there have been "massive" increases in Internet speeds in the past year or so, and that all cable companies are now offering 50-100 Mbps services, and mobile wireless carriers are offering HSPA+ and 21 Mbps services. “It’s really impossible to predict what the future is going to be, but what we know is that the future is going to look a lot different from the past,” Globerman told the committee Tuesday. “Do we want to try to manage this technological change of process through regulatory infrastructure, where the primary goal is some arbitrary number for foreign ownership? Or do we want to be able to take advantage of any technology that is out there? We should be open to those possibilities.” On the question of cultural sovereignty, committee members Carole Lavallée, the Bloc Québécois heritage critic, and NDP MP Don Davies, expressed concern that foreign ownership the telecommunications sector would increase foreign content and decrease Canadian content. “The means of transmission don’t determine the content. The consumers determine the content,” Globerman said, responding to questions from MPs. He said broadcast distributors and telecom carriers would provide content for minority groups if they see it as profitable. “It an opportunity for new suppliers to find new uses for their capital to meet the needs of the consumer,” he said. Paradis countered that Apple has no obligation to deliver Canadian content on its online music store. Without those obligations he said Canadian culture would suffer. As part of the industry committee’s study on foreign ownership, Industry Canada officials told the committee last week that Canada has the most strict foreign ownership restrictions among Organisation for Economic Co-operation and Development (OECD) countries. jmigneault@thewirerport.ca

Opening foreign ownership for integrated telecom sector will impact broadcasting, Morrison tells committee

Broadcast | March 30, 2010

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