Ottawa launches telecom foreign investment consultation, suggests changes to broadcasting

OTTAWA—Industry Minister Tony Clement announced a consultation Friday on opening Canada’s telecom sector to foreign investment—but to some surprise the discussion paper also proposed an option to increase the foreign investment limits in broadcasting. In the paper, Clement proposed three options for consideration. One of them follows up on a recommendation from CRTC chairman Konrad von Finckenstein, who called for an increase the foreign investment limits in the broadcasting and telecom sectors. Right now, those limits are set at 20 per cent in the operating company and 33 per cent in the holding company. In the first option, the consultation paper suggests increasing each of those limits to 49 per cent. Clement previously stated that he had no intention to amend the Broadcasting Act, but the foreign investment limits in the broadcasting sector can be increased through a new cabinet direction to the CRTC. The government said in the document that it could amend an existing cabinet direction to the commission and increase the foreign investment levels for “qualified corporations” operating in the broadcasting sector. The increase to the limits in the telecom sector would be made through an amendment to the Telecommunications Act. Under option one, the control in fact test—which examines powers a foreign entity can exert over a company outside traditional ownership structures, such as control of debt or non-voting but participating shares—would remain unchanged. In a second option, the consultation paper proposes to exempt small industry players and new entrants from foreign investment limits if their revenues amount to less than 10 per cent of the total telecommunications market revenues in the country. The proposal is consistent with a previous recommendation in the 2008 report of the Competition Policy Review Panel. The consultation paper said that, according to CRTC data, Canadian telecommunications revenues in 2008 amounted to $40.3 billion, so that a 10-per cent threshold in 2008 would have been $4.03 billion. A third option in the paper suggests that the government repeal section 16 of the Telecommunications Act to remove the foreign investment restrictions for all telecommunications common carriers. Jacqueline Michelis, a spokeswoman for Bell Canada, said the company is studying the consultation paper, referring to Bell’s previous position that it wants the same rules applied to all carriers. Earlier this week, Mirko Bibic, senior vice president of regulatory and government affairs at Bell, said the company supports von Finckenstein’s proposal to increase foreign investment in broadcasting and telecom to 49 per cent. But small carriers like Wind Mobile have criticized von Finckenstein’s proposal, saying it would not give companies access to enough foreign capital. Jan Innes, a spokeswoman for Rogers Communications Inc., said the company will be participating in the consultations, but for now the company is reading the discussion paper and calling for a “symmetrical” system in which incumbents and small players are treated fairly. Industry Canada is accepting comments on the discussion paper until July 30, and will post comments following the deadline. As part of the consultation, Industry Canada also asked for comments on: the conditions necessary to maximize potential benefits of reform for consumers; whether there are barriers to investment in the telecommunications industry that affect innovation and competition; how any changes to the foreign investment restrictions in the telecom sector will affect incumbents and new entrants; and whether increasing foreign direct investment in the telecom sector has the potential for unintended consequences. Von Finckenstein has repeatedly called for amendments to both the telecom and broadcasting acts to address media and technological convergence. He argues that piecemeal approaches—such as starting with amendments to the Telecom Act only—would be ineffective in the digital age. His proposal to limit foreign investment to 49 per cent would retain Canadian control of broadcasting and telecom companies at a minimum of 51 per cent. In an interview, Ian Morrison, a spokesman for the Friends of Canadian Broadcasting, did not say that he prefers one option over another, but said control over companies should remain in Canadian hands. “We want Canadian ownership and control. Sections 7 and 16 of the Telecommunications Act are of bedrock importance. This is important to Canada’s sovereignty and identity and it is not something we would negotiate on,” Morrison said, but added: “51 per cent Canadian control is fine.” sdoyle@thewirereport.ca

Ottawa launches telecom foreign investment consultation, suggests changes to broadcasting

Broadcast | June 11, 2010

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