CANADIAN PARLIAMENTARY UNIT URGES FOREIGN INVESTMENT IN TELECOM
The Canadian govt. should “remove entirely” the effective 46.7% foreign ownership limit, “including the requirement of Canadian control,” from the country’s phone, cable and satellite TV industries, a parliamentary committee said in a release accidently posted briefly Fri. on the govt. Website. Under current rules, non-Canadian companies can’t hold more than 20% of voting stock in telco and cable or a 33% stake in a Canadian holding company.
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In Nov., Industry Minister Allan Rock asked the Industry, Science & Technology Committee to review telecom restrictions only, since broadcasting was overseen by Canadian Heritage Minister Sheila Copps. Copps, a candidate for Liberal party leadership in the country’s Feb. 2004 federal elections, had expressed opposition to dropping the restriction. But the committee said it couldn’t review telcos in isolation: “Because of technological convergence over the past 2 decades, telecom common carriers and broadcasting distribution undertakings -- that is, cable TV, satellite TV and multipoint distribution systems -- can no longer be separated on the basis of their underlying distribution networks or the services they provide.” Committee Vice Chmn. James Rajotte confirmed the decision to level the playing field between competing sectors: “We decided they should be, just because of the convergence, of the competition between the two. It wouldn’t be fair to the cable companies to just do that to the telcos and not to them.”
While some groups were reserving comment until the report was officially filed in the legislature, cable companies reacted favorably: “It at least treats the cable industry and the telephony industry equally, which we've always believed that they should be. If it ever made it into legislation, and that’s not an immediate thing that might happen, it would give both industries equal footing on things like financings,” said Rogers spokeswoman Jan Innes.
The committee agreed lifting the ownership rules should attract investment to the country’s telecom infrastructure: “Most telecom companies seeking outside sources of capital for investment purposes that appeared at the committee’s hearings claimed to have encountered problems trying to raise capital in the past decade,” the committee said: “They experienced either reduced access to capital, or higher cost of capital, or both.” The committee dismissed fears of loss of Canadian content: “The committee believes that carriage and content are distinct entities, and that distribution can be separated from programming undertakings.”
The report, Opening Canadian Telecommunications to the World made 4 major recommendations: (1) The govt. should remove Canadian ownership requirements, including of Canadian control, for telecom carriers. (2) The govt. should ensure changes in telecom ownership rules were applied equally to cable and satellite TV companies. (3) The Telecom Act should be amended to require a mandatory 5-year review to keep it up to date. (4) The govt. should appoint a special parliamentary committee to “undertake a comprehensive review” of the way telecom and broadcasting are regulated in Canada.
Changing a regulatory structure that now favors telecom giants Bell Canada and Telus should encourage healthy competition, said Bill Linton, pres. of Sprint Canada’s Call- Net Enterprises: “Without an updated telecom policy that clearly encourages competition, foreign ownership is a complete nonissue. Leading with such a review would be like trying to fix your 4 flat tires on your car by filling up the gas tank. Until we have a level playing field and healthy competition, there will be little investment.”
AT&T Canada CEO John McLennan agreed removing ownership restrictions was “a step in the right direction,” adding that “without competitive neutrality, you can’t have competition. It can’t sustain itself.” But while McLennan urged the govt. to “act now,” Linton cautioned: “It is essential that we don’t simply throw another country the keys and say, ‘I'll drive in the back.'”
Although the committee stopped short of applying its recommendations to broadcasting, which isn’t governed by Canada’s Telecom Act, it did recommend that the govt. review: (1) The regulatory framework of both telecom and broadcast. (2) The organization of Industry Canada and Heritage Canada. (3) The jurisdiction, role and mandate of the federal regulator for telephone and broadcast. (4) Ways to facilitate broadband deployment in rural communities.
A Canadian Heritage committee is expected to recommend in a report due out this summer that foreign ownership limits remain for broadcasters to protect Canadian culture.