All signs point to upcoming review of telecom foreign ownership rules

Industry Canada is proposing to amend the Telecommunications Act and review foreign ownership restrictions across several industry sectors as part of the federal government’s pending Innovation White Paper. The government will have further reason to open those discussions when it receives an urgent call next month from the National Broadband Task Force to review the foreign ownership cap on telecom companies and broadcast distributors. The recommendation will be one of several included in the task force’s final report, expected the week of June 18. Insiders say a majority of the 35-member task force voted in favour of a motion calling for an "urgent review" of the restrictions. Several industry executives on the group failed to garner enough support for a motion that would have recommended that the ownership limits be eliminated. Considering the diverse make up of the task force – it includes industry stakeholders, digital content producers, rural and Aboriginal representatives, the non-profit sector, educators and governments – its recommendation for a review of the ownership limits will carry more weight than any one company or industry association. CLECs, long distance carriers and wireless competitors have long called for an easing, or the outright removal of the rules, saying such a move would improve their access to capital and market valuations. At a panel discussion last year, former Clearnet Communications president George Cope (now president of Telus Mobility) estimated that his company’s capital costs would drop by 30 per cent if the foreign ownership ceiling were removed (RoW, June 13/00). Access to more capital needed to expand networks Lobby efforts have intensified lately as carriers face the prospect of trying to raise hundreds of millions of dollars in capital to expand their networks and service offerings. Michael Helm, director general, telecommunications policy branch at Industry Canada, says whether or not a review goes ahead will be decided by Industry minister Brian Tobin. "If indeed this recommendation comes through as expected, then the minister will decide, ‘forget it, we’re not going to do this," or, ‘let’s look into it’. If he says look into it, then we’ll set up a process to look into it," says Helm. He adds that the impetus for changing the rules is coming more from industry than government. "My guess is that money’s hard to come by in this sector now. Two or three years ago you could raise your hand and say telecom or Internet or any of those magic words and you would be buried in mounds of cash," says Helm. "It isn’t that way now. So people are probably looking a lot more closely at what would have to be changed to give them easier access to capital. I expect that’s why there’s more discussion about it now." As for Industry Canada’s line item in the list of Innovation White Paper proposals, Helm stresses that the document is a "work in progress", and that any reference to reviewing foreign ownership rules isn’t specific to telecommunications. "Foreign investment is a big file within Industry Canada. We’re constantly looking at ways to make Canada a more attractive place for investment…," he says, adding, "In the context of the whole foreign investment file at Industry Canada, foreign investment in telecom carriers is a pretty small chunk." Funding may be allocated Documents obtained by Decima Publishing Inc reveal that the government’s upcoming White Paper on Innovation, expected by late June, may include funding for such a review (see story this issue). In a draft document, Industry Canada requested $54 million over four years to "create a seamless Can-US border (common standards and physical infrastructure); improve regulatory frameworks, including a review of foreign ownership restrictions." Branding Canada is also identified as a priority. Industry Canada had also put in a request for $32 million over five years to amend various pieces of legislation, including the Copyright Act, the Competition Act and the Telecommunications Act. Any change in the foreign ownership limits would require amendments to the Telecommunications Act. The line item also cites the development of new standards and voluntary codes "to enhance the effectiveness of existing regulatory approaches…" If Tobin acts on the Broadband Task Force’s recommendation and launches a review of the restrictions, Helm says the minister will also decide what type of review is needed. "We, departmental officials, would present the minister with three or four options of how a review might go, and there would be some quick ones and some slower ones…. There’s a range of options," he says.

All signs point to upcoming review of telecom foreign ownership rules

News | May 28, 2001

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