Foreign ownership proposal must lead to concrete action by government

The recommendation by the National Broadband Task Force that the federal government review foreign ownership restrictions is good, but it should go further. A review will be useless unless actual changes are made to the limits, industry experts say. "The danger would be we're going to create larger monopolies between Bell and Telus at the expense of taxpayers," Franco Lofranco of Stream Intelligent Networks Corp told Network Letter. "That would be the danger if foreign ownership restrictions aren't lifted. I for one am not in fear of that." Like many newer telecom players, Toronto-based Stream finds its hands are tied by the ownership constraints. Lofranco, the company's VP business development, says planning is already underway for a more liberalized regime. "We have business models and plans that we're ready to execute on, if we could raise more funding in the private sector and we can't because of the foreign ownership restrictions," he explains. "There's only so much money, unfortunately, in Canada. And the big guys have a lot of money tied up in Bell and Telus. You've really got to go out of the country to raise the money. And they're just not willing to deal with all the hassles and headaches that AT&T had to go through to put their structure in place, to put the money into the country." Currently, non-Canadians are limited to 20 per cent of the voting capital of telecom carriers and to 33.3 per cent in holding companies. Similar restrictions apply to broadcasters. "The U.S. doesn't have any, most of the European countries don't have any foreign ownership restrictions on telecom," Lofranco notes. "Only Canada does and it hurts our ability to provide services in tier two and tier three cities." The task force suggested the government "conduct an urgent review" of the investment threshold to determine if the restrictions hinder competition. The wording is considered a compromise between those members of the committee who are comfortable with the status quo and those who want to ditch the limits. Gerry Wall is the president of Ottawa's Wall Communications Inc. He did work for one panelist, Adamee Itorcheak of Nunanet Worldwide Communications and provided support for the task force's working group on barriers and models. (He is also a former publisher of Network Letter.) He echoes Lofranco's sentiments. "If you look at how healthy competition is in Canada in telecommunications, you've got a lot of 'hanging on by the fingernails' competition and making it for a while," he notes. "But the long term prospects for many competitors is pretty dire and I think in that sense it really does speak to the need to open up foreign ownership." The incumbent telecom companies are not so willing to level the playing field. BCE Inc president Michael Sabia, who served on the task force, let his displeasure be known shortly after the panel released its report. "That one recommendation we find kind of a puzzle," he told reporters. "If you really think that adjusting the foreign ownership regime is going to help the buildout then you probably think that fish know how to ride bicycles." Certainly BCE is such a dominant player in the telecom market the question of foreign investment is a minor one. While it has sold off 20 per cent of its Bell Canada shares to SBC of San Antonio TX, there are enough investors in Canada to keep the blue chip stock in play. This gives the telco and its subsidiaries an advantage its smaller rivals don't have. The president of a company vying with BCE's division in the Atlantic provinces doubts changes to the foreign investment rules would affect the telco. "I think Aliant, being so much larger, has many ways to access cash, whether foreign or not," David Caldwell of Halifax's EastLink Telephone says. "I don't think it's a significant factor." He adds that his firm, which is the first cableco to offer telephony, does not have any investors outside the country and is not interested in obtaining any. Wall disagrees with the BCE approach on foreign investment. Last year his firm wrote a report commissioned by several telcos outside the Bell group that concluded the limits were outdated and onerous (NL, July 17/00). Nevertheless, he commends Sabia for the way he handled the situation. "I'm very glad he waited until the process was done," Wall states. "He'd signed off on the report and then was asked and he admitted on a personal level it was not his preference, he did not think it was necessary." Wall is impressed by the level on consensus achieved by the different players on the committee. "I guess it's fair to say nobody got exactly what they wanted." The ability of all to compromise is a testament to the members, he adds. The report will be sent to cabinet for consideration this fall. Any changes to laws and regulations would follow over the course of the next few months.

Foreign ownership proposal must lead to concrete action by government

News | July 3, 2001

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Foreign ownership proposal must lead to concrete action by government

News | July 3, 2001

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