Access to capital or selling out to foreign players? Ownership debate continues

Discussions surrounding current foreign ownership limits for telecom and broadcasting companies continue unabated as both sides of the debate remain divided on the benefits to and impact on Canadian common carriers. While proponents of relaxing current limits believe Canadian companies would gain access to more foreign capital, those opposed to the idea say loosening rules simply provides an easy way out for struggling companies. In the context of this divisive debate, communications lawyers and policy-makers from across the country gathered at the New Developments in Communications Law and Policy Conference in Ottawa April 26-27 to discuss the foreign ownership file and others. In the plenary session, Chris Taylor, an Ottawa-based communications lawyer, suggested that two likely scenarios would result from the relaxing of current limits. On one hand, he said, foreign companies would invest in Canadian telecommunications service providers, giving these carriers the financial wherewithal to operate beyond survival mode. On the other hand, however, foreign companies, most likely American ones, would simply buy out smaller Canadian carriers. Taylor dismissed the first scenario, saying it is unlikely that foreign companies would invest additional capital in Canadian carriers given the current economic climate in the telecom market. He noted that it is more likely that American carriers would enter the Canadian market by purchasing Canadian operators. Bernard Courtois, chief strategy officer at Bell Canada, echoed that sentiment in dismissing the first possible outcome of relaxed foreign ownership limits. Given the current state of the telecommunications industry, there doesn’t appear to be a flood of capital waiting to enter the country, he said during a later session titled Foreign Ownership Policy: New Developments. He believes that there is currently no political appetite to change the rules. Courtois agreed with Taylor’s assessment that foreign firms would buy Canadian ones. Those companies looking for the all-out removal of foreign ownership rules are really looking to sell out to international interests, Courtois said. Taylor raised three significant questions as to the impact of increasing foreign ownership limits. Would the relaxing of current foreign ownership rules really bring in a lot more investment into Canada? If there were investment, how much would come in and for how long? How important would Canadian operations of a larger American entity be? André Bureau, chair of Astral Media, wondered if the foreign ownership debate shouldn’t be looked at from a different point of view. "Are the government’s public policy objectives still valid in today’s communications environment" to open up the doors to the potential influx of foreign investment? he asked during his rebuttal of a presentation by McCarthy Tétrault legal counsel. In a larger context, the debate on loosening foreign ownership rules is being driven by telcos’ search for more capital. While Bureau admitted that new entrants do need and should have access to more capital, he doesn’t believe that changes to the current regulatory regime will work. Canada’s existing telecom and broadcast landscape is filled with cross-ownership of telecom, broadcasting, and content companies. It is because of this environment that increased levels of foreign ownership shouldn’t be allowed, Bureau said. More specifically, it is the indirect control over programming rights that worries Bureau. There is already a close relationship between carriage and content, and broadcast distribution undertakings (BDUs) still play an indispensable role in Canadian programming services, he explained. If more foreign investment is allowed in a consolidated environment or permitting non-Canadian control, "things will start to unravel," Bureau said. If foreign investment is allowed in Canadian BDUs, they should not be allowed to have a controlling interest in programming undertakings or the country risks losing its checks and balances, he stated.

Access to capital or selling out to foreign players? Ownership debate continues

News | April 30, 2002

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