Foreign ownership restrictions limit telecom innovation: opponents

AT&T Enterprises Canada Co. is calling on Canada to eliminate its foreign ownership limits for telecom carriers, saying the country's rules are among the most restrictive among industrialized countries. The Canadian subsidiary of US-owned AT&T was one of several foreign-owned providers who filed comments this month with the Competition Policy Review Panel (CPRP) claiming Canada's ownership limits hobble competition and prevent the introduction of new services.AT&T claims in its submission to the blue-ribbon panel that Canada's telecommunications foreign ownership rules are the most restrictive of all Organisation for Economic Co-operation and Development (OECD) countries and limit the ability of foreign-owned telecom companies to compete. AT&T argues that Canada should eliminate the rules altogether, but as an interim step should remove foreign ownership restrictions for companies with less than 10% share of the telecommunications market as was put forth by the Telecommunications Policy Review Panel. "The removal of these restrictions would increase investment and telecom competition in Canada, promote increased deployment of new facilities, technologies and service innovations, bring lower prices and improved services, and stimulate broader growth in the Canadian economy," notes AT&T.The CPRP has been charged by the federal government to study Canada's current competition policies with the view to creating an environment in which Canadian companies can prosper on the international scene while also stimulating foreign investment into Canadian industries. As part of its review, the panel will study potential changes to the Competition Act and the Canada Investment Act. AT&T suggests that Canada look at recent World Bank studies for evidence that foreign investment restrictions in telecom hinder growth and infrastructure rollout, and restrict the rollout of new services for consumers. The World Bank reported in 2006 that the majority of foreign investment has gone to infrastructure deployments and putting restrictions on these investments only increases the cost of financing and can ultimately deter such investments altogether. Level 3 Communications, an international provider of optical fibre and other telecom-related services, notes in its comments that only a small portion of its 56,000 miles of long-haul capacity and 26,000 miles of metro networks in 125 cities in North America and Europe is located in Canada. Foreign investment in telecom needs to be revisited in Canada because the social and policy goals that led to the establishment of this national policy are now at odds with the new competitive market realities brought to bear by technological advancement. "Level 3 believes that in today's world the maintenance of the foreign ownership restrictions in Canada is hurting its economy and its citizens," the company writes in its CPRP submission. "Simply stated in response to the panel's question, Canada cannot be a world-leading destination for talent, capital and innovation as long as foreign ownership restrictions remain in place in such a vitally important industry as telecommunications." To illustrate the financial impact on telecom users, Level 3 says that it can offer an end-to-end service over its network to a large bank with offices in London UK and New York, yet it can't do the same if that bank has a location in Canada and wants to direct traffic from London to Toronto. The company must then allow the traffic to be terminated by a third-party - a facilities-based carrier in Canada - which increases the costs for Level 3 and its customer. "The simple economic truth is that its costs will go up once it hits the Canadian border," reads the Level 3 submission. MCI Canada owner Verizon Communications weighed into the debate questioning Canada's foreign investment restrictions when evidence suggests that there is a positive impact on a country's economic growth from foreign investment. The company also notes that Canada's rules run counter to its commitment to a greater reliance on market forces. "Such restrictions have little place in the increasingly globalized economy, especially if Canada intends to participate fully in that economy and to apply the principles of fair competition and non-discrimination," reads the company's submission. Verizon points to India as an example of the potential benefits to telecommunications from lifting foreign ownership restrictions. India's telecom sector is now the second fastest growing in the world following a move to raise foreign ownership limits from 49% to 74%. The above comments come from only three of the more than 140 submissions filed with the CPRP. Network Letter will continue to review the documents and report back with more reaction to the consultation in the next few days.

Foreign ownership restrictions limit telecom innovation: opponents

News | 01/22/2008 10:15 pm EST

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us