Rogers breaks with pack in supporting foreign ownership limits

Rogers Communications Inc. is advocating no change to Canada's current rules limiting foreign direct investment in telecommunications - the only large communications service provider to support the status quo. In its comments to the Competition Policy Review Panel, the media and communications conglomerate contends the current rules limiting foreign investment restrictions in telecommunications are relevant today and will continue to be for the foreseeable future. It argues that the current rules have had no negative impact on either competition or productivity. "Over the past 15 years, the Canadian telecommunications market has experienced an explosion of competition from Canadian companies transforming the sector from monopoly supply to a vibrant competitive marketplace with multiple local, long distance and Internet wireline providers," reads Rogers' submission. In fact, Canada is a world leader, Rogers says, with wireline telephone service available to 99.5% of the Canadian households with a penetration rate of 98%. "Canada leads the G8 in high-speed Internet penetration. Canadian broadband penetration is substantially ahead of countries such as the United States, Australia and the United Kingdom. Canada ranks 7th in penetration in the OECD and number one in terms of penetration when adjusted for population density." Comments from MTS Allstream Inc., Telus Corp. and Shaw Communications Inc. are in start contrast to those of Rogers. MTS Allstream, an ILEC in Manitoba and a CLEC in all other parts of the country, says that times have changed and the need to maintain limits on foreign direct investment in telecommunications firms no longer exists. Telus Corp. agrees, noting that Canada maintains one of the most restrictive foreign investment regimes of the Organisation for Economic Co-operation and Development's (OECD) member countries. Current restrictions have, in fact, hurt Canadian telecom companies, according to MTS Allstream. "The restrictions have been detrimental to the growth of competition, innovation and productivity in Canada's telecommunications markets, and have been an obstacle to the creation of leading-edge Canadian multinationals that can play a major role in the global market," reads the company's submission. Shaw also agrees. "Restrictions on foreign investment impair the ability of Canadian communications companies to attract the capital needed to extend broadband services to all regions of Canada, to create new media content and to compete internationally. It also increases the cost of capital to Canadian communications companies and the cost of services to consumers," the company writes to the panel. MTS Allstream highlights the impact of the unimpeded free flow of capital on the oil and gas sector as evidence of what can happen in telecommunications if the current foreign investment rules are eliminated. In the 1970s, more than three-quarters of the sector was foreign controlled but this dropped dramatically after the government dissolved the Foreign Investment Review Agency. Currently about 50% of the sector is owned by Canadian firms that can "freely access global capital," adds the Manitoba ILEC. Telus notes the rules were initially created to insulate Canadian firms from being purchased or controlled by foreign entities. "However, the best insulation against that occurring is a fully valued stock price, and avoids the detrimental effect of the foreign investment restrictions that limit the formation of joint venture initiatives with foreign firms and impede technology transfers and other unique partnerships. These are mechanisms through which domestic firms become more innovative and competitive internationally," writes Telus. Bell Canada chose not to take a position on the foreign investment in telecommunications issue. The ILEC is currently in the process of being purchased by a consortium of investors led by the Ontario Teachers Pension Fund, but which also includes two US-based private equity investors.

Rogers breaks with pack in supporting foreign ownership limits

News | January 31, 2008

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