Let foreign telecom firms in, says Competition Review Panel

The Competition Policy Review Panel (CPRP) says Canada should allow foreign telecommunications firms to establish Canadian beachheads or acquire smaller service providers - those with less than 10% market share - as a first step to easing restrictions on foreign direct investment in Canada's communications sector.In its landmark report to the federal government, the CPRP reviewed competition policies, including restrictions on foreign direct investment, the Investment Canada Act and the Competition Act, all with the goal of giving Canada the tools to compete in the globalized economy.Canada has already implemented some new policies and directions that run counter to the need to keep foreign investment restrictions in telecommunications intact, noted the panel. The policy direction to the CRTC and the decision to set aside spectrum in the ongoing Advanced Wireless Services (AWS) spectrum auction for new entrants are two examples, according to the CPRP."In this context, it appears incongruous to retain existing foreign investment restrictions that prevent Canadians from capturing the full benefits of these and other regulatory policy changes for telecommunications and broadcasting industries," reads the report, Compete to Win.The CPRP recommends the government go slow in removing foreign ownership rules for telecommunications - an approach advocated by the Telecommunications Policy Review Panel in its own report more than two years ago."In the first phase, for a period of five years, foreign investment would be permitted on a Greenfield basis or by acquiring an incumbent Canadian telecom company with a market share of 10% or less. In a second phase, beginning at the end of the five-year period, there would be a broader liberalization of the foreign investment rules for both telecommunications and broadcasting," recommends the panel. "With respect to broadcasting distribution, in this second phase, liberalization would apply to the carriage side of broadcasting distribution, while broadcasting policies would focus any necessary Canadian ownership restrictions on ‘content.'"The full recommendation is below.Keep cultural industries separateThe report also recognizes the importance of maintaining sovereignty over Canada's cultural industries. However the panel also notes that openness to more foreign investment might be good for the cultural sector. "Forgone competitive intensity may increase prices and reduce choice as well as incentives to innovate and seek out new markets. New technology and increased international exposure create new opportunities for Canadian cultural businesses in global markets, and the current Canadian cultural policy framework will need to be updated in light of this new economic reality," states the report.While the panel suggests a new way of looking at foreign investment in the cultural sector, it refused to up the limit of $5 million that triggers an investment review by Canadian Heritage.Success of Canada's cultural industries are at risk, it contends, if the country doesn't adapt to the new economic and technological realities. "Maintaining a ‘closed' regulatory system for the creation, distribution and consumption of cultural products is no longer feasible in the Internet age. Accordingly, Canadian cultural policies require urgent and systematic review in light of the changes wrought by new technology," reads the report.As a whole, the CPRP notes that Canada needs to move forward with new policies and objectives that reflect the new economic realities a variety of Canadian industries. "New and more aggressive competitors are emerging, and new technologies are reshaping entire industries," reads the preface of the report. "As a panel, we have no doubt about the need to adapt and move forward."In a market environment that is disciplined by market forces rather than regulation, the Competition Bureau of Canada will become more important enforcement mechanism particularly as greater wholesale deregulation takes place. This wasn't lost on the panel as it recommended some fine tuning to the Competition Act to make it more relevant in today's marketplace. Recommendation 14 (f) stated that the Competition Tribunal should be given the authority to levy administrative monetary penalties (AMPs) of up to $5 million on companies that run amok of the abuse of dominance provisions.The bureau recently released final guidelines on the abuse of dominance in telecommunications about 18 months after issuing draft guidelines.Recommendation #11Consistent with the Telecommunications Policy Review Panel Final Report 2006, the federal government should adopt a two-phased approach to foreign participation in the telecommunications and broadcast industry. In the first phase, the Minister of Industry should seek an amendment to the Telecommunications Act to allow foreign companies to establish a new telecommunications business in Canada or to acquire an existing telecommunications company with a market share of up to 10 percent of the telecommunications market in Canada. In the second phase, following a review of broadcasting and cultural policies including foreign investment, telecommunications and broadcasting foreign investment restrictions should be liberalized in a manner that is competitively neutral for telecommunications and broadcasting companies.

Let foreign telecom firms in, says Competition Review Panel

Broadcast | June 26, 2008

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