Clement looking at legislative changes to increase foreign investment for telecom, satellite

OTTAWA--The federal government is considering legislative changes so that Canada’s telecommunications and satellite sectors can receive foreign direct investment. Following the Conservative government’s throne speech Wednesday, Industry Minister Tony Clement said he has been advised that legislative changes will probably be necessary to increase foreign investment in the sectors. “When you look at the satellite industry, when you look at the telecom industry, there are direct benefits that can occur to Canadians in terms of jobs and opportunity, increased innovation, increased competitiveness if we open it up,” Clement said. Clement would not say what legislative changes would have to be made or to which statutes—but said he wants to bring the telecommunications and satellite sectors under the Investment Canada Act. “We're basically adding two additional sectors to the act: It would be satellites and it would be telecommunications. But we're not changing the prior conditions to approval. Those would remain the same.” The Telecom Act provides a stricter test for foreign investment than the Investment Canada Act. Canada's telecom rules currently limit foreign investment to 20 per cent of the voting shares in the carrier and 33 per cent of the voting shares in the holding company. Clement added that the satellite sector had recommended a review of the foreign investment rules. Clement spoke about increasing foreign direct investment Wednesday after the Conservative government released its throne speech. “Our Government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need,” the throne speech said. Clement said that, under the new rules, any changes in company control would still face national security and net-benefit tests. “Any investments that would occur have to be in the net benefit of Canada and have to satisfy the test of in making sure that it is consistent with national security. So those caveats are still in place in our Investment Canada rules and will continue to be in place.” Last December, the cabinet overturned a decision by the CRTC that prevented the wireless carrier Globalive Wireless Management Corp. from operating in Canada because the company, owned in part by Egypt’s Orascom Telecom Holding SAE, did not meet Canadian foreign ownership rules. Critics say the Globalive decision set a precedent for foreign ownership in Canada, and effectively loosens the foreign investment rules within the telecommunications industry. Shortly following the throne speech, Ian Morrison, a spokesman for the watchdog group Friends of Canadian Broadcasting, said in a release, “Intended or unintended, this announcement creates a slippery slope that will likely lead to the sale of Canadian broadcasters to foreign companies … “If telecommunications and satellite companies, which are in direct competition with cable, are permitted to be owned and controlled by foreign interests, then cable monopolies will demand equal treatment and sell out to the highest bidder,” Morrison added. “Broadcasters will follow suit and several generations of hard work to maintain our cultural sovereignty through Canadian ownership and control of broadcasting will be lost.” When asked whether the changes could also apply to the broadcasting or newspaper sectors, Clement said: “We said telecoms and we said satellites.” Clement told BNN Wednesday that the federal government has been supporting the recommendations in the 2008 Competition Policy Review Panel, chaired by Lynton (Red) Wilson. He said the recommendations in the report "will definitely be part of the mix." The Wilson panel recommended that foreign companies be permitted to establish new telecommunications operations in Canada or “acquire an existing telecommunications company with a market share of up to 10 per cent of the telecommunications market in Canada.” Clement stressed the benefits of foreign direct investment in Canada, including job creation and innovation. “Canadian companies are even more aggressive overseas in investing as a result of there being open markets and foreign direct investment opportunities,” Clement told reporters on Parliament Hill. “RIM, through the BlackBerry, has 20 per cent of the world market. They have 50 per cent of the North American market. If we didn't have openness to trade and to investment in this country, why would we expect the United States or China or Russia or any other country to be open to our products?” Clement also told BNN that foreign competition in Canada, created through the Conservative government’s 2008 spectrum auction, has been good for the large incumbent telecom companies, “which have sharpened up their game.” The incumbents are offering new products and more choices for consumers, he said. “Competition works, it does create better value for consumers." Clement cautioned that he is still studying the prospect of legislative changes. “It's not going to be tomorrow that we come up with a bill. We're going to be studying the exact process by which we do that,” he said. “It'll be a fair, open, honest, transparent process.” Mark Goldberg, a telecommunications analyst with Mark Goldberg and Associates, said the government will need to find the right balance to liberalize the marketplace. While the throne speech singled out “telecommunications industries," many telecommunications companies also offer cable or satellite broadcasting services. “It really highlights the arbitrary nature of any distinction,” Goldberg told The Wire Report. “Any time you have a set of rules that don’t apply uniformly, the question is, ‘What’s the rationale for enabling one category of competitors a lower cost of operation than the others?’” Goldberg added that the government should be wary of operating in a vacuum and consider the potential for distortions in the marketplace with any decisions it makes on foreign ownership rules. MTS Allstream released a statement Wednesday supporting the government's move. "Elimination of the foreign investment restrictions is a key ingredient to building a truly competitive digital economy characterized by the early offer and adoption of new technology across the economy," Chris Peirce, chief corporate officer at MTS Allstream, said in a release. "We have consistently supported liberalization, most recently recommended by the Wilson Competition Policy Review Panel." The throne speech also said the government will implement a cyber-security strategy to “protect our digital infrastructure”—for which more details are expected to be released in Thursday’s federal budget—and to strengthen Canada’s copyright law. The speech said the government will give police “investigative powers for the 21st century,” which observers interpret as support for so-called “lawful access” legislation to help police with online investigations. The government introduced lawful access legislation in the previous Parliament. news@thewirereport.ca

Clement looking at legislative changes to increase foreign investment for telecom, satellite

News | March 4, 2010

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