Experts, critics, surprised by budget’s announcement on satellites

Experts and opposition critics were surprised Thursday by the government’s plan to “open the doors” on foreign ownership—but only to the Canadian satellite sector. In its 2010 budget, released Thursday, the Conservative government announced that it intends to increase competition in the telecommunications sector by removing foreign ownership rules on satellites. But in the government’s speech from the throne Wednesday, the government announced it would “open the doors” to venture capital and foreign investment in the telecommunications and satellite sectors, leading experts to speculate that the rules would be changed for the mobile wireless market. Telecommunications strategist Eamon Hoey of Hoey Associates said the government’s focus on satellites is surprising. “They certainly held out that they were going to do a lot more,” he told The Wire Report in an interview. “To merely say it’s in satellite, is a real, significant disappointment. Consumers should be alarmed … there have been so many reports saying, ‘We need to remove these foreign investment rules,’ but they didn’t have the guts to act on it.” The 2010 budget says that the government “is committed to ensuring that Canadians can benefit from increased competition and investment in the telecommunications sector,” but the document includes no specific measures relating to the ownership of mobile wireless companies. " invests in a limited number of new targeted initiatives to build jobs and growth for the economy of tomorrow, harness Canadian innovation and make Canada a destination of choice for new business investment," Finance Minister Jim Flaherty said Thursday. With a $54-billion deficit this year ending March 31, the government was not in a position to spend new money. The budget instead identified $17.6 million in savings over five years and held to a second year of stimulus spending, at $19-billion. Industry Minister Tony Clement said Wednesday the satellite sector had recommended a review of its foreign investment rules. The Conservative government argues that increasing competition in the satellite sector will ultimately encourage innovation and lower the prices of satellite-derived products and services, such as Internet, television, radio and mobile wireless. “Consistent with the recommendations of the Competition Policy Review Panel, the Government is acting in Budget 2010 to remove the existing restrictions on foreign ownership of Canadian satellites,” the budget says. The 2008 panel report did not recommend specific measures for satellites, however. The panel, chaired by Lynton (Red) Wilson, recommended that the government amend 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.” The panel’s report recommended, in a second phase, liberalizing telecommunications and broadcasting foreign investment restrictions “in a manner that is competitively neutral” for the sectors. Industry Minister Tony Clement’s office did not comment Thursday, but Clement told BNN Wednesday that the Wilson panel recommendations "will definitely be part of the mix” for the government’s plan to liberalize the foreign ownership rules. “This will allow firms to access foreign capital and know-how and to invest in new and advanced technologies. The removal of restrictions will also allow Canadian firms to develop strategic global relationships that will enable them to participate fully in foreign markets,” the budget says of the move for the satellite sector. Hoey said there is already competition in the satellite market, and removing foreign ownership restrictions would not change things significantly. Mark Goldberg, a telecommunications analyst with Mark Goldberg and Associates, also wrote on his blog that he was surprised by the decision. “Yesterday’s Throne Speech said, ‘key sectors, including the satellite and telecommunications industries.’ That was sectors, plural. Not just the satellite telecommunications sector. Well, what about removing restrictions on foreign ownership of Canadian carriers? Small ones, new ones, big ones. Only foreign ownership of satellites?” he wrote. Liberal MP and industry critic Marc Garneau said it is “worthwhile” to re-examine the foreign ownership rules. “ were established with restrictions based on reasons that were chosen years ago. Now, in 2010, it would be a useful exercise to do,” he said in an interview. Garneau said a review would be more relevant given the government’s Globalive decision. Last December, the federal cabinet overturned a CRTC decision denying Globalive Wireless Management Corp. entry into the Canadian wireless market due to foreign ownership restrictions. “We feel it is important to be discussed in Parliament with all of the parties,” he said. “In the Throne Speech they made all sorts of wonderful sentences … talking about innovation and productivity and the digital economy … including foreign ownership for satellites and telecommunications. But the telecommunications part seemed to disappear today in the budget. I don’t know why.” The budget also calls for the development of a “digital economy strategy” focusing on information and communications technologies. “A strong digital economy will contribute to a more prosperous and competitive Canada,” the budget says. “The Government will develop a Digital Economy Strategy that will enable the ICT sector to create new products and services, accelerate the adoption of digital technologies, and contribute to improved cyber security practices by industry and consumers.” However the budget does not outline a timeline for the strategy, and does not make specific proposals. NDP MP and digital affairs critic Charlie Angus said the strategy lacks content. “In terms of digital strategy, they are nowhere, other than throwing in a paragraph … There’s nothing there,” he told The Wire Report. The budget says the government will continue a program to increase broadband access in rural communities with funding of $180 million for 2010-11. The program was announced as part of the government’s 2009 economic action plan in an effort to spread broadband coverage to as many Canadian households as possible. “This will help rural households, businesses and community institutions to make use of the Internet at levels similar to many of their urban counterparts,” the budget says. Garneau said Canada should be looking to countries like South Korea and Japan, which are “connecting themselves to ultra high speeds with fiber, and Canada is just barely out of the gate with that.” kfournier@thewirereport.ca

Experts, critics, surprised by budget’s announcement on satellites

News | March 5, 2010

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