Remove foreign ownership limits in telecom, broadcasting distribution: Report

The C.D. Howe Institute is calling for an end to Canada's foreign ownership restrictions in telecom and broadcasting distribution, the Toronto-based think tank announced in a report Thursday. The institute’s competition policy council, which held an inaugural meeting June 17, called for a blanket removal of foreign ownership restrictions for telcos and broadcasting distributors—including vertically integrated ones that are also content providers. “Ownership of physical networks of telecommunications and broadcast distribution companies has now become inseparable,” the institute wrote. “The Council majority’s view, therefore, was that distinctions between the telecom and broadcasting sectors are difficult to sustain, given the digital economy and evolving consumer usage patterns. Any change in foreign ownership requirements for telecoms therefore should be matched by a similar change for broadcast distribution undertakings.” The report said restrictions for the sectors should be abolished immediately and entirely—allowing for 100 per cent foreign ownership—without a gradual elevation of ownership thresholds. The council said it supports the continued existence of broadcasting rules to support Canadian programming, but said it is skeptical about the effectiveness of the foreign ownership restrictions in promoting Canadian social policy goals. Canada's broadcasting and telecom regulatory frameworks currently limit foreign investment at maximums of 20 per cent in the operating company and 33 per cent of the holding company. Former industry minister Tony Clement last year held a consultation on loosening the restrictions, and laid out three options for amending the Telecom Act: abolishing all restrictions; increasing the limit of foreign investment to 49 per cent; or eliminating the restrictions for companies whose market share is less than 10 per cent. The government has steered clear of the possibility of amending the Broadcasting Act. Clement’s successor, Industry Minister Christian Paradis, hasn’t revealed his intentions regarding foreign ownership. “Foreign ownership in wireless remains an important piece in this puzzle, and one that I am committed to getting right,” Paradis said at the Canadian Telecom Summit last month. “As we have demonstrated since coming to office, the policy of our government has always been to favour more competition. New entrants mean more competition, which can lead to lower prices and more competitive services for Canadian consumers.” A decision on whether to allow foreign ownership in the telecom sector will come before the next spectrum auction, which will be held in late 2012 or early 2013, the minister said. The C.D. Howe policy council said lifting the ownership restrictions wouldn’t create more competitors but would integrate Canadian companies “in a contiguous North American market” where consumers would benefit from economies of scale. “An integrated North American market, whether achieved through entrance or acquisition by US or other firms, or Canadian firms acquiring a US network, would benefit Canadian consumers through lower costs from network economies, lower capital costs, and accelerated innovation and technology adoption,” the institute reported. Wireless carrier Globalive Communications Corp., which operates the Wind Mobile brand, has spoken in favour of amending the telecom act after the CRTC ruled in 2009 that, due to the company's debt with Egyptian telco Orascom Telecom Holding SAE, Globalive was controlled “in fact” by non-Canadians. A subsequent government order-in-council decision allowed Globalive to enter the Canadian market with wireless operations. Globalive lost a court challenge of the order-in-council decision but won an appeal decision this month. news@thewirereport.ca

Remove foreign ownership limits in telecom, broadcasting distribution: Report

Broadcast | June 24, 2011

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