Consultations on further foreign ownership changes ‘not in the cards,’ Paradis says

TORONTO—The federal government will not open up Canada’s entire telecom sector to foreign ownership without further consulation on the issue, Industry Minister Christian Paradis said Tuesday at the 2012 Canadian Telecom Summit. On March 14, Paradis announced the government will remove the foreign ownership restrictions for small or new entrant telecom providers with less than 10 per cent of the national market share. Those changes will effectively apply to all Canadian telecom carriers except national incumbents BCE Inc., Rogers Communications Inc. and Telus Corp., which together hold a 93 per cent share of the market according to the CRTC’s Communications Monitoring Report released last July. Paradis said the government would need to hold public consultations before it could consider removing the ownership restrictions on those companies. “I have to be clear. We need to hear the public on this,” he said. “We will need to hold public hearings, and this is not in the cards, for now.” Earlier in the day, Ted Woodhead, vice-president of regulatory affairs at Telus, said the government’s decision to remove restrictions for small carriers is a “halfway house” toward opening up foreign investment for the incumbents. He said the changes as proposed could disrupt the incumbents’ opportunities to raise capital and called on the government to give them a clear indication of when foreign ownership restrictions will be lifted for all players. “They need to give us a runway when full liberalization will occur, whether it’s two years, three years, or whatever,” he said at the conference’s “Regulatory Blockbuster” panel. “The right public policy choice is to lift these completely.” Mirko Bibic, Bell’s executive vice-president and chief regulatory officer, said Industry Canada auction cap rules that will limit incumbents to a single block of “prime” 700 MHz spectrum in next year’s spectrum auction will give foreign players an advantage over the three incumbents, which are each capped to a single block of prime spectrum per market. “Any foreign giant will be able to acquire two blocks of prime 700 MHz spectrum, while Canada’s national carriers, those of us who invested billions in all areas of the country, urban and rural, are limited to just one block,” Bibic said. He said the rules create a “two-tiered capital structure” in the Canadian telecom market that afford foreign companies an advantage over national incumbents. “Can you imagine the U.S. government, or any other, quite frankly, ever allowing Bell Canada to have more privileged access to U.S. spectrum than companies like AT&T or Verizon ?” he said. Bibic said Bell does not quarrel with Industry Canada’s new foreign ownership or auction cap policy in isolation. “But we do object to the idea that large foreign giants should be permitted to enter and bid on Canadian spectrum while holding a two-to-one spectrum block advantage in the auction,” he said. “It would be a big mistake to assume that Canada’s national wireless carriers will be impervious to such advantages being given to foreign companies and will continue to deploy in rural areas as we have in the past,” Bibic said. He said the government should limit all auction players to a single block of prime spectrum if foreign-owned companies are taking part in the auction. Paradis said the approach is balanced. “We have to understand here that the incumbents have more than 80 per cent of the spectrum and they control more than 90 per cent of the market, so this is why I think the approach that we have is pretty well balanced,” Paradis told reporters at the conference. Ed Antecol, vice-president of regulatory affairs and carrier relations at Globalive Wireless Management Corp., which operates Wind Mobile, said Bell wants to ensure new entrant players like Wind cannot acquire more prime spectrum than an incumbent in the auction. He said the incumbents are prepared to bid heavily in the auction if it means reducing the new entrants’ chances of gaining the spectrum they need to compete on a national scale. Antecol said the incumbents’ “foreclosure value” of keeping new entrants out of the market “is far greater than any rational value that an economic actor could place on acquiring similar spectrum.” Paradis also said at the conference that the government will release a national digital economy strategy by the end of the year. “We are still developing a Canadian digital economy strategy and I am committed to delivering it by the end of the year,” he said. First promised in early 2009, a formal release of the strategy was later pegged for spring 2011 after formal consultations in summer 2010. Last September, Paradis said the strategy remained a “high priority” for the government but he did not establish a timeline for its release. On Tuesday, he told reporters the government is now in “final consultations” on the strategy. The regulatory panel also debated the merits of a CRTC consultation this spring that asked whether the commission should impose national consumer protection guidelines for the mobile industry. Antecol said a national wireless code would need “teeth” to have an impact on carriers. He said administrative monetary penalties would be the best way to ensure compliance. Ken Engelhart, Rogers’ senior vice-president of regulatory affairs, said commission tariffs would be a better way to enforce a consumer protection code. “Communications lawyers know that tariffs are equivalent to regulations,” he said. nkyonka@thewireport.ca

Consultations on further foreign ownership changes ‘not in the cards,’ Paradis says

News | June 6, 2012

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