N E W S   R E L E A S E

House Of Commons Standing Committee On Industry, Science And Technology Tables Report On Canada’s Foreign Investment Restrictions Applicable to Telecommunications Common Carriers.

FOR IMMEDIATE RELEASE

Ottawa, April 28, 2003 – The House of Commons Standing Committee on Industry, Science and Technology tabled in Parliament today the Committee’s report on Canada’s Foreign Investment Restrictions Applicable to Telecommunications Common Carriers. The Honourable Allan Rock, Minister of Industry, had asked the Committee to solicit views on Canada’s foreign direct investment restrictions. The report, entitled Opening Canadian Telecommunications to the World, is the product of the Committee’s three-month investigation into the impacts of these restrictions on the telecommunications sector.

“Most telecommunications companies seeking outside sources of capital for investment purposes that appeared at the Committee’s hearings claimed to have encountered problems trying to raise capital in the past decade” said Mr. Lastewka. “They experienced either reduced access to capital, or higher cost of capital, or both.”

The Committee heard from stakeholders in both the telecommunications and broadcasting industries. Wireless companies, wireline incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs), and cable television companies recounted their experiences in raising investment capital under the current foreign ownership regime. The evidence provided to the Committee indicated that:

“The impact of foreign ownership restrictions was felt hardest on the newest telecom companies. These restrictions were, in part, responsible for the scaling back of investment plans and the taking on of more debt by these companies.  Their higher debt-equity positions also led to considerably higher financial instability within the industry” said Mr. Lastewka.

The Committee also concluded that, because of technological convergence over the past two decades, telecommunications common carriers and broadcasting distribution undertakings – that is, cable television, satellite television and multipoint distribution systems – can no longer be separated on the basis of their underlying distribution networks or the services they provide. The Committee believes that carriage and content are distinct entities, and that distribution can be separated from programming undertakings.

Two of the Committee’s four recommendations directly addressed the foreign ownership restrictions. The Committee recommended:

That the Government of Canada remove entirely the minimum Canadian ownership requirements, including the requirement of Canadian control, applicable to telecommunications common carriers.

That the Government of Canada ensure that any changes made to the Canadian ownership and control requirements applicable to telecommunications common carriers be applied equally to broadcasting distribution undertakings.

There were two additional issues beyond that of the foreign ownership restrictions that preoccupied the Committee. First, the Committee recognized that the private sector is adapting well to the new telecommunications landscape created by digital technologies and technological convergence, but Canada’s legislative framework does not show the same flexibility. The Committee recommended:

That the Government of Canada amend the Telecommunications Act to require a mandatory five-year review of the Act by a parliamentary committee.

Finally, in light of the technological convergence and a significant degree of horizontal and vertical integration within and between telecommunications and broadcasting sectors, it was not obvious to the Committee that these sectors should continue to be treated as two distinct silos. Since this issue went beyond the Committee’s mandate and deserved more research, it recommended:

That the Government of Canada strike a special parliamentary committee to undertake a comprehensive review of the governance structure of both telecommunications and broadcasting sectors in Canada.  The review should include, as a minimum, an examination of:

(a)        the regulatory framework governing Canada’s telecommunications and broadcasting sectors;

(b)            approaches that the federal government could adopt to continue to facilitate broadband deployment in rural and remote communities;

(c)        federal departmental organization (Industry Canada and Canadian Heritage); and

(d)        the jurisdiction, role and mandate of the CRTC.

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For further information, please contact: 

Jean-François Pagé, Clerk

House of Commons

Room 671, Wellington Building

OTTAWA, Ontario

K1A 0A6

Telephone:  (613) 947-1971

Fax:  (613) 943-0307

Email: inst@parl.gc.ca