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Government Responds to Industry Committee's Recommendations on Foreign Investment Restrictions in Telecommunications

OTTAWA, September 25, 2003 — Allan Rock, Minister of Industry, today tabled in the House of Commons the Government of Canada's response to Opening Canadian Communications to the World, the Standing Committee on Industry, Science and Technology's report and recommendations on foreign investment restrictions on telecommunications carriers.

"The government is firmly committed to fostering the long-term health of the telecommunications sector, which is a key driver of innovation in Canada," said Minister Rock. "This requires both a regulatory environment that is conducive to competition and adequate access to capital."

At the November 2002 National Summit on Innovation and Learning, Minister Rock announced that he would be asking the Industry Committee to undertake a review of the foreign investment restrictions in the context of the government's innovation agenda.

"This is an issue that requires serious consideration within the context of the government's public policy priorities," said Minister Rock. "In this regard, I would like to thank the Industry Committee for its work in leading this important public discussion and for its thoughtful, well-researched recommendations."

In response to the Industry Committee's report, the government announced its intentions to:

  • table an amendment as early as possible to the Telecommunications Act, requiring its review every five years in the face of rapid, unprecedented technological change;


  • launch an analysis of the conflicting recommendations on foreign investment restrictions made by the Industry Committee and the Standing Committee on Heritage in its June 11, 2003 report, entitled Our Cultural Sovereignty; and


  • continue working with Parliament and its members to discuss its programs and operations, including those in the telecommunications and broadcasting sectors, in order to ensure that these are effective in meeting the needs of Canadians as well as industry stakeholders.

In its response, the government also recognized its responsibility to determine how best to reconcile the committees' conflicting recommendations. Accordingly, the government will undertake to immediately launch and expedite an analysis of this question, with a view to examining possible solutions in spring 2004.

Attached is the government's response to the Industry Committee's recommendations sent from Minister Rock to Committee Chair Walt Lastewka.

For more information, please contact:

Linda Kristal
Director of Communications
Office of the Minister of Industry
(613) 995-9001


Mr. Walt Lastewka, M.P.
Chair of the Standing Committee on
Industry, Science and Technology
Room 561, Confederation Building
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Mr. Lastewka:

Pursuant to Standing Order 109 of the House of Commons, I am pleased to respond on behalf of the Government of Canada to the recommendations contained in Opening Canadian Communications to the World, tabled in the House of Commons on April 28, 2003.

Over the last few years, the government has heard extensively from the telecommunications industry regarding the conditions that they consider necessary in order to thrive in Canada well into the future. Of great importance to the industry is a vibrant and competitive marketplace, a regulatory environment that supports innovation and better access to capital. In this context, the government has received numerous requests for a review of the foreign investment restrictions applicable to telecommunications common carriers. Those making the requests have noted that Canada's major trading partners have reduced their restrictions and that among Organisation for Economic Co-operation and Development (OECD) countries, the Canadian ownership regime is among the most restrictive. Countries which have liberalized their regimes have claimed the following among the benefits they have reaped: increased capital expenditures; enhanced competition; more rapid introduction of new services; and heightened innovation overall.

As Minister of Industry, I concluded in the context of Canada's Innovation Strategy that a review was required. Its key question: whether Canada could secure access to a larger pool of capital for investment in telecommunications infrastructure without imperiling our national interests. I also concluded that the expertise and experience of the Standing Committee on Industry, Science and Technology on innovation issues would make it an effective forum for an in-depth investigation and for Canadians to express their views. I appreciate the flexibility shown by the Committee in inserting this task into an already heavy winter schedule and in making itself available to hear the views and analyses brought forward by individuals, enterprises and associations.

I was impressed by your review's depth and breadth. In fourteen public meetings held in a period of barely over four weeks, with as many as four meetings in a week, the Committee heard from sixty-seven witnesses. The issue is complex, and was given a thorough review. I was encouraged to see that your witnesses included not only telecommunications carriers, but also consumer groups, academics, broadcasting distributors, broadcasters, and representatives of the Canadian broadcasting professional groups.

I was also impressed by your recognition of the issue's international perspective. Given Canada's Innovation Agenda, this must be addressed, and I noted that you heard from representatives of the Government of the United Kingdom and from the OECD.

Your Committee made four recommendations:

Recommendation 1

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

Response

The Government of Canada welcomes your recommendation for regular parliamentary review of the Telecommunications Act. The years since the current legislation came into force have been marked by an accelerating pace of technological change, in the creation of new market opportunities, and in the everyday use by Canadians of services barely even imaginable a decade ago. Clearly the framework legislation for this innovative sector must be kept up to date. At the earliest opportunity, we will introduce an amendment to the legislation requiring its review every five years.

Recommendation 2

That the Government of Canada prepare all necessary legislative changes to entirely remove the existing minimum Canadian ownership requirements, including the requirement of Canadian control, applicable to telecommunications common carriers.

Recommendation 3

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.

Response

The Government of Canada notes that the Committee's examination of the restrictions applicable to telecommunications common carriers was broadly based and very thorough. The Committee found that, over the last decade, restrictions on foreign investment have played a role in impeding capital investment by new entrants in the telecommunications sector, and are likely stifling Canada's productivity and growth. These findings have extremely serious implications; they make it clear that Canada pays a price for being out of step with the other member nations of the OECD. While our OECD partners have liberalized their investment rules and reaped the benefits of increased competition and innovation, Canada has maintained one of the most restrictive regimes. Your Committee has pointed out that we have adequate tools other than restrictions to ensure that substantial foreign investment is in the national interest, and to ensure that telecom services are provided at affordable prices across Canada.

In this context, the government acknowledges the appropriateness of your conclusion that removing foreign investment restrictions would benefit the telecommunications industry, as well users of these services. We recognize the significance of this recommendation for both the Smart Regulation Agenda and the Innovation Agenda.

As regards Recommendation 3, the Government of Canada is grateful to the Committee for its diligence in pursuing in detail the issue of foreign ownership restrictions, not only those applicable to telecommunications common carriers, but also those applicable to broadcasting distribution undertakings (BDUs) which many of your witnesses identified as equally in need of review. You concluded that symmetrical removal of restrictions for telecommunications carriers and BDUs, which compete with similar services in the same markets, is the best way of achieving the objectives of both the Telecommunications Act and the Broadcasting Act. The government accepts this reasoning, which reinforces that in order to promote competition and regulate the industry in a smart, stable and efficient manner, it would be irresponsible to move asymmetrically.

However, the government also notes that the Standing Committee on Canadian Heritage expressed concerns that changes in ownership restrictions for either telecommunications common carriers or broadcasting distribution undertakings (BDUs) could have an adverse impact on the broadcasting system.

The Government of Canada recognizes that it has a responsibility to determine how best to reconcile the conflicting recommendations of the two Standing Committees. Accordingly, the Government of Canada undertakes to immediately launch an analysis on this question. This review will be completed quickly, and by the spring of 2004, the Government of Canada will be in a position to examine possible solutions.

Recommendation 4

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 in light of technological convergence. The review should include, as a minimum, an examination of:

  • the regulatory framework governing Canada's telecommunications and broadcasting sectors;


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


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


  • the jurisdiction, role and mandate of the Canadian Radio-television and Telecommunications Commission.

Response

The establishment of parliamentary committees is the responsibility of Parliament and not the government. That said, the Government of Canada will continue to work with Parliament and its Members to discuss its programs and operations, including those in the telecommunications and broadcasting sectors, in order to ensure that these are effective in meeting the needs of the industry and Canadians, as both of these sectors are subject to considerable regulation. In this regard, the Government of Canada notes that its experience with the House of Commons Standing Committee on Industry, Science and Technology on these issues has been co-operative and collaborative.

On behalf of the Government of Canada and as Minister of Industry, I thank the Committee and its staff, as well as the individuals, enterprises and associations who contributed their comments and analyses. The Government of Canada is grateful to the Committee for engaging Canadians in a thorough examination and for its timely recommendations. The government is committed to ensuring the long-term health of the telecommunications industry in Canada, and your work as a Committee will serve as a guide as we move forward towards this goal.

Yours very truly,

Allan Rock

c.c. Ms. Louise Thibault, Clerk of the Standing Committee on
Industry, Science and Technology



Government of Canada


Date Modified: 2003-09-26 Top of Page Important Notices