NDP
SUPPLEMENTARY OPINION
The
committee hearings into the foreign ownership rules and regulations in the
telecommunications sector have raised many issues and concerns brought forth by
many witnesses who testified. The only effective conclusion that appeared to
sustain any consensus by committee members was that simplistic proposals will
not address the challenges in the sector faced by consumers, commercial
participants, cultural industries and future innovation by Canadian technology
companies.
Given
the recent spectrum auction which created the opportunity for three new
entrants that have just begun operations, now is the time to stay with the original
plan for the next two years to let the market evolve and competition to take
place between the new entrants and the established incumbents. Furthermore,
significant capital has been deployed and business planning developed and
implemented based upon the expectations set out by the government when the
spectrum auction took place that the rules setting aside spectrum available
only for new entrants, with no mergers with established operators allowed,
would remain in place for the time specified. To change the present regulatory
regime during this period is unfair and discriminatory to those who complied with
rules expecting them to be in place for the expected time.
Competition
issues not addressed by the government’s proposed changes:
- The
removal of foreign ownership rules in the telecom sector will lead to takeovers
and mergers of existing Canadian firms, resulting in the same market structure
of only two or three competitors which has been the experience in other markets
that have lifted foreign ownership limits.
- As
various studies have expounded, Canada has some of the highest prices for
wireless telecom services in the world, and consolidation by foreign companies
won’t address this problem.
- Leading
foreign investors and market experts in the wireless telecom sector have stated
that during the next few years there will be major consolidation in the sector.
All small and medium-sized operators are looking for appropriate M. &A.
deals to be able to secure their position in
respective markets. Removing foreign ownership limits in Canada would put the Canadian wireless market in the global consolidation process.
Innovation
issues not addressed by the government’s proposed changes:
- As
has been experienced in the larger technology sector, ownership determines
where research and development takes place.
- The
bankruptcy and sell off to foreign companies of Nortel’s, previously Canada’s
largest private funder of research and development, divisions has lead to a
significant set back in Canada’s wireless research and innovation.
- Removing
foreign ownership restrictions in the sector will accelerate the process of
further research and development being moved offshore to detriment of Canada’s longer term innovation and productivity.
Cultural
sovereignty issues not addressed by the government’s proposed changes:
- With
the convergence taking place between media, the internet and the wireless
sector significant concerns and issues are being raised on its impact on Canada’s cultural industries
- The
effectiveness of Canadian content rules and regulations must be examined to
ensure the vibrancy and robustness of Canada’s cultural industries
- Removing
the foreign ownership restrictions in the wireless sector before a
comprehensive examination and a new regulatory apparatus has been established
will undermine Canada’s cultural sovereignty.
Consumer
issues not addressed by the government’s proposed changes:
- Increasing
foreign ownership won’t solve the problem of the need for enforceable rules
ensuring consumer friendly standards and conduct by providers.
- Foreign
ownership will not lead to lower prices for consumers if consolidation, which
is the experience in other countries’ wireless markets, is the end result
rather than competition which must be ensured by effective regulation
- The
need is a ‘Wireless Consumer Bill of Rights’, which includes significant
consumer protections, anti-gouging measures, and a real complaint system where
consumers are listened to seriously and enforcement actions are taken rapidly against
non-complaint companies
- Office
of the Commissioner for Telecom Complaints that the government created a few
years ago, has not been effective and needs to be reformed
- The
need for universal access guarantees to wireless telephony, which is
institutionalized in others countries, must be established so that
affordability and equity is maintained in the marketplace.
In
conclusion, the present foreign ownership restrictions and the strategy in
place tied to the spectrum auction must be maintained for the next two years. A
further study examining the significant convergence of media, the internet
and the wireless sector and its impact on Canadian cultural sovereignty needs
to be undertaken before fundamental market structures a changed. The onus is on
the incumbents and the new entrants to provider greater customer service, world
leading innovative products, and more competitive prices for consumers which
are the true tests and most relevant measurements of the success of any
regulatory regime.