N E W S   R E L E A S E

Foreign Investment Restrictions in
 the Telecommunications sector

FOR IMMEDIATE RELEASE

Ottawa, December 11, 2002 – The House of Commons Standing Committee on Industry, Science and Technology announced today the commencement of its study of Canada’s Foreign Investment Restrictions Applicable to Telecommunications Common Carriers. Beginning on January 27, 2003, the Committee will hold meetings with industry and consumer stakeholders to review federal laws that restrict foreign participation in Canada’s telecommunications sector.

“Our review of the foreign ownership restrictions in the telecommunications sector will be a thorough investigation of their impact on investment and on sovereignty in light of the essential role played by this sector in a knowledge-based economy,” said Walt Lastewka, M.P. (St. Catharines), Chair of the Committee. “Maintaining a modern, domestic infrastructure in telecommunications requires periodic review of laws and regulations to ensure that they provide the right mix of incentives to achieve a proper balance between national sovereignty and economic prosperity objectives.”

In 2001, the National Broadband Task Force, whose membership reflected broad representation from Canadian industry, academia and other non-profit organizations, recommended that:

“ … the federal government should conduct an urgent review of foreign investment restrictions for telecommunication common carriers and distribution undertakings with a view to determining whether they are currently restricting or are likely to restrict increased industry participation in the competitive deployment of broadband infrastructure in Canada.”

Underlying such a recommendation is the concern that the foreign investment restrictions may be limiting the telecommunications sector’s access to capital in Canada, and may therefore be impeding innovation and expansion of this sector within the Canadian economy.

Within the context of Canada’s Innovation Strategy and the government’s commitment in the Speech from the Throne to Smart Regulation initiatives, The Honourable Allan Rock, Minister of Industry, has asked the Industry Committee to solicit views on Canada’s foreign investment restrictions. The Minister believes that the time is right for Canadians to decide whether the current approach remains the best means of achieving the objectives of strong investment and national economic sovereignty. At the suggestion of the Minister, as laid out in his discussion paper entitled Foreign Investment Restrictions Applicable to Telecommunications Common Carriers, the Committee poses 13 questions to be addressed during the review (see attachment).

Participants in the Committee’s hearings will be asked to provide their views on these and any other related issues. The Committee further asks that those wishing to participate in its proceedings inform the Clerk at the earliest opportunity.

 – 30 –

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

Questions on the impact of foreign
 investment restrictions

Question 1

Do current Canadian foreign investment restrictions significantly affect the amount of capital available in Canada to invest in the telecommunications industry?

Question 2

Should Canada’s relative per-capita investment performance in this sector be a source of concern, or has there simply been ‘over-investment’ in the U.S.?

Question 3

To what extent, if any, can differences in investment levels be attributed to foreign investment restrictions?

Question 4

Are there foreign companies that would like to establish operations in Canada and, if so, would their entrance likely affect the provision of new or improved services to Canadians, and stimulate a more competitive Canadian market structure?

Question 5

Could altering Canada’s foreign investment restrictions materially affect the ability of new competitive providers to establish and maintain financial stability, and to what extent can one link any relaxation of foreign investment restrictions with the creation of a more competitive Canadian telecommunications industry?

Question 6

Would altering the foreign investment restrictions assist the deployment of broadband infrastructure in rural and remote communities?

Question 7

Should Canada adopt the approach of other countries by placing restrictions only on the existing traditional telecommunications service providers?

Question 8

If this approach were adopted in Canada, which companies would be required to continue to be Canadian owned and controlled? All incumbent providers? Just large incumbent providers?

Question 9

Should the current ownership and control limitations be maintained for these companies, or should the voting limitation be raised from the current 20 per cent limit for operating companies to some other level, while retaining the majority Canadian ownership and control? What would be an appropriate level?

Question 10

Should the U.S. approach of licensing be applied in Canada? Would all telecommunications carriers need to be licensed?

Question 11

The government could review all applications for licence transfers and ensure the continued Canadian ownership and control of ‘major’ companies in the context of merger and acquisition proposals. If this approach were taken, how should a ‘major’ company be defined?

Question 12

In cases in which mergers and acquisitions are approved, what conditions would be appropriate to ensure the achievement of other public policy objectives?

Question 13

Were the government to make any changes to these foreign investment restrictions, would it be appropriate to introduce some form of delay between when the changes would be announced and when they would take effect?