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In reviewing Canada’s foreign ownership regime applicable to telecommunications common carriers, the Committee found that the regime is too restrictive when compared to that of other OECD member countries, and that the restrictions are having a negative impact on the Canadian telecommunications industry. Foreign ownership restrictions have played a role in impeding capital investment by new entrants in the Canadian telecommunications sector in the past decade. They have also been a factor in the recent financial instability of the industry, which saw a number of capital restructurings and bankruptcies. Moreover, since telecommunications is a critical element of the global, networked, knowledge-based economy, these restrictions are also likely stifling Canada’s productivity and economic growth performances.
In summary, foreign ownership restrictions compromise, among other important economic contributions, the diffusion of new communications technologies and Canadians’ access to modern telecommunications services. For all these reasons, the Committee recommends the complete removal of Canada’s foreign ownership restrictions applicable to telecommunications common carriers.
While this reform could conceivably lead to foreigners gaining control of a Canadian telecommunications carrier, the Committee is confident that the Investment Canada Act provides the government with the tools it needs to ensure that substantial foreign investment will be carried out in a way that is consistent with the public interest. The CRTC also has the authority and means to ensure that telecommunications services are provided at affordable prices to rural and remote regions of the country.
The removal of these restrictions, however, is not a panacea for the telecommunications sector. The Committee is not convinced that removing the restrictions on FDI applicable to telecommunications common carriers will, for example, lead to increased access to broadband in rural and remote communities in the short term.
The Committee further believes that telecommunications common carriers and broadcasting distribution undertakings 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. Cultural policy objectives can be achieved by treating content and carriage separately. For these reasons, the Committee recommends the complete removal of the foreign ownership restrictions imposed on broadcasting distribution undertakings. The Committee views full liberalization of the ownership regime on a symmetrical basis to all carriers of signals competing in the same markets as being the best way of achieving government objectives as laid out in the Telecommunications Act and the Broadcasting Act.
The Committee is also of the opinion that reforms to Canada’s foreign ownership regime must be the first step in a multi-step reform of the telecommunications and broadcasting sectors in Canada. From the Committee’s perspective, regulatory reform may be necessary to ease the transition from monopoly to a more competitive structure; and given technological and industrial convergence between telecommunications and broadcasting, reform of Canada’s political governance structure for these sectors may also be required. Because such reforms go beyond the Committee’s current mandate, the Committee recommends a broad review of these issues by a special parliamentary committee.
Finally, the Committee is confident that these recommendations reflect the expert testimony it received; this testimony was thorough and comprehensive. The report’s recommendations imply that more work remains to be done in this important area, and the Committee is prepared to provide more parliamentary guidance in the near future. The Committee also looks forward to having the Minister appear before the Committee to explain how the federal government will act on the Committee’s recommendations.
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[F]oreign ownership restrictions are a particularly blunt and self-destructive way of seeking ends far more readily achieved by regulation. [Hudson Janisch, University of Toronto, 16:15:55]
[N]o single factor would have a greater positive impact for the prospects of telecom growth and competition than eliminating the [foreign ownership] restrictions as quickly as possible, at least as they apply to new entrants. [André Tremblay, Microcell Telecommunications Inc., 13:15:55]
We don't lose any control over the system if we open up foreign ownership. The CRTC continues to have … the same regulatory powers. [Francis Fox, Rogers AT&T Wireless Inc., 13:16:55]
Rural Canada has to have affordable access to broadband and right-of-way. It needs a choice of carriers and suppliers and that means a competitive environment must exist … [Vic Allen, Upper Canada Networks, 14:15:40]
[T]here's no distinction between carrying a telephone signal and the carriage of a broadcasting signal. Consequently the carriers … be they telephone companies or broadcast distribution undertakings should enjoy the same access to capital and be bound by the same ownership rules. Anything less would give one sector an unfair advantage over and distort economic decision making. [Konrad von Finkenstein, Competition Bureau, Industry Canada, 23:16:50]
The foreign ownership regime should be technologically and competitively neutral and the rules of the game should not be changed in midstream by economically disadvantageous some competitors by adhering to obsolete labels such as traditional carrier. [James Peters, TELUS Corporation, 16:15:45]
It won't change the fact that this country's policies have never been adjusted to fully integrate the idea of competition and, as a result, most competitors have floundered rather than flourished. There is a way to fix it. The government, the CRTC and the industry must work together to create a framework that is fair to both the incumbents and the competitors, one that promotes rather than just permits competition. [William Linton, Call-Net Enterprises Inc., 14:16:00]
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