The federal government finally loosened up foreign ownership restrictions in telecommunications in 2012, so why aren’t Canadians getting home phone, internet and TV all together for less than $50 a month like the Dutch, Danish and Germans do?
Liberalized ownership, after all, was supposed to be the silver bullet that would solve competitive problems and high prices in Canadian wireless, internet and television. So what happened?
The answer depends on whether you’re a cynic or an optimist. On the one side is the belief that the government did the bare minimum with its slight amendments last summer to the Telecommunications Act. At the other end is the possibility that the changes were just the first step in creating a more competitive service landscape, with more action to follow.
The changes that did go into effect were much needed. Previously, foreign investors were limited to owning 46.7 per cent of the voting shares of an infrastructure-based telecom carrier and prevented from exerting “control in fact.” In an age where multinational telecom companies are fiercely competing against each other across a battleground comprised of multiple countries, Canada has largely remained a foreigner-free zone as a result.
The amendment means foreign investors can now completely own and control a company that has less than 10 per cent of the Canadian market’s revenue, which is estimated at around $42 billion. It’s effectively shorthand for anyone but Bell, Rogers and Telus.
Smaller companies such as Wind Mobile and Mobilicity will benefit most, since they are now free to seek necessary capital from outside of Canada. And companies are free to grow beyond the 10-per-cent threshold, so long as it’s not through acquisition of bigger players.
Yet, industry observers and even opposition politicians say the changes won’t do much to affect the status quo. Smaller players may have an easier time raising money, but they’re still up against well-resourced and entrenched rivals.
Liberal party leadership candidate Marc Garneau recently advocated throwing the doors wide open, allowing investment or even takeovers of all telecom companies, regardless of size.
The catch to the suggestion, however, are the remaining restrictions on broadcasting, which are similar to the old rules on telecom.
Broadcast, telecom regulation merger needed
Over the past few years, the biggest telecom players have not only grown bigger, they’ve also become acquisition-proof under these Broadcasting Act restrictions by swallowing up the likes of CTV, Global and CityTV.
Even telecom companies that don’t own broadcasters but sell television access over internet protocol – as Telus does through its Optik service, for example – could be protected from foreign takeover, or prevented from getting foreign investment.
With technology, the medium itself and ownership having converged, it’s no wonder many - including former Canadian Radio-television and Telecommunications Commission chairman Konrad von Finckenstein – are suggesting it’s time for a unification of the still-separate laws governing them.
Broadcasting restrictions are a thornier issue, however, since there are cultural protection issues attached to them. Critics say foreign investors would be even less inclined to fund and promote Canadian programming than existing domestic owners.
Observers say that’s an easy enough problem to solve, since ownership of broadcasters can be clearly separated from the rules that govern how broadcast licenses are given out.
“The arguments for preserving the current restrictions are tough to support once you remove sentimental attachment or emotional concerns,” says Mark Goldberg, industry consultant and organizer of the annual Telecom Summit. “Is there really any reason to believe that a foreign-owned company could not be held responsible to comply with Canadian content regulations or any other conditions of license?”
Foreign owners could in fact be a boon for Canadian culture, since they’re more likely to want to recoup their investments in domestic programming.
“Foreign owners might be better positioned to market and commercialize Canadian content around the world,” says Michael Geist, the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa.
With the first steps taken in 2012 toward a more open and competitive telecom market, the focus is now clearly shifting toward the broadcasting side of the equation. The government’s seriousness in wanting to improve services and prices will be judged on whether or not it tries to open this particular can of worms, and whether or not it might try to do so in 2013.