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Feds stay mum on telecom foreign ownership changes

The government isn't ready yet to reveal its new foreign investment strategy, Industry Minister Christian Paradis has told a communications conference

OTTAWA – The delegates were nestled all snug in their convention-centre chairs while visions of liberalized telecommunications regulations danced in their heads. But Santa Claus didn’t come to the International Institute of Communications Canada conference Tuesday.

Rumours had circulated that Industry Canada minister Christian Paradis would announce relaxed restrictions on foreign ownership of telecommunications companies during his end-of-conference speech. Some news reports said the restrictions would be lifted for companies with less than 10 per cent of the market, and the upcoming spectrum auction would cap the amount of spectrum any participant could buy.

But Paradis’ brief speech offered no policy announcements. “Some of you may have been looking for an early Christmas present today,” he acknowledged, “but I am afraid I am going to be a bit of a grinch.”

Paradis said decisions on several issues, including foreign ownership, allocation of 700-megahertz and 2,500-megahertz spectrum for the auctions, tower sharing and roaming rules, are complex and interrelated and the government wants to take time to get them right.

The government has taken long enough to make up its mind, retorted Amit Kaminer, analyst at telecom industry research firm SeaBoard Group. “It’s about time to make a decision already.”

Kaminer said in an interview the government has two realistic options: remove foreign ownership restrictions on companies that hold less than 10 per cent of the market, or remove them altogether. A third option that has been discussed – raising the limit on how much of a Canadian telecom company may be foreign-owned from 46.7 to 49 per cent – isn’t a serious option in Kaminer’s opinion because it would not really change anything.

Opinion on the foreign ownership limit is divided, though, as a debate earlier in the day at the IIC conference showed.

Hank Intven, leader of law firm McCarthy Tetrault‘s telecommunications practice who also acts for the parent company of cellular startup Wind Mobile, argued that support for Canadian content and culture depends on a web of regulations, including foreign ownership restrictions in the telecom industry. The government should be move cautiously and consider all of Canada’s interests, he said, not just the prices of telecommunications services, before making a decision.

It would be difficult to change foreign ownership rules for telecommunications companies while leaving them as they are for broadcasting distribution companies because the two groups increasingly compete with each other, said Intven, who was one of a three-member Telecommunications Policy Review Panel the government set up in 2006. But foreign ownership of broadcasting companies might endanger the success of Canadian broadcast production.

On the other side of the debate was Lawson Hunter, counsel for law firm Stikeman Elliott LLP, where he heads the competition and antitrust group. A former senior official at Bell Canada, Hunter argued existing restrictions are “way too protectionist” and contribute to a shortfall in Canadian productivity versus other countries.

He added that removing specific restrictions on foreign ownership of telecom firms would not necessarily offer foreign investors unlimited freedom to buy up Canadian telcos. “Even removing restrictions does not mean that Investment Canada would not continue to apply to this sector,” he said, referring to the review mechanism that this year blocked a foreign takeover of Potash Corp. of Saskatchewan.

Hunter believes Canadian companies can and must compete in world markets and Canada cannot continue to protect them. But Intven noted that major Canadian telecom companies have retreated from some foreign ventures and said Ottawa should first “increase competitive intensity” in Canadian telecom before encouraging national champions to pursue world markets.

While he agreed that access to foreign investment could help smaller Canadian telecom competitors stay in business, Intven argued changes need to be made cautiously.

Paradis’ talk of getting the decisions right suggests the government agrees. But Kaminer believes a decision has to come soon, and will probably mean at least some loosening of the foreign investment limits. It may not come in time for Christmas, though.