It’s time for the feds to toss foreign ownership rules

If you listened to Industry Minister Maxime Bernier and officials of BCE Inc. at the recent Telecom Summit in Toronto, you might get the mistaken impression that the federal government has decided the telecom market should be regulated only when necessary, and as a general rule, telecom policy will be dictated by market forces.

The federal government tabled a Parliament policy proposal recently which would direct the Canadian Radio-television and Telecommunications Commission (CRTC) to regulate the industry only when necessary.

But the same rule doesn’t apply to the government itself when it comes to the issue of foreign ownership.

The proposed directive to the CRTC was good news to BCE Inc., and officials at the dominant carrier were quick to praise the government for stepping in and supposedly ensuring that no unnecessary restrictions were in place.

But if the Conservative government was truly in favour of regulating only where it is necessary, it should either eliminate the foreign ownership restrictions on carriers with the stroke of a pen, or it would clearly state why the regulations are necessary. It has done neither.

Currently, the Telecommunications Act forbids foreigners from owning more than 20 per cent voting shares of a carrier, and from owning more than one-third of the voting shares of a holding company that owns a carrier.

Note this does not prevent foreign carriers from actually offering facilities-based telecommunications services or from offering local residential service to consumers.

What the foreign ownership restrictions do is prohibit companies such as AT&T (or Microsoft, or Exxon for that matter) from buying one of the telcos, or from starting its own facilities-based telco – unless at least 53 per cent of voting shares are held by Canadians, with the foreign company providing financing through non-voting shares, bonds or some other method that prevents them from being able to hire and fire directors.

The prevailing argument in favour of foreign ownership restrictions seems to be based on two concerns. One is the possibility of lifting restrictions in broadcasting, meaning that a company based in the U.S., rather than in Toronto, could decide what music someone in Nanaimo, B.C., will listen to. Or something like that. The second concern lies in the essential nature of local service. If you live out in the boonies (or at Toronto’s Yonge and Eglinton, for that matter), having local phone service is as necessary as plumbing and electricity. So it’s better to have your local phone service controlled by a rich tycoon living in Toronto, Calgary or Antigonish, than by a rich tycoon living in New York, Berlin or Dubai – or something like that.

It should be noted Bernier is not making these comments, but he did say the government wants to study the effects on the Canadian economy before making a decision on foreign ownership.

He did not say there’s any evidence it’s actually necessary to regulate foreign ownership.

Therefore, the federal Cabinet is not practicing what it preaches. On the one hand, it wants to tell the CRTC to regulate “only when necessary,” as if the CRTC is imposing unnecessary restrictions just for something to do. On the other hand, Industry Canada does not plan to lift foreign ownership restrictions.

Greg Meckbach is the editor of Communications & Networking.

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