Canada’s largest wireless player is calling on Ottawa to treat all telecom companies equally if it changes foreign investment rules for the sector, saying the only fair approach is loosening ownership requirements for both big and small firms.
Rogers Communications Inc. , which has more than nine million wireless subscribers, argued on Thursday that if Ottawa only chooses to change the rules for smaller upstarts, then it risks engaging in an “arbitrary management” of the marketplace.
Ottawa is considering a change to ownership laws that would allow foreign companies to own small telecom upstarts that have a market share of 10 per cent or less.
Current law restricts direct and indirect foreign investment in telecom companies to a combined total of 46.7 per cent.
Ken Engelhart, senior vice-president for regulatory affairs at Rogers, said his company would not object to changes to foreign investment rules, provided the rules apply to the big three incumbents, which also include BCE Inc. and Telus Corp.
“If the government wants to change the foreign ownership rules, they should change them for all players,” Mr. Engelhart said.
“The government shouldn’t be trying to jig the game by manipulating the rules. They should have an even set of rules that affect all players in the same fashion.”
Extending a change in rules to the bigger companies would spark a political firestorm over fears of potential foreign takeovers, the threat of massive job cuts and the dangers they could pose to smaller companies.
Bell is Canada’s second-largest wireless player, with roughly 7.3 million subscribers, while Telus has about 7.2 million.
It’s not clear when Ottawa will decide its course of action. Industry Minister Christian Paradis will give a speech to the telecom industry on Tuesday and is planning a trip to New York City next week, presumably to speak to Wall Street. But his office won’t say whether the visit is to consult on possible changes to foreign investment rules, or to brief analysts on Ottawa’s plans.
Sources say the Harper government’s Priorities and Planning cabinet committee deliberated Nov. 22 on whether to proceed with a proposal to allow 100-per-cent foreign ownership for Canadian telecom firms with 10 per cent market share or less.
Smaller players, including Wind Mobile and Public Mobile, have argued changes to foreign investment rules are long overdue. But those companies also want Ottawa to set aside wireless licences for smaller players during a key government auction next year.
Rogers and BCE argue that approach would be unfair, especially if Ottawa also chooses to change foreign ownership rules. According to sources, Ottawa is contemplating capping the amount of spectrum any company can purchase at 10 megahertz of bandwidth.
“We don’t think there should be set-asides or caps,” Mirko Bibic, senior vice-president of regulatory and government affairs for BCE, said in an interview this week. He argued the market share threshold being considered for such foreign ownership changes amounts to “market engineering” that would give foreign wireless players “squatter’s rights” here.
“Where does that come from? Ultimately, all it does is it makes sure that everyone can potentially qualify for foreign ownership liberalization and brand-new foreign entrants can come in – except for the three national players in Canada,” he said. “And so, why penalize those companies who are spending the most capital building a national franchise?”
At least one upstart player is also calling for Ottawa to loosen foreign ownership restrictions for the entire industry – including Rogers, Bell and Telus.
“The foreign ownership restrictions on telecom should be removed entirely,” said Bruce Kirby, vice-president of strategy and business at Public Mobile. “We don’t think they actually serve any practical policy purpose for Canada. And the only thing that they have an impact on is that the limit the sources of capital for new entrants.”
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