Reflection is rampant on what a majority Harper government will do with its new-found powers. Top of the list is the question of whether it will loosen the foreign ownership limits for telecoms.
The Conservatives are well known for wanting to liberalize the current rules. Academics and consultants such as Michael Geist and Mark Goldberg have also called for greater foreign investment in Canadian telecoms. Most banking analysts feel the same way.
Konrad von Finckenstein, CRTC chief, is also in favour, but frets about how to deal with the slew of integrated telecom-media behemoths that he has recently blessed: Bell Media, Roger Media, Quebecor, Cogeco and Shaw (but not Telus). In other words, how do you open the gates for more foreign investment in telecoms but not broadcasting?
Those in favour of changing the existing rules believe that doing so could usher in more investment in network development, more competition, less bandwidth throttling and far greater consumer choice. The current incumbents that dominate the telecoms, media and Internet markets in Canada would, so many appear to believe, be forced to compete head-on with the big global players – AT&T, France Telecom, T-Mobile, Japan’s NTT, China Telecom – for customers.
The goals are laudable, but are they realistic?
Some suggest that movement on the issue will be slow because the Tories do not have a clear strategy to deal with it. Yet, the Government has had several options on the table since 2006:
- Removing all foreign investment limits;
- Raising the limits from the current twenty percent to just under half;
- Permitting foreign investment only in new companies that have less than 10 percent market share.
The only strategy the Government doesn’t have is keeping the status quo. Expect change soon.
The Government’s Cabinet Directive in 2006 instructing the CRTC to rely on market forces to the maximum extent feasible also tips its hand. Indeed, the Government tried to do an end run around the law through another Cabinet Directive overturning the CRTC’s decision to reject Globalive’s (Wind Mobile) bid to become a new wireless player on the grounds that it was not Canadian owned and controlled, as the Telecommunications Act (sec. 16) demands.
A Federal Court in February stopped that effort in its tracks. At least a formal change to the Telecommunications Act’s foreign ownership rules would have the virtue of bringing the law into conformity with the facts on the ground, i.e. Wind Mobile is up and running.
Even if we assume that allowing greater foreign ownership is a good thing (and I will offer a few more reasons below as to why it could be) many pesky issues remain. For example, what if the Government decides to just go with option No. 1: Allowing greater access to foreign capital markets for new comers?
The intended beneficiaries, of course, are Wind Mobile, Mobilicity and Public Mobile, but would it also apply to Quebecor, a company that is a newcomer to wireless but well-entrenched across the rest of the media? Somehow that doesn’t seem right.
That raises the larger issue about how to disentangle telecoms from broadcasting. The fact that telecoms and broadcasting are becoming more intertwined is becoming clearer by the day as Netflix gains a stronger footing in Canada and as Google and Apple appear routinely before the CRTC and Parliamentary Standing Committee on Canadian Heritage.
Indeed, when the Americans negotiated the NAFTA and WTO deals they anticipated that digitization would soon dissolve the boundaries between telecoms and broadcasting and bring the ‘cultural industries’ within the reach of the ‘global trade regime’ as a result of ‘technological forces’. MIT scholar Ithiel de Sola Pool argued much the same thing in his 1983 classic, Technologies of Freedom, many years earlier.
