BCE Inc.'s proposed $1.3-billion takeover of CTV Inc. will make it easier for Ottawa to navigate the controversial process of relaxing foreign ownership restrictions in telecommunications and broadcasting.
Since the Throne Speech in March, when the Conservatives announced plans to loosen the rules governing telecommunications and satellite companies, federal politicians have run up against the fact that those companies are now aiming for control of the country's major broadcast networks. If BCE's bid for CTV and Shaw Communications' deal for the former CanWest Global TV assets are both approved, all of the country's largest TV networks will be owned by telecom companies, except the CBC.
That makes foreign players a frightening prospect for cultural groups that fear new owners would cut domestic production, jobs and content.
BCE has argued that as the government investigates ways to simplify or eliminate foreign-ownership restrictions for telecom firms, the process must also include broadcasters, since consolidation has rendered the two indistinguishable.
Currently, foreign direct and indirect ownership is restricted to 46.7 per cent for telecom providers while broadcast licences may not be issued to companies controlled by non-Canadians.
BCE CEO George Cope said BCE's bid on Friday for CTV proves its point.
“We've proposed that both broadcast and telecom move toward 49 per cent, and we proposed it for a number of reasons – one of the strongest reasons is that you can't do one without the other now, because they're one and the same,” Mr. Cope told The Globe and Mail. “Maybe this will put some strength behind that argument. I hope it does and I think it should.”
Both Liberal and Conservative politicians – fearful of losing votes and mindful of the importance of culture in vote-rich Quebec – have been studying the issue, and recommending further study.
But with Shaw's bid for CanWest's TV assets in May, and Bell's big move on Friday, almost all of the country's large broadcasters are owned by domestic telecom firms.
“Maybe,” said Mr. Cope, the CTV deal “will clarify that for everyone in Ottawa.”
But it could also clarify a different message entirely. A senior regulatory source in Ottawa said that since broadcasters are now effectively owned by telecom players, the government is free to lift ownership restrictions entirely for pure telecom companies, since none of the big players would qualify without spinning off broadcasting assets.
It would also allow new wireless players to get more foreign funding, or perhaps be bought entirely by a foreign player, preserving competition that has lowered consumer prices.
Many also think that Canada's huge converged players – from BCE and Quebecor, which owns TVA Group, to Rogers , which owns CITY-TV – are less likely as foreign takeover prospects, since growth is slower and regulatory issues more uncertain, and that further domestic consolidation between these players is more likely.
Industry Minister Tony Clement said in an interview that most players seem to be okay with the first option – the least controversial and Bell's preferred – of liberalizing ownership restrictions for both telecom and broadcasting.
“I am detecting consensus at least on option one, that people don't mind bumping it up to 49 per cent, generally,” Mr. Clement said from Tianjin, China. “But there are other options as well, so I think I'm going to have to hold my fire until I complete the one-on-one consultations with players in the sector.”
Mr. Clement, however, also said that there would be "absolutely no changes" to the majority ownership rules of the broadcasting arms of these companies under his watch, though the telecom sides of the business may see changes.
"If we do go ahead with any reforms and any players want to up their foreign investment, it would have to be some sort of wall between [telecom] and the broadcasting side," Mr. Clement said, stressing, not for the first time, that it is possible to liberalize ownership restrictions without touching the politically sensitive Broadcasting Act.
