Ottawa is preparing new measures that may soon allow foreign companies to buy small Canadian wireless players, part of the Harper government's ongoing attempts to deregulate the country's telecommunications sector.
In its budget last week, the federal government said it would open the satellite sector to greater investment from non-Canadians. But Industry Minister Tony Clement said he still has broader ambitions for reducing barriers to foreign investment in telecom. This could include allowing outside investors to acquire small players in Canada's wireless sector.
"That is one of the possibilities, but not the only possibility," he said.
The efforts to open up this country's telecom sector to more foreign capital is part of a broader bid by the Harper government to spur more competition and shake up what it regards as complacency in some sectors where non-Canadian investment has been strictly limited. The Tories are looking favourably on a request by Internet bookseller Amazon.com to set up a physical presence in Canada and planning measures to loosen restrictions on foreign investment in the uranium sector.
Similar issues are popping up in the world of television, as users increasingly turn to the web for their content.
Last week's Budget 2010 offered only baby steps on reducing barriers to foreign investment in telecom, allowing outsiders to buy bigger stakes as they like in one sector: satellite-based telecommunications carriers like Telesat and SkyTerra.
The budget has also led to confusion in the industry, as telecom companies struggled to understand the government's intentions. Mr. Clement says the Conservatives are mindful of the fact that their March 3 pledge to open up the telecom sector has fired up speculation.
"I am conscious of the fact that by mentioning it in the Speech from the Throne it's become a matter of commentary and that affects marketplaces and so on. So I don't want this to drag on forever."
The minister says Ottawa intends to move relatively quickly on further liberalization, but will first launch public consultations on how to proceed on measures beyond satellites. "I do want to allow the industry a bit of time to breathe on it. But at the same time we will be coming to a conclusion and acting on it."
This week, a Parliamentary committee launched a review of foreign ownership limits on Canadian broadcast, radio and telecom companies, setting the stage for what is expected to be a heated political debate about the challenges of protecting local content in an increasingly digital age.
The Standing Committee on Industry, Science and Technology met in camera on Tuesday and appointed Conservative MP Michael Chong to chair a review of foreign ownership restrictions under various federal acts regulating telecommunications, broadcasting and radio companies and "any other legislation deemed appropriate," according to minutes posted on a parliamentary website Wednesday.
The minutes said the review was triggered by a cabinet decision in December to overturn a Canadian Radio-television and Telecommunications Commission decision and approve the wireless licence of Globalive Wireless Management Corp. The wireless company operates Wind Mobile, a cell phone company that is largely financed by a Cairo-based communications giant.
Mr. Chong declined to comment and fellow committee members Anthony Rota and Robert Bouchard could not be reached.
Industry observers greeted news of a broader parliamentary review as the clearest sign yet that Ottawa may be laying the groundwork for a regulatory overhaul of foreign limits at a time when some communications companies are scrambling for capital and others are losing business to more nimble Internet-based competitors.
"This signals to me that we are going to see meaningful change and it could be substantial change. It is time that someone looked forward here and paid attention to how technology is changing this business," said Lawson Hunter, a veteran communications lawyer and former senior executive with BCE Inc.
Sophie Émond, vice-president of regulatory and government affairs with Astral Media Inc., said the company will participate in the committee's review process, and called foreign ownership rules "a key pillar of our broadcasting system."
On the telecom front, the last time the Tories received guidance on the topic was nearly two years ago when a competition review panel recommended a phased liberalization of foreign investment rules for telecom.
The Compete to Win report in 2008 called for the Tories to first allow foreign investors to acquire Canadian telecom companies that have a market share of 10 per cent or less - in other words, new entrants or small players.
If Ottawa was to let foreign firms snap up small telecom players but not let incumbents access to the same outside capital the changes could pose a big problem for established firms, a list that includes Rogers, Bell and Telus.
The same 2008 competition policy review also recommended a second phase of liberalization five years later that would ratchet back restrictions on investment rules governing both telecommunications and broadcasting sectors.
With files from Susan Krashinsky in Toronto
Editor's Note: This online article has been updated to reflect the following correction: Sophie Émond, vice-president of regulatory and government affairs with Astral Media Inc., said foreign ownership rules are "a key pillar of our broadcasting system." Incorrect information appeared in the original newspaper version of this article and an earlier online version.
Steven Chase