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Tories to launch plans for telecom shakeup

Industry Minister Tony Clement.

Jacques Boissinot/The Canadian Press

The Harper government is expected to launch consultations on scaling back foreign-investment limits - changes that could shake up the future of Canada's $41-billion telecom industry.

Telecom sector sources anticipate the process could be kicked off as early as Monday, when Industry Minister Tony Clement is scheduled to deliver a keynote address at the Canadian Telecom Summit in Toronto. It's a major annual event for the sector.

The minister declined to talk on Thursday about the exact date he'll start canvassing Canadians on how to open up the telecom sector to more foreign investment, saying only that he would "be doing so as quickly as I can." He cautioned he still needs "final go-ahead" for the process.

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Mr. Clement said he wants to lay out options for scaling back foreign ownership restrictions when he seeks feedback from Canadians. Current restrictions limit direct and indirect foreign investment in telecom to a combined total of 46.7 per cent.

Although the Industry Minister wouldn't reveal the alternatives, telecom-sector sources say a variety of scenarios could be on the table.

The range of options for consultation is believed to include:

- Capping direct foreign investment in a telecom provider at 49 per cent, an idea floated by Canadian Radio-television and Telecommunications Commission chairman Konrad von Finckenstein. This would keep companies in Canadian control.

- Allowing foreign companies to set up new telecom providers or buy Canadian ones with a market share of 10 per cent or less. Any scaling back of restrictions on outside investment in bigger domestic players would only happen in a second phase of changes. This recommendation, which has been backed by two independent panels, is believed to be Ottawa's favourite.

- Relaxing ownership and control limits across both the telecom and broadcasting sectors.

Other options up for discussion could include:

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- Relaxing foreign ownership and control limits for telecom providers generally, but not for broadcasters. This could be complicated because major Canadian telecom firms are also in the broadcasting business.

- Relaxing foreign ownership and control limits for wireless players only.

The Conservatives have already demonstrated how determined they are to overturn existing foreign ownership restrictions, part of their economic prescription for making Canada more competitive.

In December, the Harper cabinet overruled the CRTC - Canada's telecom regulator - and approved the wireless license of Globalive Wireless. It operates Wind Mobile, a cellphone company largely financed by a Cairo-based communications giant.

The CRTC had ruled that because the venture was heavily dependent on debt financing and technology from Egyptian wireless heavyweight Orascom Telecom, a foreign firm was really in control.

Critics charged that the Harper government was rewriting foreign ownership rules on an ad-hoc basis. Other telecom players complained that this rendered the previous wireless frequency auction unfair because other would-be entrants had stuck carefully to existing rules on how much foreign ownership and control was allowed.

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The Canadian telecom sector generates about $41-billion in annual revenue from the wireless and wireline sides of the business.

Relaxing foreign-investment rules and allowing more outside capital to fund telecom activity in Canada could lead to a spate of big mergers or takeovers in Canada. Big international players could buy small Canadian startups and intensify competition in the wireless sector.

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About the Author
Parliamentary reporter

Steven Chase has covered federal politics in Ottawa for The Globe since mid-2001, arriving there a few months before 9/11. He previously worked in the paper's Vancouver and Calgary bureaus. Prior to that, he reported on Alberta politics for the Calgary Herald and the Calgary Sun, and on national issues for Alberta Report. More

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