Canada’s wireless industry could be lined up for a dose of competitive fervour if Ottawa launches its anticipated loosening of foreign ownership restrictions and throws open the doors to outside investors in the coming months.
Analysts widely anticipate that Industry Minister Tony Clement could unveil further details of government’s plans for changes to ownership in the communications industry during a key note speech slated for Monday morning at the Canadian Telecom Summit in Toronto.
The minister is expected to first seek the opinions of Canadians after unveiling the details of the government’s plan.
“Certainly he’ll put feelers out and see what kind of response he gets to it,” said Mark Tauschek, senior research analyst with InfoTech Research Group.
Clement has become the face of potential changes in Canada’s wireless industry after making the controversial decision last year to overrule the CRTC, and permit Egyptian-funded cellphone operator Globalive Wireless to open shop in Canada.
At that time, Clement said the decision wasn’t intended to set a precedent for the industry.
However, the move shook up existing telecom regulations —which limit direct and indirect foreign investment to 46.7 per cent —and established a new potential for companies wanting to build a presence in the country.
“You can pull that trick once, twice — you can’t really pull it three times plus,” said National Bank analyst Greg MacDonald.
“They’ve got to address the Act itself.”
Clement’s plan faces a wall of challenges both from the industry, regulators and critics who question whether easing restrictions would tighten the noose for existing Canadian companies.
At this point, federal regulators require telecommunications companies to be owned and managed by Canadians, and that includes all cable, satellite and wireless services, as well as television broadcasters. The exception to the rule is that a majority foreign, non-voting stake is permitted.
What the government said it wants to do is alter the foreign ownership rules while maintaining existing the non-voting stake rule.
Some critics have found problems with Clement’s plan, saying companies like Rogers Communications (TSX:RCI.B) are both content providers and distributors, which makes it difficult to separate their functions.
CRTC chairman Konrad von Finckenstein said that both broadcasters and telecoms work hand-in-hand, which would make it very difficult to separate their functions through regulation.
Communications, Energy and Paperworkers union president Dave Coles said Friday that he sees problems with easing restrictions on foreign investment.
“Privacy for individuals and security for the nation are both threatened by placing our critical telecommunications infrastructure into foreign hands,” Coles said in a statement.
“Missing in the whole discussion is the critical role that telecommunications plays in maintaining Canadian cultural sovereignty, and the overarching purpose of the Telecommunications Act, which is to ’perform an essential role in the maintenance of Canada’s identity and sovereignty.”’
A representative for Clement’s office said Friday he was unable to comment because he was in transit.
Other industry observers see opportunity in lifting the longtime restrictions.
“Why do we have them? What are we trying to protect?” said Ian Grant, managing director of Seaboard Group in an interview with BNN, a business news cable TV channel based in Toronto.
“There was a stage when we tried to protect Canadians from U.S. investors but that didn’t apply to everybody. Bell Canada, for example, was founded by U.S. investment, a precursor of Telus was largely owned by U.S. investors, these started communications in Canada. We haven’t really suffered because of that.”
In some ways, Canada’s wireless industry may have been hurt by its tight restrictions on who can put their money into the industry, others said.
“My personal belief is it probably inhibits competition and it probably inhibits network upgrades and currency,” Tauschek said of existing regulations.
“If you want to encourage competition, there’s probably not enough capital in Canada to build out the kind of networks that we need.”