INST Committee Report

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NDP DISSENTING OPINIONS

Foreign Investment Restrictions Applicable to Telecommunications Common Carriers

Brian Masse, MP
NDP Critic for Industry Science and Technology
April, 2003

“Leading with such a review (on foreign ownership restrictions) is like trying to fix your four flat tires on your car by filling up the gas tank. Until you have fixed the real problem, the one preventing you from moving forward, you are not going to go anywhere. More foreign capital won’t get competition moving. It won’t level the playing field.”

William Linton, Call-Net Enterprises Inc.

The Minister of Industry, Allan Rock, has called upon the Standing Committee on Industry, Science and Technology to conduct a review of Canada’s restrictions on foreign direct investment (FDI) in the telecommunications industry. Some have argued that there is an imbalance between investment in the sector and Canadian public policy on sovereignty; creating barriers to innovation and growth in the sector.

As part of this study, the Committee heard from a number of witnesses, and has produced this report. I cannot support the recommendations in the report as there was not sufficient proof demonstrated that the removal of restrictions on FDI will achieve balance in the telecommunications sector. In addition, there was considerable testimony that suggests the industry as a whole is in desperate need of a more comprehensive study prior to any decisions that will have irreversible effects on the industry, and Canadian consumers. Furthermore, testimony clearly demonstrated that there is no consensus on this particular issue, while the common theme of the need for a broader study emerged. Ironically one of the recommendations in this Committees’ report is for further study, but after lifting FDI restrictions. I believe this is putting the cart before the horse, and will outline dissenting recommendations for consideration.

List of Dissenting Recommendations

The Government of Canada strike a House of Commons committee to undertake a comprehensive review of the governance structure of both telecommunications and broadcasting sectors in Canada to study technological convergence. Included in these examinations, as a minimum, should be the examination of:

(a)

the regulatory framework governing Canada’s telecommunications sector with a view to determining the relationship between it and monopoly, competition, foreign direct control of ownership, broadcasting distribution undertakings, consumer pricing, employment and national sovereignty;

(b)

approaches that the federal government could adopt to continue to facilitate broadband deployment in rural and remote communities;

(c)

federal departmental organization (Industry Canada and Canadian Heritage); and

(d)

the jurisdictional role and mandate of the Canadian Radio-television and Telecommunications Commission (CRTC).

That the Government of Canada amend the Telecommunications Act to require a mandatory five-year review of the Act by a parliamentary committee.

Information and communication technologies have always played a crucial role in the development of social, economic and public policy. During the past several years, Canadians have witnessed and been introduced to a number of services that have had considerable impact on their personal and professional lives. In more recent years, the rapid pace of technological change has complicated legislative relationships, regulations, and departmental responsibilities. Despite all these factors, many witnesses identified that Canada is a world leader in terms of service availability, consumer options and pricing.

“Firstly, I would like to reiterate a comment made by Mr. Sabia of BCE, when he was before this Committee last week. Mr. Sabia said, and I agree, “Canada has gotten it right.”

Donald Ching, President and CEO Sasktel

The actual mandate of the Committee’s review included measuring FDI and national interests: however much of the testimony centred on a philosophical debate of lifting restrictions and the relationship it would have on increased competition and the injection of fast capital. It should be again noted that several witnesses expressed concerns of other issues facing the industry. When determining lifting restrictions on FDI, a number of fundamental questions and answers need to be considered, such as:

•

Is there an imbalance in Canadian public policy compromising access to capital for national interests?

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Could lifting FDI restrictions correct this imbalance?

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Can new FDI improve national sovereignty?

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Does new FDI improve access to rural and remote areas?

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Would lifting FDI restrictions result in new capital, and if so, would it be enough to make a difference for the industry?

•

Is a total elimination of FDI restrictions the only way to increase access to capital?

•

Will consumers benefit from reduced prices?

What will happen with the lifting of FDI restrictions are a series of probabilities that could complicate or worsen the current state of the industry. Additional questions about lifting FDI restrictions that need more analysis are:

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Will Canadians lose control of a very important piece of infrastructure?

•

Will Parliament have introduced changes to an industry prior to a full evaluation of the entire industry?

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Will it be impossible or fiscally improbable for Parliament to reverse these changes should new recommendations emerge following a comprehensive review?

•

When FDI restrictions are lifted will it make investment complicated knowing there is a more comprehensive review by the House and Senate?

•

Could this FDI scoped approach undermine the industry further, and result in detrimental impacts on Canadian consumers and culture?

•

Is this issue really about control, as there are no current restrictions on non-voting foreign investment?

Dissention from Committee Recommendations

Despite the presence of several alternatives to the immediate lifting of FDI restrictions, the recommendation to the Government of Canada in this report is to eliminate all Canadian ownership requirements. This approach is one that opens our entire telecommunications infrastructure to the world and could lead to the complete elimination of Canadian controlled companies. It also ignores the reality that many companies have not reached their limit of voting FDI options, and can still attract more in the current legislative environment.

In addition, it does not address the consequences of such a decision in terms of national sovereignty, consumer protection, employment and the relationship of this action to that of a more comprehensive review as suggested in the recommendations found in this report. What we do know is that Canadians are concerned about this issue:

“Canadians don’t want further foreign ownership. There’s a Decima poll out that suggests that 72% of Canadians are opposed to the kinds of changes that are potentially being contemplated and advocated by others.”

Mr. Brian Payne, Energy and Paperworkers Union of Canada

For these reasons, and others, I believe it is crucial to not act on FDI regulations in isolation.

Aside from the above noted issues there are several others matters worth noting and requiring further analysis. They involve access to capital, fair competition, infrastructure sharing agreements, new entrants versus existing entrants, trade policy strategies and several issues surrounding culture. The mere fact that many industry companies, labour representatives, experts, organizations, academics and government institutions have raised a variety of issues in many different contexts warrants careful consideration of a national asset prior to the most radical option: the complete elimination of FDI restrictions.

In conclusion, I do not believe that denying FDI at this moment is the end of the process or debate, rather it should start a more comprehensive examination of issues facing this industry as a priority. To quote Alexander Graham Bell “When one door closes another opens; but we often look so long and so regretfully upon the closed door that we do not see the ones which open for us.” The Committee’s work has not been in vain, rather it has opened a more important door that we need to walk through first. This in itself will lead to some improvements to attract capital cheaper for companies as Mr. Leonard Asper articulated during witness deliberations, “That’s why even the perception that the market is more open would help Can West and other companies with international ambitions to have those kinds of discussions with international companies that have a more valuable stock price or currency.”