INDU Committee Report

Mr. David Sweet, M.P.
Chair of the Standing Committee on
Industry, Science and Technology
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Colleague:

Pursuant to Standing Order 109 of the House of Commons, I am pleased to respond on behalf of the Government of Canada to the recommendations contained in Canada’s Foreign Ownership Rules and Regulations in the Telecommunications Sector, tabled in the House of Commons on June 16, 2010.

Given that the telecommunications industry is critical to the modern digital economy, the importance of having a telecommunications regulatory framework that promotes innovation, competition, and investment has never been greater.  As a result of this importance, the Government of Canada has taken consistent policy actions to put into place such a framework.

Relaxation of the foreign investment restrictions is a potential policy action which is often discussed in the context of contributing to the creation of a telecommunications regulatory framework that promotes innovation, competition, and investment.  As you are no doubt aware, the Government is currently engaged in a review of the telecommunications foreign investment restrictions.  A consultation document was released on June 11, 2010, in order to receive Canadians’ views on this important issue.  The consultation closed on July 30, 2010.  I was pleased with the level of response that was generated by this consultation; the Government received almost 400 submissions from interested organizations and individual Canadians.

Given the Government’s interest in this issue, I followed the Committee’s proceedings with great interest.  I was pleased to see that the Committee heard a comprehensive and broad range of testimony, from academics, incumbent and new entrant telecommunications companies, content producers, cultural groups, and others.  This testimony has conveyed the full range and complexity of the issues at hand, including rapidly changing technologies, convergence, integrated networks and product offerings, carriage, national security concerns, broadcasting, content and culture.

The Committee’s report adds to a growing body of literature that argues that there are compelling economic arguments in favour of increased foreign investment.  The Committee’s report also acknowledges that there are potential social and cultural concerns with increased telecommunications foreign investment.

Your Committee made two recommendations on which I would like to comment:

Recommendation 1

Clarify the interpretation of the "Control in Fact" test.

Response

The "control in fact" test is common to legislation in many sectors, including the telecommunications, broadcasting, aviation, and banking sectors.  It is also present in income tax legislation.  In these instances, "control in fact" is assessed on a case‑by‑case basis depending on the unique circumstances of each case.  Where guidelines or information bulletins on "control in fact" have been issued, it has commonly been in recognition of the importance of determinations of "control in fact" being conditional upon the unique facts of each situation.  In the ensuing months, the Government will be examining whether, and in what ways, it might address the concerns raised by the Committee with respect to clarification of the interpretation of the "control in fact" test.

Recommendation 2

Remove the foreign ownership restrictions in respect of satellite ownership or operation in Canada given that Canadian satellite companies (e.g., Telesat) already face competition from foreign entities in the domestic market.

Response

In the Speech from the Throne of March 3, 2010, the Government announced its intention to "open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need."

Subsequently, in Budget 2010, the Government announced that:

Consistent with the recommendations of the Competition Policy Review Panel, the Government is acting in Budget 2010 to remove the existing restrictions on foreign ownership of Canadian satellites.  This will allow firms to access foreign capital and know‑how and to invest in new and advanced technologies.  The removal of restrictions will also allow Canadian firms to develop strategic global relationships that will enable them to participate fully in foreign markets.

The appropriate legislative amendment to implement this government priority and remove the foreign ownership restrictions in respect of satellite ownership or operation in Canada is contained in Bill C‑9, the Jobs and Economic Growth Act.  Bill C‑9 received Royal Assent on July 12, 2010.  The foreign ownership restrictions in respect of satellite ownership or operation have been removed.

On behalf of the Government of Canada and as Minister of Industry, I thank the Committee and its staff, as well as the many witnesses who appeared before the Committee, be they individuals, enterprises or otherwise, for their insightful testimony.

Yours sincerely,

Tony Clement

c.c.   Ms. Michelle A. Tittley, Clerk of the Standing Committee on Industry, Science and Technology