Whither Clement’s Telecom Pledge?

The industry minister promised to open Canada's telecom sector to foreign investment. We're still waiting for the legislation.

Last March, Industry Minister Tony Clement pledged to open the telecom sector to foreign investment. There was a throne speech announcement, with much fanfare. Whither that pledge now?

To paraphrase Yogi Berra, it's lost but making good time. At least, that appears to be the case following a House committee report that slipped under the radar recently.

As parliamentary business came to a close in June, the industry committee, after hearing from expert witnesses, released a report on foreign ownership in the telecom sector. The report was most notable for what wasn't in it: a consensus. The federal parties could only agree on two rather staid recommendations.

Foreign investment and ownership in the Canadian telecom sector has been on Ottawa's radar for years. The Telecom Policy Review Panel in 2006 and the Competition Policy Review Panel (chaired by former BCE CEO Lynton “Red” Wilson) in 2008 both recommended loosening the restrictions. Right now, the Telecom Act restricts foreign investment in the sector to a 20 per cent stake in a domestic Canadian carrier and 33 per cent in its holding company.

In June, Clement launched a public consultation on the issue, releasing a discussion paper that proposed three possible ways to change those restrictions.

Industry Canada’s first option, reflecting CRTC chair Konrad von Finckenstein’s recommendation to confront network convergence, suggested loosening the telecom and broadcasting foreign investment restrictions to 49 per cent at both the operating and holding levels of a company. Canadian control would be maintained at a minimum of 51 per cent.

The second option followed up on a recommendation made by both the Telecom Policy Review Panel and the Red Wilson panel, which said the foreign ownership restrictions in the Telecom Act should be removed for small players that control no more than a 10 per cent share of the Canadian telecom market. The big, incumbent players would continue to face the existing restrictions.

The third option was to scrap the restrictions for everyone – throwing the door open, as it were.

The industry committee report, released a couple of weeks after the discussion paper, served as a platform for the parties to take positions on, or should I say opposition to, Clement's three options.

The industry minister at some point will have to choose one of his options, or a variation on one of them, and table legislation to implement it. But the positions of the opposition parties indicate that all three options have the makings of a non-starter in the House.

The Liberals say they don’t want to see the restrictions loosened until a "thorough review" – either departmental or by an expert panel – is conducted so as to better understand the potential impacts on broadcasting. In an age of convergence, cultural groups say you can't tinker with telecom without affecting programming. Opening up the telecom sector means opening up cable as well, and the foreign-owned companies that control the pipes could influence the content within them – or so the argument goes. The Liberals say they’re prepared to consider Clement’s first option – opening up the restrictions under the Telecom Act to 49 per cent – but, for now, are voicing their support for the existing restriction of 20 per cent in the carrier and 33 per cent in the holding company.

The NDP and the Bloc Québécois, surprisingly, agree with the Liberals, calling for more study of the issue. The NDP wants to wait two years to see what effect new entrants like Wind Mobile, Public Mobile, and Mobilicity – which purchased wireless spectrum in a 2008 government auction – have on the market. The Bloc says it wants to stick with the existing restrictions and undertake a study on the potential for a new communications act that merges telecom and broadcasting regulation.

So Clement’s options aren’t looking so good. He needs the support of at least one party to move any legislation through the House. If the minister goes ahead with the second or third option – both of which propose letting new, foreign-owned players into Canada’s telecom sector – the legislation would probably be dead in the water. Option one could make some headway if the Tories can bring the Liberals aboard. It depends on which option Clement prefers.

The industry minister hasn’t played all of his cards, but it’s safe to say that the Conservative government favours open markets. The Tories suggested as much in this year’s speech from the throne. At that time, the minister said he wanted to apply the Investment Canada Act to the telecom sector. That effectively means going with option three, or scrapping the existing restrictions under the Telecom Act and relying on the national security and “net-benefit” tests under the Investment Canada Act. The statement naturally sent Ottawa's lobbyists buzzing.

But Clement cautioned that he was only considering legislation. Then the government took a step back, and launched consultations. When in doubt, consult. So here we are. Clement’s consultation closed July 30, and in the fall he’s expected to put forward legislation.

What the minister introduces in the House will depend on whether the government wants to make compromises. It also depends on what political considerations are in play.

The Tories could always table legislation to implement option three and completely open the doors to the sector. It would certainly represent a policy statement and a political position. Who knows? By the fall the Conservatives may also want to precipitate an election, in which case they could make the bill a confidence vote.