Dispelling fears of foreign telecom ownership in Canada

Time for Cabinet to lift restrictions and welcome the barbarians at the gate

Time to welcome the barbarians at the gate. (PhotographLayne/Flickr)

There was quite a bit of speculation leading up to Tuesday’s speech by Industry Minister Christian Paradis at a telecom conference on whether he would address the festering issue of foreign ownership. The speech came and went, and Paradis–although he visibly gave the speech–continues to be, policy-wise, the Invisible Man.

Despite the fact that two successive government-appointed panels–one Liberal, the other Conservative–urged lawmakers to lift restrictions that limit foreign entities from having any meaningful ownership of Canadian telecom companies with an actual physical infrastructure, Paradis et al. continue to show a lack of backbone to do what’s necessary. As both panels have pointed out, removing those restrictions would not only bring Canada in line with every other developed nation, it would also improve competition and lead to better services and prices.

So what’s the problem? The government is obviously falling prey to one, some or all of the fears that have always dogged this issue. In the spirit of trying to help Cabinet grow a pair, here’s a list of those fears, why they’re bogus and how they can be overcome in the minds of the public:

1. It’s complicated. It’s hard to loosen the ownership restrictions on telecom but not on broadcasting. And that’s a problem because the companies are one and the same now, right? Wrong. Foreign ownership limits on broadcasters can easily be maintained even as the ones on telecom are lifted. The only thing that might complicate this is Number Two:

2. Domestic mergers. One thing is for sure: as soon as those telecom ownership restrictions loosen up, Canada’s big telecom and cable companies will move to merge because remaining independent would make them easy takeover targets for the likes of AT&T and Comcast. Bell and Telus will form Bellus and Shaw and Rogers will form Shawgers. The spectre of the four big getting bigger scares many Canadians. On the telecom side, though, it shouldn’t. Do Bell and Telus really compete? Do Shaw and Rogers? On the broadcast side, it’s a different story. It’s probably a no-brainer that Global and CityTV shouldn’t be allowed to merge, which means someone would have to spin off one or the other. That runs counter to all the broadcasting acquisitions these telecom companies have spent the past few years making, which is probably what they’ve been filling Cabinet’s ears with in their private lobby sessions. And that’s why this is the odds-on favourite reason for what’s holding things up. But there’s no reason to be concerned about that: Vertical integration is a stupid idea anyway, so if the government lifting foreign ownership limits in telecom indirectly ends that, all the better.

3. Job losses. The main reason to get rid of the ownership limits is to get new money and companies into Canada. As Wind Mobile’s financial backer Naguib Sawiris recently pointed out, his backdoor into the country has resulted in 800 jobs being created. This is obviously a very desirable result. But one of the big worries is that a change in the law would lead to the likes of Bell and Rogers–if they don’t merge with other big Canadian players–being bought out by foreign companies, which–the theory goes–would then result in job cuts. That–if it happens at all–may or may not be a bad thing. Can anybody really argue that Canada’s telecom companies are lean and mean fighting machines? Perhaps employing an overbloated labour force is part of what’s keeping prices so high, so trimming the fat may be just what the doctor ordered. That said, there is always the reverse: As the government review panels asked, and as Sawiris pointed out, why aren’t Canadian telecom companies operating in other countries? Perhaps if they didn’t have it so cushy here, they’d expand outward and become global companies, which means they would add jobs. Lots of them. So, if you want to really keep job numbers low, then keep those ownership walls up and keep coddling your companies.

4. Goodbye to CanCon. Another scary ghost says it’s hard enough getting Canadian companies to fund and promote Canadian programming, so it’ll be even harder to get foreigners to do the same. Wrong. As with the broadcasting ownership laws, the rules here need be pretty simple: Contribute X dollars to a programming fund and air X hours of Canadian content or you’re not allowed to operate in Canada. That’s it, that’s all.

Believe it or not, the video game industry is highly instructive when it comes to those last two fears. With no foreign ownership restrictions and the right government tax incentives, global companies such as Ubisoft and Electronic Arts have established major, world-leading operations in Canada that create hugely successful global products–game franchises such as Assassin’s Creed, Splinter Cell and even FIFA Soccer (do any Canadians even play soccer?!?!). These games may not be about Inuit struggles in the arctic or the plight of cod fishermen in Halifax, but they are cultural exports nevertheless. They’re also more successful than any TV shows or movies Canada has produced and tried to export. Almost half of Ubisoft’s employees and a third of EA’s workers–including high-up executives and producers–live and work right here in Canada–but they call the shots around the world.

What more encouragement does the government need? For Canadians and the government alike, there is no reason to fear the barbarians at the gate.




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Dispelling fears of foreign telecom ownership in Canada

  1. And, come on.  Rogers and Shaw wouldn’t merge and become Shawgers.  They’d merge and become RAW!  Way cooler.

  2. Well  I can’t imagine the foreign teleco’s could be possibly worse than the grasping vultures we have now. Worse case scenario would be more of the 5th rate service and crooked pricing we’ve come to expect.

  3. Agree with the article. The Canadian telecom industry desperately needs this kick in the pants to get some actual competition going for the benefit of Canadian consumers.

    Also, to add to the video game example; Canadian studio Bioware is a recognized leader in the RPG (role playing game) genre, having created titles like Baldur’s Gate, Mass Effect and Dragon Age.

  4. Full disclosure: I work for one of the big companies listed here and normally don’t comment on telecom. But I have to challenge a few things here:

    1) “Do Bell and Telus really compete? Do Shaw and Rogers?”

    Are you kidding? Of course they do. Bell, Rogers and Telus compete nationally for consumer and commercial wireless business. Bell and Telus dominate small business wireline in their home territories, but compete nationwide (with Allstream and others) for large commercial wireline. And the telcos and cablecos compete furiously in their home markets for consumer wireline business.

    Most of the action is in consumer wireless and wireline business, and all players have invested billions in the last few years to step up their services and networks. Look at Bell Fibe, 100+Mbps Internet service and a nationwide rollout of 4G wireless data if you need to see competition in action.

    2) “Vertical integration is a stupid idea anyway, so if the government lifting foreign ownership limits in telecom indirectly ends that, all the better.”

    I think Comcast would dispute that, and I don’t think you’ve made a case here. There are also certain media properties which have been very useful to their telco owners recently, serving as leverage in negotiations. Separating content production/ownership from distribution is going to be a delicate task at this point.

    3) “Can anybody really argue that Canada’s telecom companies are lean and mean fighting machines?”

    Who knows? You haven’t made the case at all. But here’s the result of 1 minute’s research:

    Company   Revenue per Employee
    Comcast    371,931
    Verizon      548,174
    AT&T         468,257
    Shaw         387,863
    Telus         282,802
    Rogers      485,498
    Bell           359,940

    That’s a pretty cursory evaluation, but considering American economies of scale, I think the Canadian operators look pretty good (with the possible exception of Telus).

    Unfortunately, the telecom funding decision won’t be based on any rational evaluation. But it would be nice if the press offered a little more depth than this. Instead, you’re telling Canadians a bunch of things without bothering to support them.

    • Fibe 100mb?Where is that?Not across country I can tell you that.Its a small footprint that covers very few.Are they lean and mean?No they are protected from competition by walls around the country.Only competition is in cell.After that its 2 companies fighting for your $ and if one raises prices the other follows suit “To better align themselves with the competition” rather than actually competing.

  5. Didn’t the FCC just nix AT&T gobbling up T-mobile based on unfair competition?  Should we expect the same intervention here in Canada?

  6. Whatever happens I’m sure our business will remain important to them :) .

  7. …Close the Gates…Close the Gates…Close !

  8. You  do know that soccer is the most played sport in Canada, right?

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