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.

Looking for more?

Get the Best of Maclean's sent straight to your inbox. Sign up for news, commentary and analysis.