Told you so

When the Industry Minister delivered his Interim Report on the Digital Economy, he chose to delay the decision on foreign direct investment in telecommunications.

With respect to foreign ownership, I have been consulting throughout the summer on whether the current restrictions constitute an impediment to growth in the wireless sector. Those consultations will continue as we proceed with our discussions on the 700 MHz spectrum.

And this just makes sense. After all, how spectrum is allocated and who is eligible to compete for it — and pay for it — are interrelated issues. And so we will consider foreign investment rules and decisions around the 700 MHz auction together, as part of an integrated regulatory approach.

The foreign investment determination is certainly a pre-requisite to the 700 MHz auction. That doesn’t mean that there should have been a 6 month overhang of the capital markets.

Last June, I warned about delays in determining the outcome of the foreign investment review.

Once you open a process and there’s uncertainty as to which direction is going to be followed, it creates an overhang for the capital markets. The [impact on the] ability of companies to raise capital during that interim period of uncertainty can’t be overstated.

It could be extremely damaging to small players and large players alike to have a lengthy period of uncertainty when you’ve got such a capital intensive business.

There are a lot of players in the Canadian telecom market who are impacted by the delay in a decision, but it isn’t really surprising. Even before the formal consultation was announced, I warned that this wasn’t going to happen this year:

Telecom analyst Mark Goldberg said he doesn’t see any changes coming this year due to the complexity of the issue. A minority federal government will also make it challenging to pass legislation.

“I don’t think people should be holding back on their purchases waiting for a Verizon store to open up in their shopping mall soon,” said Goldberg of Mark Goldberg and Associates.

There is a cost to uncertainty. The government needs to clarify the rules.