With Shaw Media being acquired by Corus, it might be worthwhile to review the ownership requirements in the Canadian communications industry.

Both Shaw and Corus are controlled by the Shaw family although both companies are publicly traded (SJR.B and CJR.B respectively on the Toronto Exchange).

Shaw is being characterized now as focused on telecom, while Corus will have the broadcasting assets. However, from a regulatory perspective, Shaw’s cable TV service is considered to be a “Broadcast Distribution Undertaking” and as such, it is governed by the Broadcast Act. The rest of Shaw’s operations fall under the Telecom Act.

Under the Broadcast Act, foreign control simply is not permitted:

3 (1) It is hereby declared as the broadcasting policy for Canada that
(a) the Canadian broadcasting system shall be effectively owned and controlled by Canadians;
…

The Telecom Act allows companies that have less than 10% of Canada’s total telecommunications services revenues to be exempted from foreign ownership restrictions. A foreign owned telecom company is permitted to grow organically beyond the 10% threshold, but it may not do so through acquisitions.

The latest Communications Monitoring Report from the CRTC showed $45.9B in total telecommunications services revenues (2014). Shaw’s 2015 annual financial reports indicated revenues of $5.488B, of which $1.080 came from Media, leaving revenues of $4.408B, including cable TV (which would be a substantial portion of the $3.752 in Consumer revenue.

So, while Shaw has less than 10% of Canada’s telecommunications services revenues, broadcast distribution continues to be a poison pill that would block foreign control of the company.

Is there too much focus on broadband access and not enough emphasis on adoption?

That is an issue I have raised frequently over the years [as early as this post from 2007]. Canada enjoys nearly universal access to broadband, but one in six Canadian households still does not have a broadband connection.

TELUS raises this important point in its submission to the Governor in Council [pdf] in respect of Bell’s appeal of the Fibre to the Home resale requirements in the CRTC’s Wireline Wholesale Decision [see full file for the appeal here].

An entire section of the TELUS submission explores this issue. The section, entitled “Encouraging greater broadband access and adoption requires a broader toolbox than that available to the CRTC,” leads off stating, “the benefits of ultra-high speed Internet access and adoption encompass economic policy, health policy, environmental policy, and more. These policy issues require policy levers that are beyond the institutional wherewithal of the CRTC.”

The section talks about measures to promote adoption that should be the focus of government, requiring an evolution in the focus from a monopoly era regulatory focus on mandated access. “Canada is now benefitting from a level of platform competition (between cable, telephone company and wireless networks) that renders monopoly-era remedies like mandated access unnecessary and harmful.”

TELUS says “Broad public policy issues demand broad policy tools.” And while the marketplace has evolved, with most Canadian homes having broadband access offered by multiple wireline and wireless networks, TELUS says “The world has moved on, but the CRTC’s toolbox has not.” TELUS tells the Governor-in-Council that “a far more productive, positive, and impactful focus for government efforts” would be to address “the other digital divide,” such as the socioeconomic factors delaying broadband adoption. “The private sector can build networks. But government can help to ensure that more Canadians use those networks.”

To fully exploit the benefits of ultra-high speed Internet, there must not only be access but also adoption. It is one thing for people to be able to sign up with a provider; it is quite another for them to do so. And while platform competition will encourage innovation and investment, it cannot, on its own, encourage adoption. This is a key area for government support.

In its submission, TELUS describes how nationally, 97% of Canadian households have access to broadband, yet only 80% subscribe. In some regions the gap between access and adoption is more acute, such as Saskatchewan where 99% of households have broadband access, but only 72% subscribe.

TELUS encourages the government “to devote resources to increasing adoption”. It observes many “important programs and initiatives that are beyond the resources and scope of the CRTC, yet of critical importance to broadband adoption.”

The TELUS submission is worth a review by all of us who support enhancing Canada’s internet economy. With so many of the submissions setting out somewhat obvious, self-serving positions, it is refreshing to read one that steps back and lays out a broader digital vision for Canada.

I’d like to think increasing adoption of digital technology is a position we can all support.

It has been 10 years since Canada held its last comprehensive review of telecommunications policy. The final report [pdf] was delivered in March 2006 and it included a recommendation that such a review be held regularly – every 5 years.

In April 2005, the Telecommunications Review Panel was struck by the Liberal Minister of Industry, David Emerson “to review Canada’s telecommunications policy framework and make recommendations on how to modernize it to ensure that Canada has a strong, internationally competitive telecommunications industry that delivers world-class services for the economic and social benefit of all Canadians.” The panel delivered its recommendations in March 2006 to Conservative Industry Minister Maxime Bernier.

For a number of years, I have been indicating that a review is long overdue [such as here, here and here].

There is much to review in Canada’s legislation and in our regulatory institutions, as I have highlighted on this site.

As Canada approaches its sesquicentennial next year, Canada’s Minister of Innovation, Science and Economic Development, Navdeep Bains, should create a new expert panel with a similar mandate to the panel of a decade ago, “to ensure that Canada has a strong, internationally competitive telecommunications industry that delivers world-class services for the economic and social benefit of all Canadians.”

An article in the Globe and Mail over the holidays merits highlighting. “Southern Ontario should be an innovation cluster, not a farm team” was authored by Patrick Deane, Meric Gertler and Feridun Hamdullahpur, the president and vice-chancellor of McMaster University, the president of the University of Toronto and the president and vice-chancellor of the University of Waterloo respectively. In their article, the academic institutions’ leaders set out to describe a vision for a Southern Ontario innovation supercluster in the Toronto, Waterloo and Hamilton regions.

As they write, “Enabling higher rates of knowledge-intensive growth in an economy as diverse and complex as Southern Ontario’s requires a break from the status quo.”

So how do we realize this ecosystem’s full innovative potential, instead of continuing as a farm team? The right mix of investments and policies will spur us forward.

• Invest in organizations that drive local economic development and quality of life, from civically minded governance bodies to cultural institutions.
• Co-ordinate investments in research areas with both the highest success rates and strongest growth potential, from regenerative medicine to quantum science; from advanced materials to environmental technologies.
• Ensure that our immigration rules make us a destination of choice for high-potential individuals.
• Turn taxpayers into equity partners and give the public a share of the upside.
• Support firms that can scale up by connecting them to successful mentors, addressing gaps in our venture financing systems and leveraging public procurement strategically.
• Inculcate a culture of risk-taking that rewards rather than penalizes failure, that fosters adaptability and learning from mistakes.

Whoa! Are these folks serious? “Inculcate a culture of risk-taking that rewards rather than penalizes failure”. Tolerates failures, yes; accepts failures, yes; but, “rewards failures”? That sounds like our current system of government subsidies for failing aircraft industries (among others). Take taxes from successful companies and give handouts to failing companies.

“Turning taxpayers into equity partners” is an equally questionable approach. Governments typically do a notoriously bad job picking winners. Do we really think that crown corporations are the way to enable higher rates of knowledge-intensive growth?

Surely we can encourage risk-taking by tolerating failure without actually rewarding it. Our ultimate objective has to be building successful ventures. Our policies need to reward success, not failure. Do these universities give degrees to students who fail? My alma mater doesn’t.

The university presidents were correct that to enable a knowledge-intensive transition in Southern Ontario’s economy we need to break from the status quo. Unfortunately, their recommendations sound too much like more of the same old approach.

What caught your eyes this year?

Looking at the analytics, these 5 blog posts had the most individual page views:

1. “Beginning of the end” [September 22]
2. “Does CRTC policy inhibit investment?” [October 20]
3. “Fair, predictable, and transparent” [March 4]
4. “Competition in telecom: net neutrality and innovation” [March 27]
5. “Is Mobile TV broadcasting or telecom?” [February 21]

I have to add an honourable mention for “Changing the name of the game“, the piece I wrote December 16, just a couple of hours after the Shaw – WIND Mobile transaction was announced. It quickly rose to be one of the top viewed posts of the year, despite only being available for the last two weeks of the year.

Thank you for following and engaging over the past year.

As I wrote last week, let me extend to you the very best wishes for health, happiness and peace in the year ahead.