Do foreign ownership restrictions in Canada’s Broadcasting Act create a poison pill for foreign ownership of Canadian telecom carriers?

A number of recent articles discuss the benefits of increased foreign ownership in Canada’s telecom sector. Those articles have focused on restrictions contained in the Telecom Act. Last Friday, a detailed “explainer” appeared on The Hub, discussing “A brief history of foreign ownership restrictions in Canada’s telecom sector”.

However, most carriers in Canada also hold broadcasting licenses, even if the companies are not involved in radio or TV stations. The Broadcast Act comes into play for their TV distribution businesses (cable or IPTV). As I observed last week, I have not seen discussion of liberalization of foreign ownership limits contained in the Broadcasting Act. Under that 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, and it is recognized that it includes foreign broadcasting undertakings that provide programming to Canadians

“Broadcasting undertaking” is a defined term under the Act: “includes a distribution undertaking, an online undertaking, a programming undertaking and a network”. Under the Broadcasting Act, “Network” is defined as: “includes any operation where control over all or any part of the programs or program schedules of one or more broadcasting undertakings is delegated to another undertaking or person, but does not include such an operation that is an online undertaking”.

As I noted two years ago, the 2006 report of the Telecommunications Policy Review Panel [pdf, 1.6 MB] and the 2008 Competition Policy Review Panel report [Compete to Win] each recommended liberalization of restrictions on foreign investment in order to boost competition.

The 2008 Competition panel wrote:

Telecommunications and Broadcasting

• For several years, Canada has been reorienting its telecommunication policies to place greater reliance on market forces in recognition that competitive access to information and communications technology facilitates business productivity throughout the economy.
• Canada’s telecommunications policy was subject to an extensive review in 2005–2006 by the Telecommunications Policy Review Panel, which concluded that reducing restrictions on foreign ownership would increase competitive intensity, improve industry productivity, and be more consistent with Canada’s open trade and investment policies.
• Accordingly, the Panel recommends the adoption of a two-phased liberalization of foreign ownership rules pertaining to the telecommunications and broadcasting sectors. In the first phase, foreign telecommunications companies would be permitted to establish a new Canadian business or acquire an existing Canadian telecommunications company with a market share of up to 10 percent. In the second phase, liberalization of foreign ownership would be undertaken for both telecommunications and broadcasting in a way that would be competitively neutral.

The Telecom Act was updated to accommodate that first phase; the Broadcasting Act was not.

There are all sorts of cultural sovereignty issues that come to mind when considering complete liberalization of foreign ownership in the broadcast sector. However, is there really such an issue for broadcast distributors – companies that deliver cable TV or IPTV services?

Perhaps the most obvious cure would be to declare that broadcast distributors are telecom undertakings, and explicitly remove this class from the ownership restrictions in the Broadcasting Act. If we consider the metaphor of streaming video services, we do not consider an internet service provider (ISP) to be a broadcast distribution undertaking. Do we still need to maintain a different ownership regime for transporting linear channels?

There are still wholesale access issues that could need adjudication by the regulator, but we are talking about liberalization of ownership, not deregulation of the sector. Couldn’t the current regulations remain intact?

Foreign ownership restrictions under the Telecom Act apply only to Bell, Rogers and TELUS, the only service providers with telecommunications revenues exceeding 10% of the national telecommunications services market. However, broadcasting foreign ownership restrictions continue to serve as a poison pill, even for smaller telecom service providers that also provide TV distribution. Does that continue to make sense?

Looking beyond companies that own radio and TV broadcasters, perhaps it is time to examine the first steps toward creating an antidote for broadcasting’s foreign ownership poison pill.

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Postscript: Writing on The Hub, Peter Menzies covered a similar theme in his post today with “When it comes to telecoms, does Canada need to get over its foreign ownership phobia?”

In a recent newsletter, the Canadian Anti-Monopoly Project (CAMP) delivers an overly simplistic rebuttal to Sean Speer’s plea for increased liberalization of Canada’s telecom market.

You should read both. Both pieces have their shortcomings, especially in failing to consider the impact of foreign ownership restrictions in the Broadcast Act that would also need liberalization in order to accommodate broadcast distribution licenses (such as cable TV / IPTV).

The CAMP perspective fails to acknowledge real challenges faced by facilities-based companies that invest tens of billions of dollars in digital infrastructure each year. There is a cost associated with restrictions on the sources of capital, costs that inevitably factor into the prices paid by consumers. CAMP says “Current ownership rules block foreign stakes in large incumbents precisely to prevent further consolidating market power in the sector.”

Consider an alternate scenario. As a colleague recently observed privately to me, “Shaw sold to Rogers, increasing concentration, because they didn’t have the risk tolerance for raising the capital they needed to upgrade to competitive infrastructure. Obviously an American partner would have had the capital.” Liberalized foreign ownership might have provided an alternate option for the Shaw family to exit, resulting in more competition, not less.

Would a foreign buyer have emerged? Who knows. There are so many other problems with Canada’s telecom policy framework, not the least of which are considerations I discussed last week.

But we won’t know.

Each restriction on capital investment reduces degrees of freedom. Each translates into lost opportunities.

As I have written many times, we need to look at the industry like a chess master, thinking three or four moves ahead. Anticipate consequences of each path – intended and unintended. How would foreign ownership liberalization impact jobs? Ownership of intellectual property rights? Responsiveness to rural, remote, and indigenous investment?

It is worth noting that CAMP’s newsletter includes a line, “regulatory actions have supported strong independent carriers like Sasktel”. Sasktel is hardly an independent carrier. It is the provincially owned incumbent in Saskatchewan. The new entrants in that province are Bell, Rogers and TELUS, none of which received regulatory support for market entry.

Avoid overly simplistic takes. Telecom policy requires a much more sophisticated approach.

As I was marking these days of reflection in the Jewish calendar, I found myself asking, where is the vision for Canada’s national digital strategy?

Sure, there is a Digital Charter, a pronouncement heavy on market intervention, following the tradition theme of “Tax it, regulate it, subsidize it”. But, the Digital Charter is light on how we drive increased national productivity. Where is the strategic vision?

When I look at the official mandate for the responsible federal agency, I read “Innovation, Science and Economic Development Canada’s (ISED) mission is to foster a growing, competitive and knowledge-based Canadian economy.” The department says its “raison d’être” is to work “with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment, enhance Canada’s innovation performance, increase Canada’s share of global trade, and build a fair, efficient and competitive marketplace.”

It sounds good so far, but what is the strategy to achieve these bold objectives? It is somewhat trite to say that the department’s “raison d’être” – its very reason for being – is to improve investment conditions, enhance innovation performance, and build a fair, efficient and competitive marketplace.

How does the department plan to do that? Indeed, considering the current government has been in power for 9 years, how did the department plan to do that? Where is the strategy that has been guiding them?

Regulation in the absence of an overall strategic vision can be harmful. In rejecting Senate Bill 1047, the AI safety legislation, California Governor Gavin Newsom wrote: “Given the stakes – protecting against actual threats without unnecessarily thwarting the promise of this technology to advance the public good – we must get this right.” Arguments were made that the provisions of SB 1047 are too broad and could stifle innovation, and could hinder AI’s development itself.

I took a look at ISED’s Plans and Reports web page. There is a link to a “Science and Technology Strategy” and another link to “Canada’s S&T strategy”. The “Science and Technology Strategy” page is now archived. It dates back to the 2007, when the Conservatives were in power. The “Canada’s S&T strategy” also dates back to the Conservative era, publishing a report in 2014 (“Seizing Canada’s Moment: Moving Forward in Science, Technology and Innovation 2014”), and launching a consultation (“Developing a Digital Research Infrastructure Strategy”). The Digital Charter sets out 10 principles. Are we doing enough to tie these to the departmental raison d’être, to “improve investment conditions, enhance innovation performance, and build a fair, efficient and competitive marketplace.”

A lot of these government consultations produce reports that sit on shelves. But, isn’t it helpful to have a somewhat official strategy point of reference to guide the development of more specific objectives and tactics? When handing out billions of dollars in government subsidies, shouldn’t the Minister be able to point to a strategy document to justify certain priorities over others?

This isn’t the first time that I have come back from Rosh Hashana with broad policy reflections. Three years ago, I wrote “How did we get here? How do we move forward?” and wrote:

So, how did we get here?

A number of years ago, in “Digging ditches and digital policy”, I cited a paper from the Institute for Research in Public Policy that said “Like other countries, Canada is once again engaging actively and more openly in industrial policy. In fact, it has a profusion of industrial policies, what it lacks is a strategy.”

No clear strategy. No clear objectives. No scorecard for measuring progress.

What are we trying to accomplish? How do we measure success? As I have said many times [here and here], I would like to see us start with clear objectives: “Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to the objectives.”

How do we celebrate success in digital policy, if we aren’t clear about what we are trying to do?

How do we move forward?

If we want to create appropriate incentives for private sector investment, we can’t keep changing the rules (see: Calvinball). A recent essay on The Hub asks “what incentives do firms have to incur the risk and costs of investment in new network infrastructure if the government can later unilaterally grant access to their competitors at rates determined by regulators?” As the authors write, “The goal should be to create the conditions for investment, innovation, and technological development rather than micromanage the market to produce a particular number of market participants.”

Set clear objectives. Align activities with the achievement of those objectives. Stop doing things that are contrary to those objectives.

A few weeks ago, I wrote about competing visions for a digital future being laid out in the US. Where is the competing vision from His Majesty’s Loyal Opposition, Canada’s apparent government-in-waiting?

At some point, the Opposition Critics have become known as Shadow Ministers. Being a critic is important in a Westminister-style government. It is their role to hold the Minister to account. But, it is a lot easier to criticize than to develop policy and strategies from scratch. A Canadian election is coming at some point in the next year, and all signs point to a Conservative majority. Casting stones is a lot easier than gathering them together to build something. It’s even harder to build something that will endure.

For the past 9 years in opposition, we have heard what the Conservatives won’t do. It is time to transition from critics to leadership. Where is the vision for Canada’s digital future?

Maybe it’s the time of year. Last October, I wrote “Regulators regulate”, saying “If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.”

Regulators feel the need to regulate. They can’t help themselves.

That was the impression I had reading last night’s press release from the CRTC, issued after the markets closed.

Roaming fees for Canadian travelers are often inflexible, causing consumers to pay a flat fee of $10 to $16 per day regardless of how much they use their cellphone. The CRTC’s priority is to ensure that Canadians have the flexibility to choose an affordable plan that best meets their needs.

The CRTC doesn’t mention that consumers have access to plans that include roaming to many of the most popular destinations. My personal plan includes US roaming. Others in the family have plans with US and Mexico.

As TD Securities wrote,

Canadian consumers have multiple options for roaming outside Canada, including a plethora of plans that include free U.S. roaming. Furthermore, wireless pricing overall has never been better for consumers. We see no big problem to be fixed, and we expect minimal impact from this review.

The CRTC addressed its letter to Bell, TELUS, and Rogers, saying “Roaming fees for Canadian travelers are often inflexible, causing consumers to pay a flat fee of $10 to $16 per day regardless of how much they use their cellphone. The CRTC’s priority is to ensure that Canadians have the flexibility to choose an affordable plan that best meets their needs.”

Freedom Mobile has plans available that include data as well as unlimited talk and text for roaming in 92 countries. There are add-on passes that provide similar access for up to 101 countries for as little as $30 for 30 days.

TD’s report concluded with an admonishment to the CRTC, saying that roaming isn’t an area where intervention is required. “Consumers who do not want to shop around for better wireless rates neither need nor deserve regulatory protection, any more than consumers who choose to pay premium prices for the similar food at a specialty grocery store.”

Shana tova. Have a good year.

This year, Rosh Hashana, the two-day holiday marking the Jewish New Year, begins Wednesday evening, October 2. Rosh Hashana, literally “head of the year”, is the start of the year 5785.

Over the past few years, I have talked about how Rosh Hashana is very different from the celebrations marking the arrival of January 1. It is a time of reflection and introspection. We review the previous year, and look ahead to the next. But the past year has been unlike any other in my lifetime. For Jews around the world, 5784 was a troubling year. For the first time in nearly 80 years, it has been a challenging time for Jews in Europe and North America to wear signs that visibly identify ourselves.

As I noted last year, the first month in the Jewish calendar, Tishrei, is filled with holidays – what should properly be termed Holy Days. Combined with Rosh Hashana and Yom Kippur, there are 7 holy days this month. Rosh Hashana is on the 1st and 2nd of Tishrei; Yom Kippur is on the 10th of Tishrei (October 12); Sukkot runs from the 15th to the 22nd of Tishrei. Last year, the last day of Sukkot fell on October 7, a day that changed the world for Jews around the world. This year, 6 of the 7 days fall on Thursdays and Fridays, meaning that observant Jews need to take a lot of time away from the office. My office will close Wednesday (October 2) at 2pm, and remain closed for the rest of the week.

In last year’s post, I wondered if the world was more tolerant than I experienced in my early working years. I asked that in advance of October 7 and the disturbing waves of antisemitism that we have experienced over the past year. Would businesses and schools make reasonable accommodations for observance of the holidays? Please try to help your employees, your colleagues, your students, by making those conversations more comfortable.

Seven months ago, I wrote “Defending my identity”, trying to capture some of my feelings on the 5 month anniversary of the horrific terrorist attacks by Hamas. October 7, 2023 marked the start of a global campaign attacking Jewish indigeneity in Israel, a global campaign that began even before Israel’s military entered Gaza to respond to the attacks. I encourage you to re-read that piece to get an appreciation of what Jews like me are feeling as we approach the first anniversary of October 7.

Followers of this website know that I frequently travel to Israel. Israel is an intrinsic part of my Jewish identity. When Jews pray, we face toward Jerusalem. Our prayers and our bible contain countless references to Israel. Major Jewish festivals are tied to agrarian timetables and practices in Israel. I am not an Israeli citizen, but I have family who are.

The events of October 7, 2023 have been deeply troubling to me. The response – or more correctly, the lack of moral leadership – by Canadian officials has been disturbing. The sacking of British Columbia’s NDP cabinet member Selina Robinson demonstrates a pervasive rot – or latent antisemitism – among many political leaders.

I am tired of politicians thinking that the way to respond to antisemitic acts is to write on Twitter that “This is not who we are” or claim that “Hatred and violence against Jewish communities have no place in Canada.”. Condemnations on social media are no match for intimidation by throngs calling “Death to the Jews”. Tweets are ineffective against firebombings and shots fired at synagogues and Jewish community centres.

In defending freedom of expression, I have frequently quoted Aaron Sorkin’s brilliant speech from The American President. “You want free speech? Let’s see you acknowledge a man whose words make your blood boil, who’s standing center stage and advocating at the top of his lungs that which you would spend a lifetime opposing at the top of yours.”

Still, there are limits to those speech rights. As CIJA said in a statement, “We cannot allow mob-driven demonstrations to obstruct our right to participate fully in society.”

Which brings me to how you fit in to help in defending my identity. In resigning from British Columbia’s provincial NDP caucus, Selina Robinson wrote, “I don’t need your hugs and your emojis. What my community needs however, is for you to stand up to antisemitism.”

Call out hate when you see it online. Tell your elected officials that antisemitism isn’t just a problem for Canada’s Jews. Demand action.

And every once in a while, I’d be OK with a hug.

Last year, I observed that the journey we travel over the course of a year often takes some detours, presenting challenges along the way. “It is rarely a smooth, incident-free trip. Sometimes, it feels more like we are riding a roller coaster. Still, we press ahead, continuing to approach each day with a positive outlook, moving forward one step at a time.”

Who knew what this past year was going to be like?

May we see the unconditional release of the hostages being held in Gaza. May the year ahead be marked by good health, by personal and professional growth, and may it be a year of peace for all. Shana tova.