On March 14, 2012, Canada's Minister of Industry announced
proposed changes to the existing foreign ownership restrictions on
Canadian telecommunications service providers and announced certain
measures relating to the upcoming auctions for 700 MHz spectrum and
2500 MHz spectrum.
The Telecommunications Act will be amended to lift the
foreign ownership restrictions for telecommunications service
providers that hold less than a 10-percent share of the total
Canadian telecommunications market based on revenue. These
providers will continue to be exempt from such restrictions when
their market share grows (other than through acquisition or merger)
above 10% of the Canadian market. Existing Canadian ownership
restrictions provide that non-Canadians may not own, directly and
indirectly, more than 46.7% of the voting securities of a
telecommunications carrier and may not otherwise exercise
"control in fact " of such carrier through contract or
otherwise.
The removal of the foreign ownership restrictions follow from the
commitment made by the government to examine foreign investment
rules for the Canadian telecommunications market. They are intended
to remove barriers to investment in smaller providers and to allow
such providers to access further capital. The government believes
this will result in increased competition among existing providers
and will also encourage new entry in the Canadian
telecommunications market. The amendments are to become effective
prior to the upcoming auctions of the 700 MHz spectrum band
expected to take place in the first half of 2013 and of the 2500
MHz spectrum expected to take place early in 2014. It should be
noted that that similar foreign ownership restrictions contained in
the Broadcasting Act which apply to broadcasting entities
in Canada are not affected by the announcement and will continue to
apply.
The Minister's announcement also described various measures to
be implemented relating to the upcoming auctions for 700 MHz
spectrum and 2500 MHz spectrum. These measures are also intended to
promote the government's stated goals of increasing competition
and investment in the Canadian telecommunications market.
Spectrum caps will be applied on the amount of spectrum available
to bidders. The caps are intended to enable four or more providers
in each region to obtain spectrum in both the 700 MHz band and the
2500 MHz band and also to enable new entrants to acquire spectrum.
Unlike the process used in the Advanced Wireless Services (AWS)
spectrum auction of 2008, the government will not identify specific
blocks of spectrum to be "set-aside" for certain bidders,
but will allow all bidders, subject to the spectrum caps, to choose
blocks of spectrum based on equipment ecosystem preferences and
business plans. A portion of the 700 MHz spectrum will be reserved
for exclusive use by public safety users across Canada.
In order to ensure that acquired spectrum is deployed by
telecommunications service providers in a timely manner, successful
bidders acquiring spectrum will be required to deploy new advanced
services to 90 percent of the population in their coverage area
within five years of licensing and to 97 percent within seven years
of licensing.
The government also intends to change, following stakeholder
consultation and input, the existing rules and policies governing
roaming and tower sharing arrangements to further support
competition.
As part of the next steps, the government will carry out
consultations with interested parties on the implementation details
of various measures announced and the form, process and rules for
the upcoming spectrum auctions.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2012 McMillan LLP
