Canada: Roll Back Of Foreign Investment Controls Competitive Signals In The Telco Sector

Last Updated: March 22 2012
Article by Stephen Selznick

Canadians want and expect robust world-class wireless services. Not an unreasonable ask in a country marked by northerly stretching latitudes and pockets of residents separated, and in some cases isolated, by vast uninhabited distances. Underscoring this is an increasingly borderless international business and cultural environment in which we assume that our ability to receive and exchange information, and effectively compete in the international marketplace, should be ubiquitous and defined by consumer and business choice, not geographic situs. However, technical advancement is not without its cost; especially the financial cost of innovative wireless applications and the infrastructure require to make "choice" a seamless exercise to the ultimate consumer.

Canadian airwaves have always been considered a natural resource belonging to all Canadians and administered on their behalf by the Canadian federal government. Thus some level of foreign ownership control to ensure a Canadian voice and presence in the broadcasting and telecom sectors was an understandable and laudable licensing parameter. At present, foreign ownership of a Canadian telecom licensee is limited to direct control of 20%, and indirect control of not more than 46.7%, of the licensee's voting shares. Clearly this has been effective. The "Three Canadian Sisters" – Bell, Rogers and Telus – currently control over 90% of the telecom market in Canada. They also complete aggressively among themselves for the consumer's dollar and loyalty. This clearly has benefited the consumer. There is though an unseen cost to the consumer, which one can anticipate will become more poignant if we factor in the cost of remaining competitive in the provision of new and novel wireless solutions. In order to fund their operations and anticipated technological innovation, Canadian telcos are forced to borrow large sums on a debt (as opposed to equity) basis. In doing so, they incur significant debt service costs that have to be factored into the cost of their operations. In turn, these operational costs are ultimately charged back to the consumer in the pricing of telco products and services. Frustrating the laudable objective of some measure of control on foreign investment, is the reality that Canadian telco licensees are precluded from accessing more cost effective financial solutions in international common share markets which might allow them to seek investment of the same dollars from investors looking for capital appreciation and profit over regularized debt service. Prophetically, these foreign ownership controls may very well have the effect of stifling the very innovation and opportunity for choice, and thus a Canadian voice in choice, that they were intended to stimulate and protect.

Foreclosing access to foreign equity markets has a quantum effect on smaller Canadian based telcos (those residing on the fringe in the remaining 5% - 10% of the Canadian telecom marketplace), with the result that these market players face significant barriers to entry. They don't have the installed customer base necessary to generate the cash flows, and cash flow projections, required to justify the debt borrowings required to tool-up and expand. Ultimately, consumer options end up limited in a marketplace in which market share among competitors is inelastic for reasons that have nothing to do with the quality of product and service offerings. 

Yesterday the Canadian federal government announced a few steps to be taken along the road to manage these issues.

First, market share rules will apply to the anticipated 2013 government auction of the valuable long distance low frequency 700 MHz wireless spectrum (as well as the 2500 MHz spectrum auction to be held at a later date). Each of the Three Canadian Sisters will be limited to the purchase of not more than 25% of the 4 prime spectrum blocks in each of Canada's 14 regions. That leaves 1 prime block in each region (25% of the prime spectrum in these frequencies) reserved for small carriers.

Second, the federal government will also set requirements for telcos that win two or more blocks in the 700 MHz band, to guarantee services to rural populations by specific dates, so that robust service offering are not limited to financially valuable cosmopolitan regions.

Third, and perhaps most importantly, the federal government intends to remove the foreign investment/ownership controls on telcos who possess 10% or less of the market. Moreover, the foreign investment/ownership control roll back will continue to apply even if the exempt small carrier's market share grows to more than 10 percent; provided that growth is not in consequence of merger or acquisition.

Following along on the Canadian federal government's removal of foreign-ownership restrictions on fixed and mobile satellite earth stations in 1998, and more recently, the removal of foreign-ownership restrictions on Canadian satellite carriers in 2010, yesterday's announcement may signal positive Canadian federal government movement towards in-bound foreign investment in other sectors.

These proposals still require parliamentary approval, but that is not foreseen as a limiting or delaying step given the current Conservative Party majority in the House of Commons.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions