On March 14, 2012, the Honourable Christian Paradis,
federal Minister of Industry, announced proposed amendments to the Telecommunications Act to lift certain
restrictions on foreign ownership in the telecommunications sector.
These amendments were included in a package of measures which also
addressed elements of the Policy and Technical Framework for the upcoming
spectrum auctions for the 700 MHz and 2500 MHz bands.
Currently, under the Telecommunications Act,
non-Canadian entities may not own, directly or indirectly, more
than 46.7% of the voting shares of a Canadian carrier (33.3% at the
holding company level and 20% at the operating company level), and
may not otherwise have "control in fact" of such a
carrier. The Minister's announcement provides that the
Telecommunications Act will be amended to exempt
telecommunication carriers that hold less than a 10 percent share
of the "total telecommunications Canadian market revenue"
from these foreign ownership restrictions. The Government's
stated objective for implementing this change is to improve access
to capital for smaller carriers. Going forward, such carriers will
continue to be exempt from foreign ownership restrictions if their
market share increases above the 10 percent market share threshold,
other than by way of a merger or acquisition. Restrictions on
foreign ownership under the Broadcasting Act would remain
in place for such carriers for their broadcasting distribution
activities. The provisions of the Investment Canada Act
and the Competition Act would also continue to apply where
review and notification thresholds are met. A draft of the proposed
amendments has not yet been released.
These proposed amendments have been anticipated for some time.
In 2006, the Telecommunications Policy Review Panel and
in 2008, the Competition Policy Review Panel which were
both expert panels appointed by the federal government, issued
recommendations in favour of such amendments. Furthermore, in the
2010 Throne Speech delivered by the Governor General,
the federal government announced its intention to "open
Canada's doors further to venture capital and to foreign
investment in key sectors, including the satellite and
Concurrently with the announcement on foreign ownership
restrictions, the federal government also announced it will apply
caps in the upcoming 700 MHz and 2500 MHz spectrum auctions to
guarantee that both new and incumbent carriers have access to the
spectrum up for auction. Spectrum auction caps limit the amount of
spectrum that a company can acquire in a given auction. In the case
of the 700 MHz spectrum, which will allow carriers to deploy 4G LTE
(i.e., next generation) networks and services, a limit on prime
spectrum will be imposed on incumbents, which will effectively
reserve prime spectrum for new entrants and regional providers.
Finally, the federal government also announced it will: (i)
apply specific measures in the auction to see that rural parts of
Canada have access to advanced services in a timely manner; (ii)
improve and extend the existing policy on roaming and tower sharing
to improve information sharing and to facilitate agreements between
companies to slow the proliferation of new cellphone towers; and
(iii) reserve a portion of the 700 MHz spectrum for public safety
users such as police and firefighters across Canada.
Michelle Lally chair of the firm's
prestigious Competition Law and Foreign Investment Group and
immediate Past Chair of the National Competition Law Section of the
Canadian Bar Association. Pierre Fournier-Simard
has successfully completed the Quebec Bar in December 2011 and is
now working as an articling student in the Corporate
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