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In our
Telecommunications Bulletin of March 2012, we wrote about the
proposed changes to the existing foreign ownership restrictions on
Canadian telecommunications service providers contained in the
Telecommunications Act announced by Canada's Minister of
Industry on March 14, 2012. The proposed amendments to the
Telecommunications Act were included in the 2012 omnibus Canadian
Federal budget bill (Bill C-38) and came into effect on June 29,
2012, just before Parliament's summer recess.
As a result of the amendments, foreign ownership restrictions
have been removed on telecommunications service providers that hold
less than a 10% share of the total Canadian telecommunications
market based on revenue. As previously noted in our March 2012
Bulletin, these 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 Canadian Radio-television and
Telecommunications Commission (CRTC) reported in its 2011 Communications Monitoring Report that total
Canadian telecommunications revenues for 2010 were $41.7 billion.
With the current 10% revenue threshold being just under $4.2
billion, foreign ownership restrictions will not be applicable on
any of the current telecommunication service providers in Canada
other than the current three largest carriers.
The announcement of the Minister in March 2012 also described
various measures to be proposed relating to the upcoming auction
for 700 MHz spectrum intended to promote the government's
stated goals of increasing competition and investment in the
Canadian telecommunications market. In this connection, the
Canadian government issued a consultation paper (Consultation on a Licensing Framework for Mobile
Broadband Services (MBS) — 700 MHz Band) on the
licensing considerations related to the auction format, rules and
processes, as well as on conditions of licence for spectrum in the
700 MHz band and seeking comments from interested parties.
One of the changes described in the consultation paper is the
change to the format of the upcoming auction. Industry Canada has
examined advances in auction theory and design and the development
of new auction formats and rules in other countries. Following such
examination, Industry Canada proposed the combinatorial clock
auction (CCA) format for the 700 MHz auction rather than the
Simultaneous Multiple Round Ascending (SMRA) auction format which
has been used in most of the previous spectrum auctions in Canada
and is still popular in other countries. The CCA format is a
variation on the SMRA format and involves the bidding on a package
of licences rather than individual licences as in the SMRA format.
This change in format to the CCA format and the bidding on packages
of licences eliminates the risk under the SMRA format that a bidder
will win some but not all of the licences needed for its business
case and thereby be left stranded with licences that cannot be used
as effectively.
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.
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