1.1 Please describe the: (a) telecoms; (b) audio-visual media distribution; and (c) internet infrastructure sectors in Canada, in particular by reference to each sector's: (i) importance (e.g. measured by annual revenue); (ii) 3-5 most important companies; (iii) whether they have been liberalised and are open to competition; and (iv) whether they are open to foreign investment.
Annual revenues in the Canadian telecommunications and broadcasting sectors are approximately $44.8 billion and $17.1 billion, respectively. The five largest telecoms and cable companies (BCE Inc., Rogers Communications Inc., Shaw Communications, TELUS Communications Company and Québecor Media Inc.) captured 85% of all communications revenues. The next five largest companies captured 9%.
Three companies (Bell, Rogers and Québecor) offer services in all 11 communications markets, capturing more than 60% of total revenues. There are an estimated 500 internet service providers (ISPs) in Canada. However, the five companies noted above dominate the market. Significant restrictions are imposed on foreign ownership and control in the Canadian telecommunications and broadcasting sectors (see the response to question 1.4).
1.2 List the most important legislation which applies to the: (a) telecoms; (b) audio-visual media distribution; and (c) internet, sectors in Canada.
Telecommunications service providers (TSPs) are subject to the Telecommunications Act, under the responsibility of the Minister of Industry. TSPs include facilities-based telecommunications common carriers (Canadian Carriers) and resellers. The majority of the regulation focuses on Canadian Carriers, which include incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs). ILECs are subject to more onerous regulatory requirements than CLECs and other TSPs. Small ILECs are subject to lighter regulation than the larger ILECs. There are approximately seven ILECs, 35 SILECs and 65 CLECs registered with the Canadian Radio-television and Telecommunications Commission (CRTC). Canadian Carriers may operate as an ILEC in one region of the country and a CLEC in another region.
The regulation of the equipment and activities that make use of the radio spectrum, as well as the allocation and management of the radio spectrum itself, is subject to the Radiocommunication Act, also under the responsibility of the Minister of Industry.
Undertakings engaged in broadcasting (both programming transmission and distribution) are subject to the Broadcasting Act, under the responsibility of the Minister of Canadian Heritage.
1.3 List the government ministries, regulators, other agencies and major industry self-regulatory bodies which have a role in the regulation of the: (a) telecoms; (b) audio-visual media distribution; and (c) internet, sectors in Canada.
The CRTC, an independent administrative agency that operates at arm's length from the government, regulates and supervises the broadcasting and telecommunications sectors. The powers and jurisdiction of the CRTC are set out in the Telecommunications Act, the Broadcasting Act and the Canadian Radio-television and Telecommunications Commission Act.
The Governor in Council (i.e., the federal Cabinet) has the power to direct the CRTC on a number of matters, including directions of general application on broad policy matters under both the Telecommunications Act and the Broadcasting Act, and to impose conditions on the issuance, amendment or renewal of a licence under the Broadcasting Act. The Governor in Council is also authorised to set aside or refer back to the CRTC any telecommunications decision or any decision to issue, amend or renew a licence under the Broadcasting Act.
The Commissioner for Complaints for Telecommunications Services, an independent, industry established consumer complaints agency, deals with complaints regarding services the CRTC has forborne from regulating.
The Minister of Industry is responsible for the regulation of the equipment and activities that make use of the radio spectrum and the allocation and management of the radio spectrum.
1.4 Are there any restrictions on foreign ownership or investment in the: (a) telecoms; (b) audio-visual media distribution; and (c) internet, sectors in Canada?
A Canadian Carrier must be Canadian-owned and -controlled unless it holds less than a 10% share of total Canadian telecommunications services revenues, as determined by the CRTC.
The definition of "Canadian" is based on citizenship, permanent resident status and/or the percentage of share capital owned and controlled by non-Canadians. Effectively, non-Canadians may own up to 46.67% of the voting shares of a Canadian Carrier through direct ownership of 20% of the voting shares of the corporation and the ownership of 33.33% of the voting shares of the Canadian Carrier's parent corporation. 80% of the members of the board of directors of the Canadian Carrier must also be Canadian. In addition, non-Canadians are not permitted to control a Canadian Carrier, whether on the basis of personal, financial, contractual or business relations or any other considerations relevant to determining control (control in fact).
The restrictions on foreign ownership do not apply to resellers and other TSPs that only operate switches, routers or other exempt transmission apparatus.
Similar foreign ownership restrictions apply in the broadcasting sector. There is, however, no exception for broadcasting entities that have less than a 10% share of broadcasting revenues. In addition to the restriction on non-Canadians indirectly owning more than 46.67% of the voting shares of a broadcasting undertaking, the chief executive officer of the licensee and 80% of the board of directors of the licensee must be Canadian. An Independent Programming Committee must be established if: (i) Canadians own less than 80% of the voting shares of the parent corporation; (ii) the chief executive officer of the parent corporation is a non-Canadian; or (iii) fewer than 80% of the directors of the parent corporation are Canadian.
Non-Canadians can own non-voting shares of broadcasting undertakings or Canadian Carriers to increase their overall equity participation. However, the equity participation of non-Canadians is a factor considered in the control-in-fact test.
To read the full article please click here.
Originally published by Global Legal Group
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.