Originally published in Blakes Bulletin on
Communications, March 2010
On March 4, 2010, The Honourable James Flaherty, Minister of
Finance, delivered the federal Conservative government's 2010
Budget. Of particular interest to the telecommunications industry
is that the budget provides for the removal of the existing
restrictions on the foreign ownership of Canadian satellites.
However, in light of the March 3, 2010 Speech from the Throne,
companies are now speculating about the Conservative
government's strategy with respect to foreign ownership.
The Speech from the Throne created a heightened expectation in
the telecommunications industry with the statement that: "our
Government will open Canada's doors further to venture capital
and to foreign investment in key sectors, including the satellite
and telecommunications industries, giving Canadian firms access to
the funds and expertise they need." This revelation hinted at
the potential for a broad elimination of foreign ownership
restrictions on telecommunications firms, including wireless
providers, which would increase the access of Canadian firms to
foreign capital and to allow them to participate more fully in
This was also fueled by the CRTC's Globalive decision in
late 2009, which held that Globalive, a new entrant in the Canadian
wireless market, was controlled in fact by non-Canadians and
therefore not eligible to operate as a wireless carrier in Canada.
This decision was overruled by the Federal Cabinet, which many in
the industry believed was a sign of that the federal government was
prepared to make changes to foreign ownership policy in this
sector. (See our December 2009 Blakes Bulletin on Communications: Canadian
Cabinet Reinterprets Foreign Ownership Rules.)
The current regulatory framework in Canada places limits on the
amount of foreign ownership permitted for all telecommunications
common carriers. These limits include a requirement that at least
80% of a carrier's board of directors must be individual
Canadians and that Canadians must own at least 80% of its voting
shares. Where the telecommunications carrier is held by a holding
company, non-Canadians are permitted to hold up to 33-1/3% of the
voting shares of that holding company. As well, in both cases, the
carrier must not be otherwise controlled in fact by
Despite the expectations created by the Speech from the Throne,
Thursday's budget only made reference to the removal of
restrictions as they relate to satellite operators but did not
address the foreign ownership of other types of Canadian
telecommunications carriers. This has caused a great deal of
speculation as to why the government backed down from its initial,
It is possible that the government views changes to satellite
ownership as a less controversial start to the liberalization
process as there are relatively few players and they already
compete on the international stage. However, starting the
liberalization with satellite operators may have more to do with
the fact that they do not hold broadcasting licenses.
Liberalization of this narrow portion of the telecom sector
therefore avoids the thorny issues regarding content and culture
under the Broadcasting Act. These issues have frequently
been raised as impediments to proceeding with foreign ownership
changes, due to the convergence of telecom and broadcasting in the
business models of many industry participants.
It is still not clear how or when the government will expand its
policy to other sectors of the telecommunications industry but it
is likely that the liberalization of foreign ownership restrictions
for other sectors of the telecommunications industry will be
introduced at some point, along the lines suggested in the
Competition Policy Review Panel Report in 2008.
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