TORONTO – In light of Industry Minister Clement’s comments on foreign investment on Monday, it wasn’t long before the topic du jour came up again at Tuesday’s ‘Regulatory Blockbuster’ panel, an annual highlight of the Canadian Telecom Summit.
And while all six of the panelists supported the idea in theory, sparks flew, albeit in a good natured way (well, most of the time), on how best to loosen Canada’s foreign ownership restrictions.
Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, said his company favours the approach put forth by CRTC chair Konrad von Finckenstein to boost foreign ownership limits from 47% to 49%, while still keeping the control in fact test in place.
“The most practical perspective is to raise the foreign ownership limits in a way that still allows for Canadian control of broadcasting and telecom because that’s the only way you’re going to get the foreign capital that we apparently desire and the foreign expertise, and, you won’t change the Broadcasting Act which means you’ll have symmetry,” he told the packed session.
Globalive’s vice-president of regulatory affairs and carrier services, Ed Antecol, was quick to challenge Bibic on his approach.
“That is not going to attract one iota more of foreign capital”, he said. “That will do absolutely nothing. If you want to attract significant amounts of capital to build out your new networks, you have to do more than tweak the foreign ownership levels to 49%. You have to remove that restriction and get rid of that control in fact test,” which he went on to describe as “a subjective examination of shareholder tradeoffs.”
Perhaps surprisingly, since the two often disagreed during the session, Telus’ SVP of regulatory and government affairs, Michael Hennessy, agreed with Antecol.
“(Bell’s and von Finckenstein’s suggestion) makes no sense for achieving the government’s objective of attracting more capital for infrastructure investment, and you need the infrastructure investment to have true facilities-based competition,” he said firmly. “That’s the bottom line.”
Chris Peirce, chief corporate officer for MTS Allstream, took issue with Bibic’s use of the word ‘symmetry’, calling the present situation anything but symmetrical.
“Companies like Bell Canada or Telus are able to fund the main parts of their capital investments from their free cash flows because they still have returns on large portions of their business,” he said in reference to an earlier comment saying the current regime benefits incumbents at the expense of competitors.
“It’s untenable for us in Canada, with a market of 30 million people total and the geographic land mass that we have, to think that we’re going to have the risk capital, because that’s what competitor investment is, it’s a risk capital, that’s going to be available to fund a broadband or network expansion,” added Peirce.
Globalive’s Antecol agreed with him, saying that it’s even tougher for startups like his company (whose brand name is Wind Mobile, of course) to raise Canadian capital.
“It’s a much different prospect than an incumbent that has millions of customers and an established track record of revenues and EBITDA”, he said, before needling Bibic that Bell too once relied on foreign capital (from U.S. investors).
John Lawford, counsel for the Public Interest Advocacy Centre (PIAC) offered a more cautious endorsement of upping foreign ownership when moderator Greg O’Brien, editor and publisher of Cartt.ca, pointed out foreign investment could prove fruitful in bringing more cash to push networks out farther, or perhaps work the other way where large multinationals in control could simply ignore the gaps in broadband coverage here.
“We have a concern, that’s shared by the unions, that when foreign ownership takes a larger position in Canada, you lose some control,” he said. “It’s already hard enough for these guys, (gesturing to his fellow panelists), to provide vertical access across the country.”
Ken Engelhart, SVP of regulatory for Rogers, said that he too supports the idea of opening up foreign ownership, but only for the cable and telecom industries and leaving cultural companies like broadcasters alone.
“Cable and telecom are basically the same business now, but there’s no good reason to do it for radio and television,” he said. “The pipe businesses need a ton of capital and they have very little cultural content, not zero but little, while radio and TV have a lot of cultural content – they don’t need much capital. It’s not capital intensive.”
Hennessy, whose company owns no content (where Rogers owns lots and Bell owns a 15% stake in CTVglobemedia) called Engelhart’s culture reference “the biggest red herring being put on the table in this debate.”
“How do you separate broadcasting assets from cable if you own both (and want to take advantage of potentially new foreign investment, should the rules change)?,” he asked. “It’s very simple. You have to sell one of them, you can’t own it anymore – it has to be divested. That is a fundamentally easy business decision to make.”
“That’s a good answer except that it ignores this practical reality”, Bibic shot back. “You’re both advocating, Ken and Michael, for cable networks to be regulated under the Telecom Act when it comes to the cable video business. You haven’t answered how you’re going to segregate cable regulations.”
“That train has left the station,” Antecol rejoined. “The Minister is not changing the Broadcasting Act so cable companies will still be regulated under the Broadcasting Act if they’re distributing video content.”
