After months of delay, Industry Minister Christian Paradis unveiled the
government's telecom strategy last week, setting out the details of the
forthcoming spectrum auction and tinkering with longstanding foreign
ownership restrictions. Spectrum allocation and auctions, which focus
on the availability of
frequencies used to provide wireless services, involves fairly
technical questions that few outside the industry follow closely. Yet
the impact of spectrum policy has far reaching effects on consumers,
since the right policies can foster greater competition, better
services, and lower prices.
While the headlines have focused on changes to the foreign ownership
rules, my weekly technology law column (Toronto
Star version, homepage
version) echoes my initial post on the decision by arguing the
government's policy choices are rather timid.
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Appeared
in the Toronto Star on March 18, 2012 as Ottawa Foregoes Bold Vision
for Telecom
After months of delay, Industry Minister Christian Paradis unveiled the
government's telecom strategy last week, setting out the details of the
forthcoming spectrum auction and tinkering with longstanding foreign
ownership restrictions.
Spectrum allocation and auctions, which focus on the availability of
frequencies used to provide wireless services, involves fairly
technical questions that few outside the industry follow closely. Yet
the impact of spectrum policy has far reaching effects on consumers,
since the right policies can foster greater competition, better
services, and lower prices.
While the headlines have focused on changes to the foreign ownership
rules, the government’s policy choices are rather timid. Its strategy
to facilitate greater telecom competition focuses on two key
issues. First, it opts for a spectrum cap that will limit the
amount of the best “beachfront” spectrum any single company may hold.
When combined with a use-it-or-lost-it requirement that should guard
against carriers hoarding spectrum without using it, the policy is
designed to ensure that every market in Canada has at least one major
wireless carrier not named Bell, Telus, or Rogers.
Second, the government has opened the door to increased foreign
investment. The current foreign investment restrictions will be lifted
for any carrier with less than ten per cent market share (effectively
anyone other than the big three). Restrictions remain in place for
broadcasters and broadcast distribution companies. The move will
put to rest the controversy over Globalive that dogged the last
spectrum auction, when questions arose as to whether it fully complied
with foreign ownership restrictions.
After heavy lobbying from all stakeholders, the government’s policy
choices reflect a desire for compromise. For example, the choice of a
spectrum cap falls between the set-aside demanded by smaller players
and the fully open auction favoured by the incumbents.
The primary goal appears to be the creation of a strong, fourth carrier
in the market. The spectrum caps and foreign ownership changes are both
geared toward giving a fourth player the necessary spectrum and access
to capital to compete with Bell, Telus and Rogers. That suggests
consolidation of the current smaller players in the hope of a single,
stronger competitor - possibly foreign owned - challenging the
incumbents.
With the proposed approach, large international players such as Verizon
or Deutsche Telecom will be limited to buying up (or investing in)
smaller Canadian companies with a long-term vision of building market
share. Had the government fully liberalized the market, those telecom
giants could have considered strategic investments in the big three and
caused a far bigger shift in the competitive environment.
The chief barrier to the complete removal of foreign ownership
restrictions is presumably concerns over the cultural policy
implications of opening the broadcast sector to greater foreign
ownership. Many observers appear to assume that Canadian ownership and
content requirements go hand-in-hand, fearing that a foreign owned
broadcaster would be less likely to comply with Canadian content
requirements. Yet there is little reason to believe this to be so.
Foreign owned businesses regularly face Canadian-specific regulations
and there is little evidence that Canadian businesses are more likely
to comply with the law than foreign operators. Cultural businesses may
raise particular sensitivities, but broadcasters dependent upon
licensing from a national regulator can ill-afford to put that licence
at risk by violating its terms or national law.
The government could have shaken up the Canadian market by removing
telecom foreign ownership restrictions altogether and considered
dropping foreign ownership limits on broadcasters as well. The Paradis
incremental, go-safe approach might make for good politics, but passing
on a bolder vision is a lost opportunity.
Michael Geist holds the Canada
Research Chair in Internet and E-commerce Law at the University of
Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online
at www.michaelgeist.ca.
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