Telecom Update: Federal Government Announces Plans to Ease Foreign Ownership Restrictions on Telecom Companies
On March 14, 2012, Industry Minister Christian Paradis announced that the federal government would ease foreign ownership restrictions on telecom companies in Canada and put in place caps on upcoming wireless spectrum auctions to allow smaller wireless companies increased access to the market.
In the Industry Canada news release, the Minister announced that the Telecommunications Act would be amended to lift foreign investment restrictions for telecom companies with less than a 10% market share and that the Government would be applying caps in the upcoming spectrum auctions to “guarantee that both new wireless competitors and incumbent carriers have access to the spectrum up for auction”.
The Government also introduced several other measures, including the improvement and extension of tower sharing and roaming policies and imposing obligations on 700 MHz spectrum licence holders for the timely delivery of advanced wireless services to rural Canadians.
The impetus for these changes, according to the Government, included the fact that the “Canadian wireless landscape had changed significantly” since the last auctioning of Advanced Wireless Services Spectrum in 2008. Some of the specific changes have included new wireless entrants (e.g., Wind Mobile and Mobilicity). In this regard, the Government said in its related Backgrounder:
“The Canadian wireless landscape has changed significantly since the 2008 auctioning of Advanced Wireless Services spectrum. At that time, the government set aside spectrum for new entrants and implemented other policies to support new competitors. New entrants have since made large investments to launch services and are providing greater choice to Canadian consumers. These new entrants currently serve over 1 million Canadians. At the same time, Canadian incumbent wireless providers continued to invest in their networks. Over 98 percent of Canadians now have access to high-speed wireless services. Average Canadian mobile wireless prices have fallen by more than 10 percent since 2008.”
The announced changes have been criticized by some, including the head of Wind Mobile – see: Wind Mobile Chief Pans New Telco Rules – who called the changes “a total disaster”:
“It gives the illusion that the competitive marketplace has been strengthened, but it will be a catalyst for consolidation and new entrants will be starved of frequencies.”
Before these changes were announced, foreign investors were limited to total direct and indirect investment in Canadian carriers of less than 50% (as well as a de facto control test, which included factors such as minority veto powers and licensing agreements).
Amendments to the Telecommunications Act and regulations relating to wireline and wireless carriers will be necessary to effect the announced changes, which the Government has suggested would be passed in advance of the anticipated 700MHz spectrum auction in the first half of 2013 (see: Rules for the 700 MHz and 2500 MHz Spectrum Auctions).
For Industry Canada’s news release see:
For related background documents see:
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