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In an interesting story earlier today, Bloomberg reported that Public Safety Canada has warned Industry Canada that loosening investment restrictions in Canadian telecommunications providers would pose a “considerable risk” to Canadian national security.

In particular Bloomberg has reported that Public Safety Canada told Industry Canada that the “security and intelligence community is of the view that lessening or removing restrictions from the Telecommunications Act, without implementing mitigation measures, would pose a considerable risk to public safety and national security.”  Bloomberg also reports that Public Safety Canada is working with Industry Canada to “ensure that any risks to Canada’s telecommunications sector are identified and addressed”.

Last month Industry Minister Christian Paradis 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 imposing caps in upcoming spectrum auctions in 2013 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.

Foreign investors are presently subject to Canada’s national security review regime (in addition to general Investment Canada Act review or notification), under which the Minister and federal Cabinet can review proposed or completed investments that may be “injurious to national security” (a purely political and undefined test).

Under Canada’s (relatively new) national security review regime, the Government may conduct a national security review of an investment regardless of whether it triggers the general thresholds for review under the Investment Canada Act or whether control of a Canadian business is acquired.

For more about Canada’s foreign investment regime see:

Investment Canada

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