Industry Committee on March 30th, 2010

[The Chair, Conservative, Michael Chong]

Good morning. Welcome to members of the committee and to our witnesses.

This is the sixth meeting of the Standing Committee on Industry, Science and Technology, March 30, 2010. We are here today pursuant to Standing Order 108(2) to study Canada's foreign ownership rules and regulations in the telecommunications sector.

In front of us today we have three witnesses: we have Mr. Morrison, who represents Friends of Canadian Broadcasting; Monsieur Paradis, from Groupe CIC; and finally Mr. Globerman, as an individual from Western Washington University. I want to in particular thank Mr. Globerman, who came on very short notice. We found out yesterday that he was in town today, coincidentally, to meet with someone else, and he graciously agreed to come in front of our committee today.

We'll begin with opening statements from each of the witnesses, beginning with Mr. Morrison.

[Ian Morrison, Spokesperson, Friends of Canadian Broadcasting]

Mr. Chair, members of the committee, thank you for inviting us to appear before you today.

Friends of Canadian Broadcasting is a watchdog for Canadian programming on radio, television, and new media. We're supported by 100,000 Canadians. Our most recent appearance before this committee was in 2003 during the hearing on foreign investment restrictions applicable to telecommunications common carriers. Plus ça change....

Section 7 of the Telecommunications Act states that “telecommunications performs an essential role in the maintenance of Canada’s identity and sovereignty”. The act outlines objectives of Canadian telecommunications policy, including:

to facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions; ... to promote the ownership and control of Canadian carriers by Canadians; ... and to stimulate research and development in Canada in the field of telecommunications...

Hence, section 16 requires that Canadian carriers be owned and controlled by Canadians.

We support these provisions of the act, and we note that, by a wide margin, so do Canadians. In a survey that Friends of Canadian Broadcasting, ACTRA, and the Communications, Energy and Paperworkers Union commissioned from Harris-Decima in November 2007, for example, 61% of Canadians had an unfavourable reaction towards foreign ownership of telephone companies. Among our concerns regarding a possible loss of Canadian ownership and control of Canadian carriers are the export of high-end jobs, reduced protection of the personal privacy of Canadians through the intrusion of such instruments as the United States Patriot Act, loss of sovereignty through dependence on the United States routes for data flow, reduced resilience in emergencies, and a threat to service access on the part of Canadians living in rural and remote areas.

Friends' principal concern, however, relates to Canada's cultural sovereignty. Canada's media and communication industries have converged in recent decades, and the pace of this convergence has recently increased. For your convenience, we have reproduced CRTC data on the corporate structure of Canada's biggest media and communication companies: BCE, Canwest, Cogeco, CTVglobemedia, Quebecor, Rogers, Shaw, and Telus.

Let's take Rogers as an example. Beneath the holding company known as Rogers Communications, of which the Rogers family controls 82% of the voting shares, Rogers' business lines include cable television, local and long distance telephone, Internet access, wireless broadcasting, baseball, and publishing. Last year its revenues approached $12 billion. Although Rogers may be the most converged media and communications company, it is by no means unique.

Shaw operates in the cable and Internet business and is entering wireless. Through the Shaw family's common ownership and control, Shaw is related to Corus, a radio and specialty television company. Quebecor controls Videotron, TVA, and Sun Media, and offers Internet access and plans to enter the wireless business. BCE controls Bell Canada, Bell Aliant, and Bell TV, and has a 15% stake in Bell Globemedia, which controls Canada's largest television company and The Globe and Mail.

In this integrated communication business, changing the foreign ownership requirement for one sector, telecom, can be expected to impact on the other sectors. If BCE were foreign-owned, it would become ineligible to control Bell TV. Rogers would have to dispose of Rogers Media and Rogers Cable, and so on. Disposing of these key broadcasting assets would destabilize the Canadian broadcasting system by reducing the investor pool as well as ending synergies between the component parts. For example, Rogers Cable's pipes carry Rogers Cable's telephone and Internet services.

It's reasonable to assume that the affected players would instead call for changes to ownership requirements under the Broadcasting Act, just as they did successfully when telecom ownership requirements were last changed in the 1990s.

The Montreal Gazette reported on November 23, 1995:

...the federal government is relaxing limits on foreign ownership of Canadian cable and broadcasting companies…. (Heritage Minister Michel) Dupuy said the rule changes put the broadcasting and cable industries on the same footing as telecommunications companies.

Indeed, CanWest's Leonard Asper told your predecessors during the 2003 hearings that:

Any changes in the rules that apply only to telecom companies would soon be of competitive significance to broadcasters as telecom companies move increasingly into the BDU and broadcasting businesses.

BDU means broadcast distribution undertaking. I call it CRTC, to speak for cable and satellite.

Cogeco's Louis Audet told the committee:

We are suggesting that competitive equity will require that cable companies and telephone companies be treated the same way under liberalized foreign ownership rules.

The 2003 industry committee's report underscored Mr. Audet's comment in the following passage:

Technological advances and convergence of technologies, especially over the last decade, have blurred the lines that previously separated the services offered by telecommunications common carriers and broadcasting distribution undertakings (BDUs, including cable companies, DTH satellite service providers and MDS). Telecommunications carriers and BDUs are now competing for the same customers in some markets (e.g., high-speed Internet service). The telecommunications and broadcasting landscape is further complicated by vertical integration and by cross-media ownership. Clearly, defining an enterprise as a pure “telco” or “BDU” on the basis of their underlying distribution networks or the services they provide is becoming more and more difficult.

That committee then produced a little visual that I find still applicable, and I ask to have it passed out for your consideration.

Canadian broadcasting is a public good that is essential to the communications infrastructure of local economies across the land. It facilitates the participation of citizens in the democratic process and contributes to building a distinct identity on the northern half of the North American continent. Allowing such an important instrument of Canada's national development to fall into foreign hands would signal the demise of our cultural sovereignty.

While no patriotic Canadian would deliberately counsel such an outcome, tinkering with foreign ownership rules in one part of the media and communications industry will place other parts at risk.

Last week you heard from Marta Morgan at Industry Canada that relaxing foreign ownership rules in telecom would serve to bring Canada in line with other OECD countries. None of them is immediately adjacent to the huge cultural and economic influence of the United States of America.

In view of Canada's unique position, we urge you to heed the advice of the Lincoln report--that's the heritage committee--that the existing foreign ownership limits for broadcasting and telecommunications be maintained at current levels.

Thanks for your attention.

Thank you for inviting us, Mr. Chair.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Morrison.

Mr. Paradis, you have the floor.

[Richard Paradis, President, Groupe CIC]

Thank you, Mr. Chair and members of the committee and staff.

My name is Richard Paradis, and I'm president and CEO of Le Groupe CIC, a communications and telecommunications consulting firm based in Montreal, with clients in broadcasting, telecommunications, and the cultural industries sectors. I also teach at both the University of Montreal and the Hautes Études Commerciales, teaching courses in communications policy, management, cultural industries, the history of media, and social science research methodology. During my career, I've also worked for Bell Canada, the CRTC, and the department of communications both in Ottawa and in Quebec City.

At the outset, I would like to thank the committee for holding these hearings to review a very fundamental issue, which has been at the center of our tremendous success in communications and telecommunications over the last 50 years in Canada.

Over time, Canadian ownership and nurturing of a dynamic communications infrastructure in the public interest has made us a model for many foreign countries having to deal with moving from a state-owned telecommunications infrastructure to a mixed public and private system.

Our historic approach to Canadian ownership is directly linked to the social, cultural, and economic development of our country, and should not be handed over to foreign interests without some serious thinking about how we got there, who we are, and more importantly, where we want to go in the future. Communications are at the core of just about everything we do now, from waking up and checking our e-mails and cell calls, to listening to music on mobile phones and iPods, or watching the news and our favourite television shows on our iPhones.

Why are we here today? What has changed so drastically that we have to even think of opening our telecommunications sector to increased foreign ownership? Have we not been well served by our present system, which already allows for minority ownership of our telecommunications companies by foreign interests?

Through the telecommunication monopolies we had in Canada for decades, Canadian taxpayers have all contributed over the years to the development of telecommunications infrastructures that we benefit from today. In many ways, the telecommunication companies we have should be thanking Canadians for having favoured the development of one of the best telecommunications systems in the world.

Why are we thinking of opening the door to more foreign ownership? Are our telecommunication companies suffering from lack of investment funding? Do they have dwindling revenues, low profits, and do they fear for their future? All recent public data about our major telecommunications companies would seem to show otherwise.

The Canadian telecommunications industry revenues for 2008 were $40.3 billion. With respect to their wire line operations--that's the little wire that goes into the wall--which encompasses telecommunications operations as well as programming and non-programming BDU activities, the incumbent telephone companies reported a $6.3 billion EBITDA and a 29.1% EBITDA margin. That's earnings before interest, taxes, depreciation, and amortization--EBITDA.

The wireless industry EBITDA increased from $6.5 billion in 2007 to $7.2 billion in 2008. Of this, the incumbent telcos and cable companies accounted for $4.5 billion and $2.8 billion respectively.

Let's talk about the cable sector. Based on the lastest industry data released by the CRTC, the Canadian cable industry saw a revenue growth of 11.9% in 2009, following subsequent increases of 16% in both 2007 and 2008. Total revenues were $11.4 billion, with a PBIT--profit before interest and taxes--of $2.3 billion, up from $2.1 billion in 2008 for a PBIT margin of 25.1%. For example, Rogers gets $100 million profit from their business operations every month. That's $100 million.

As any observer can see, except for the banks, this is one of the most lucrative industrial sectors in the country, even during an economic downturn.

There is no legal or other type of reason for opening the Canadian telecommunications sector to more foreign ownership. Why do we feel this is necessary?

In an era when telecommunications is becoming so important to our economic development--ensuring improved communication between all Canadians and the world--why do we want to now turn our industry over to foreign ownership and decision-making?

Why, after we have invested as a country for decades in developing one of the most impressive telecommunication sectors in the world, do we want to hand it over to others? Where's the logic? That is, other than to benefit a handful of senior management who would be looking for the golden exit, or lawyers and financial analysts who will ultimately just boost the value of a property with no real benefits for Canadian consumers.

Telecommunications is an essential component to our future as a country and to our economic well-being. Would you put a major part of your personal wealth in the hands of foreign managers who have no legal obligations towards you? Well, that's what we're thinking of doing.

Let's just reflect for a moment on where we will draw the line if we envisage relaxing our present ownership rules. What's going to be the magic number--49%, 66%...? Why not 100%? How many competitors can we have in a small country like Canada? We're close to 40 million citizens. And more importantly, how will we ensure we are getting the best out of our telecommunications sector if its business decisions are taken in Dubai, Chicago, or Beijing? The ultimate deciding factor is where is the most return on investment.

Canada was the first country in the world to launch a commercial satellite in the early seventies. We were at the forefront of the development of the telephone with Alexander Graham Bell, and one of the first countries to develop national fibre optic highways across the country.

Yes, Canadians pay more for certain telecommunications services such as mobile phone service, text messaging, cable service, etc., but this is not because we lack competition in Canada. The federal government has introduced competition in almost all sectors of communications through the CRTC decisions and policies during the last twenty years.

There is ample competition presently in the Canadian market, and the only reason prices are not coming down is because the industry is complacent. This will not necessarily drastically change by letting in foreign players.

I notice in the description of the research areas to be covered by the committee that you also want to take a look at the implications of foreign ownership on the radio act and the Broadcasting Act. I am one of those who strongly believe that in today's world of convergence, the government should look at revisiting both the telecom act and the Broadcasting Act to reflect the convergence we now have with large corporations. They not only have concentrated ownership, but are also highly integrated both vertically and horizontally.

Whether we speak of Rogers, Shaw, Quebecor, Bell, or Telus, all of these companies have many things in common. They deliver communications services to Canadian consumers. They are at times radio or television broadcasters, local telephone and IP providers, they offer mobile phone service and audio-visual content. It can range from music preferences to yesterday's favourite television program or today's financial market data, the weather, and the local news as it happens.

May I remind the committee of the key words spoken by a number of prominent Canadians in the past: It's all about content. I sincerely believe that we are at the crossroads in terms of where our broadcasting and telecommunications system is going. It is up to you and your fellow parliamentarians to ensure Canadian content can continue to be developed, and, more importantly, reach Canadian consumers through whatever means they may wish.

Your committee will be meeting with a number of cultural organizations next week, and I'm sure many of them will complement my comments today. But the major telecommunications operators will then give you their version of the world in three weeks. I can only say, please take care to ask them why the Canadian model needs to be changed. How will this ultimately and truly benefit Canadian consumers? Yes, more competition can be good, but too much competition can also be detrimental to any given industrial sector.

This completes my oral presentation. Thank you.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Paradis.

Now we'll go to Mr. Globerman.

[Dr. Steven Globerman, Director, Center for International Business; Kaiser Professor, Western Washington University, As an Individual]

Thank you, Mr. Chairman, and thank you, committee.

I am here almost by complete coincidence, by getting an e-mail late yesterday afternoon while I was in the airport in Vancouver, flying here for another purpose. I did manage to organize a few thoughts, and I hope they're relatively coherent, but they're nowhere near as well organized as my co-panellists', so bear with me.

Let me give you just a bit of background about myself.

I'm currently the Kaiser professor of international business at Western Washington University, which is in Bellingham, Washington, about 60 miles from Vancouver, but I'm also an adjunct professor at the Segal Graduate School of Business in Vancouver. I have had my academic career in Canada, starting at York University's faculty of administrative studies, and then at UBC, and then at Simon Fraser University.

My background has been focused very heavily on issues of foreign ownership, particularly foreign ownership in Canada, and the telecommunications and broadcasting industries. I've written extensively on all of these topics. I did not prepare a bibliography, but I can tell you that in 1986 I published an article in Telecommunications Policy, and the article was focused on foreign ownership and telecommunications, with a particular focus on Canada. So I addressed many of the issues in this article, I think, that you're going to be talking about in this committee and that were already raised by my co-panellists today. Most recently, I completed a fairly extensive report on foreign investment in Canada for the Global Competitiveness Committee. These are the background areas I'm going to draw on to make my comments.

Now, there are a number of fundamental questions that are clearly being considered by the committee and that are raised by my co-panellists, so let me start with the main point.

Why do we tolerate foreign ownership? Why do we even want foreign ownership in any industry, to start with? The answer, I think, has been made relatively clear over at least 30 years of academic research: foreign investment improves efficiency in the host economy. That is a fundamental, empirical observation. I'll say it again: foreign investment, inward investment, improves productivity in the host economy. That's my own research for Canada. I've had a number of papers published in the Canadian Journal of Economics that document this, and there are literally hundreds of studies out there.

Now, the question is why is foreign investment of benefit to the productivity of the host economy? There are a variety of channels that people talk about that have been identified. It's the source of inward technology. This technology spills over to domestic firms. Domestic firms then get the benefit of this technology that comes into the host economy. Workers who are trained in foreign-owned companies improve their skills. They migrate, they start their own companies, or they work for Canadian-owned companies.

The competition itself--a point that was raised a moment ago by Mr. Paradis--improves efficiency. How much competition is enough? We're never going to be perfectly competitive in any industry. By definition, “perfect competition” is enough. We'll never have perfect competition. More is almost always better than less, but in any case, empirically inward investment does stimulate competition, and improved competition stimulates improved efficiency.

Now, is there any reason to believe that's different for the telecommunications industry? There's no reason to believe it's different from the telecommunications industry. There are lots of concerns about why the telecommunications industry is unique. And by the way, I agree completely with the panellists that it's very hard to arbitrarily separate discussions of the telecommunications industry from the broadcasting sector. They intersect, they interact, but so do a lot of industries . I'll get back to that point in a minute, and that will be one of my last points.

The co-panellists offered you a variety of reasons for concern about why telecommunications might be different, why this is a sensitive sector and it requires special consideration. Now, I'm not going to deny that telecommunications is an important sector. It is. Clearly, it is. It's very important. But I'm not sure it's unique, in the sense that it obviates the basic wisdom that an open market, with free-flowing capital and labour and inputs of other sorts, is good for the industry in terms of improved efficiency, and is ultimately good for consumers.

Let's look at some of the concerns. The concern was raised that rural Canadians will be disadvantaged because foreign owners will want to charge prices that reflect the costs of providing service in high-cost areas. Well, so did Canadian telecommunications companies. I was involved in almost all of the deregulation hearings, starting with the long distance hearing and the CNCP hearing. Canadian carriers from Bell Canada on down all wanted to charge prices that were reflective of costs. In the end, the subsidy was determined by government policy. CRTC policy is directed by government, and that presumably would continue.

There are concerns about trusting foreign managers with critical infrastructure like telecommunications, which we use for defence and security. Again, those are assets the Government of Canada has sovereignty over. An act of sabotage, terrorism, or misuse of those facilities is certainly, to my knowledge, a criminal act, and could be made one if it's not at present.

Foreign managers and foreign investors absolutely are concerned with profits. So are Canadian managers and Canadian investors. To the best of my understanding, the Government of Canada has no less sovereignty over a foreign company operating in Canada than it does over a domestically owned company operating in Canada. There is nothing in any trade agreement that I know of that makes that invalid. A company is subject to the sovereign rules of the state in which it does business.

Technological change is often raised as a concern. Where is the R and D going to come from if the industry is owned by foreigners? The concern is that they're not going to do R and D. Well, that's not necessarily true. It's been true in the past that Canadian-owned telcos did more R and D per dollar of sales than foreign companies operating in Canada in roughly the same industry, but things are changing. The whole notion of global value chains is making location a very fungible item in the calculation of corporate strategy. Companies are moving activities to where it's efficient to do those activities. It may well be that by saying no to foreigners that they can't come here, even if they want to move R and D facilities here, we're actually denying our industry the opportunity to grow and to do more technology.

At the end of the day, the world is becoming more integrated. It's becoming much more specialized in what it does, where activities are done, and how they're done. We can choose not to be part of global value chains, but if we do, we're hurting ourselves. I don't think telecommunications are any different. If we have strong suppliers of equipment, foreign-owned companies will want to buy the equipment in Canada. They have to. In a competitive industry, they can't afford not to. You have to buy the inputs that are giving you the most value for the money you pay.

I could go on, but I know that time is short and that you want to ask questions. Let me just say that the issue of the cultural identity component of telecommunications is a tricky one. I've written a lot about that as well. It's not made me popular with almost anyone in the cultural industry, but I don't think I've changed my mind on this. I think many of the things I've said about telecommunications apply to culture as well. At the end of the day, if Canadians want content and we want them to watch content that's Canadian, we want them to watch it on the best available technology that can deliver that content. So why deny Canada the opportunity to import improved technology through foreign ownership? By the way, if it's not improved technology, the foreign companies are going to come in here and lose money and they are going to leave. The market will decide whether that's the best way to deliver those signals.

Thank you very much.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Globerman.

We'll begin now with questions and comments from members, beginning with Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

Thank you very much for your testimony on an important and very complex subject.

With regard to Canada's telecommunications sector, a number of people seem to think that our country is lagging behind its competitors when it comes to access, costs, speed and access to services. For instance, there is the issue of broadband cellular or Internet access in some parts of the country and even in our big cities.

Some people are speculating that the problem is related to competition and, by extension, are suggesting that, if we wish to increase competition, we must encourage foreign investment. In a way, this is what we are really talking about. Of course, we are also talking about the complex issue of cultural connections.

Regarding competition, Mr. Paradis, you said in your testimony that you feel that there is ample competition in Canada and that, perhaps, the problem really stems from the fact that our companies are complacent. I would like to get your opinion and that of other witnesses on competition.

Will attracting foreign investments enable us to increase competition or is this unnecessary, as you say, Mr. Paradis, because there is ample competition already?

[Richard Paradis]

I could share with the committee some information I came across at the commission, where a study was conducted last year on the difference between costs of various types of mobile services—high-speed Internet and other services—in various countries like Canada, the United States, Great Britain, France and Australia.

Many people out there believe that we are paying more for those services in Canada. However, services equivalent to those we have here are more expensive in the United States. There are some sectors where we may be paying more for services. There is a lot of pressure for as many people as possible to have high-speed Internet access at very affordable rates.

If you were to ask me if Canada is shutting itself out of technology development, I would say that, aside from the fact that we must wait about a month before we can get our hands on the iPhone because the U.S. market can absorb everything that was produced in the first months, we are right up there with other countries. As to whether there is enough competition, I believe that one of the reasons for our being here is Globalive and the reversal of the CRTC decision.

New players are getting ready to tap into the Canadian market and offer people wireless services. Quebecor will begin a service that will be very competitive in the Quebec market starting in June or July. Globalive will launch Wind Mobile. It is already clear that this company, though it is well funded by foreign owners, is having a lot of difficulty starting up because existing market players—TELUS, Bell and Rogers—own about 94% of the wireless market.

So, even if lots of companies were allowed to enter the market, they would not necessarily be able to offer products at a better price. You should not forget that all the companies now entering the market, whether it is Dave Wireless or anyone else—there are three or four companies that are getting ready to enter the market—have paid about two and a half times more than they expected to pay for the frequencies they have bought. If you are in business and you believe that starting a company will cost you $100 million, but you end up spending $250 million, it will affect your ability to establish yourself in the market by offering advantageous rates in an attempt to compete with companies that are already established, that have an infrastructure.

So, the problem does not lie in the lack of market competition. As I said in my statement, there are big companies that have been established for a long time, such as Bell and TELUS—originally BC TELECOM—and their gears are turning slowly when it comes to change and opening the market to competition. Competition in the long-distance sector has existed for only 15 years. Before that, we could not own a telephone at home. It's hard to believe, but it's true.

Therefore, the Canadian market has developed slowly from an acknowledgment of the fact that monopolies were initially necessary for reaching as many Canadians as possible. Ninety-nine percent of Canadians have access to a telephone at home, and thanks to wireless phones, it is now possible to reach most Canadians. Because of the current wireless rates, Canada is one of the countries with the least penetration in that sector. The rate of penetration in the wireless sector is still at around 67% in Canada, compared to 80% or 90% in Europe.

[Ian Morrison]

I understand the need to be quick here, so I'll speak in bullets if I may.

First, I think we have moved over a period of two or three decades from monopoly situations to duopolies and then to more of a market situation. There's an evolution.

We are a country of 34 million people now, with a huge geography and many time zones, with vast expanses of land that cost more in terms of infrastructure than European or United States comparisons would indicate, and we've done rather well, considering that. If you consult the CRTC's most recent monitoring report, the Communications Monitoring Report, for 2009, you'll see some international comparisons that reflect less poorly on our competitiveness and affordability than you tend to get from some of the recent information.

I'd just like to point out that in 2003, when this committee was studying this matter the last time, the Canadian dollar was down in the range of 70 cents and below. Today, the Canadian dollar is at 98 cents and is projected to pass above parity. It's a 50% change in exchange value with the U.S. dollar. The euro was at 1.6-something and is now 1.35. It's a 15% change. These things tend to tilt statistics in a way that makes our infrastructure look more expensive but have nothing to do with the underlying fundamentals.

Then there's also the issue of mergers. I noticed that Mr. McTeague raised this subject with the industry department last Thursday. The issue of unintended consequences is one where you can do something and provoke a Telus-Bell merger, for example. What are you going to do about that?

There are a lot of anti-competitive factors at work in the marketplace today that relate to company policies. We commissioned a major research project from Pollara, just a year or two ago, about Canadians' attitudes to the cable industry. We found that a majority of Canadians really didn't feel they had a choice in telecom providers, because the companies bundle Internet, cable, and telephone services for you to buy at the same time. It's too big a decision to change it.

Those are my bullets.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Morrison.

Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair.

Gentlemen, good morning and welcome to the committee.

As Mr. Paradis said, we are principally here because of the Globalive issue. We are also here because the government expressed its intention, in the Speech from the Throne, of opening the satellite and telecommunications market to foreign ownership. Another reason for our meeting is the government ultimately deciding to include in its Budget Enforcement Act a clause on opening the telecommunications market.

The government did things backwards. It did not amend the Telecommunications Act or the Broadcasting Act. It sold spectrum licenses to Globalive for $442 million. The company came up with $500 million. It is to be expected that someone who puts up $500 million intends to have a say in the matter.

I will give you some context. CRTC had decided that the company was foreign-owned, but the government reversed the decision. Had the matter been handled according to the rules and gone through Parliament, and had an attempt been made to amend the Act to open the market to foreign ownership, do you not think that other companies would also have been interested in buying spectrum licences? Selling first and then having to issue an order to open the market to foreigners was not the best way to go about this.

Do you see a way to put a stop to opening the market to foreign investors? Of course, I am talking for those who wish to put a stop to this practice. Those in favour of it can also speak up.

[Richard Paradis]

You raised a number of issues that you will have to settle among yourselves.

Let us consider what happened in the case of Globalive, as it is related to what I said. There will always be foreign investors interested in investing in Canada. As I have already said, nothing is currently stopping a foreign investor from investing money in Bell Canada, TELUS or Rogers. They can buy shares and have their say, when the times comes, at annual meetings.

The real issue is control. Who will be making the decisions and in whose interest? Earlier, the gentleman said that, even if foreign companies become owners, they will be governed by Canadian laws. This is possibly true, but let us go back to the economics. When the time comes to make decisions on profit margins, if those who invested in Globalive see it as more profitable to invest in France or in South America, they will not hesitate much before moving their money.

In Canada, we have a system in place and there is enough funding. Bell never complains about not finding enough shareholders, and it is the same with TELUS. Occasionally, they consider merging in order to become even stronger global competitors. Nevertheless, at the end of the day, capital is available in Canada. As for the decision on Globalive, I believe that CRTC's decision should have been respected, but we do not get a say in these matters.

[Serge Cardin, Bloc, Sherbrooke, QC]

You talked about opening the market to foreign investors. Are you not worried that, instead of bringing more competition, this practice might make the market much more concentrated, since foreign companies will have to buy spectrum licences or buy companies with licences? You also said that executives could perhaps make some money. This is potentially true, but I rather think that we would end up with more concentration instead of more competition.

[Dr. Steven Globerman]

I'm sorry, but I'm going to have to ask for a translation of that.

[The Chair, Conservative, Michael Chong]

I'm sorry, Mr. Globerman, there's translation provided through channels 1 and 2.

[Dr. Steven Globerman]

I didn't see that.

[Richard Paradis]

I would just like to add that every time a company buys frequencies, it must pay additional fees. When additional fees are paid, consumers end up with higher rates so that the company can turn a profit. When the government sold new frequencies a year and a half ago, it really opened the market to competition, and it even set aside 25% of frequencies for new market players. In Canada, there are mechanisms for fostering competition and enabling new players to enter the market, but I could never understand the rush to fling the doors wide open.

Earlier, the gentleman said that we need not concern ourselves about the Canadian content carried by these companies. I would just say that convergence is real. If users own iPhones and subscribe to Bell or another company, they have access to TV programs. To what extent will we be able to ensure that Canadian content is available to these users in the future? This is an important issue.

[Serge Cardin, Bloc, Sherbrooke, QC]

Yes, given the rapid evolution of cellphone technology, do you believe that CRTC's decision to not regulate the content of telephone systems is still a good idea?

[Richard Paradis]

I feel that, with the arrival of the Internet, CRTC, our regulating organization, was, for the first time in its existence, unsure of what to do and was even afraid to think about the possibilities.

A number of foreign governments, including France and Australia, are currently considering ways of profiting, or at least getting some advantage for the community, from the Internet systems on their territories. For instance, this can be done by imposing fees on Internet users and using the money to help Canadian designers develop content for those platforms. ADISQ will most probably talk about this next week.

[The Chair, Conservative, Michael Chong]

Could you perhaps rephrase your question for Mr. Globerman?

[Serge Cardin, Bloc, Sherbrooke, QC]

I believe that one can have too much of a good thing. Unlike you, I believe that opening the market to foreign ownership will more likely result in market concentration. Of course, foreign companies have to buy spectrum or buy companies that own spectrum, but this could create much more concentration rather than competition, in my view.

[Dr. Steven Globerman]

I think the basic issue is how much competition is enough, and if we do want more competition, how should we manage that? Should it be with very deliberate steps of allowing x% of ownership in a staged manner for different stages of the industry, or should we truly open up the market to whichever investors want to put their money at risk? If they deliver the product to the customer, they're going to make profits and be successful.

As an economist, it's hard to favour anything except allowing the market to determine how much competition there should be, subject to the Competition Act, which is there protecting all industries from abuse of dominance and monopolization. I don't think there is a magic number. I don't think anyone can credibly defend any magic number for foreign ownership as being "optimal", whether it's 49% arbitrarily because that's the limit before you get control, 23%, or 22%. I don't think there is a magic number.

There's one thing that should be very clear, and I think it was mentioned a moment ago. It's that the telecommunications industry is truly dynamic. New technologies are being made available. Comparisons of Canada's performance to other countries based on terrestrial models of telecommunications are really irrelevant, because we're moving away from those models rapidly, and in broadcasting as well. It's really impossible to predict where the future is going to be, but we know that the future is going to look a lot different from the past.

Do we want to try to manage this whole technological change process through a regulatory infrastructure, where the primary goal is some arbitrary number for foreign ownership? Or do we want to be able to take advantage of any technology out there that's superior in a meaningful way? That can certainly come through foreign ownership, or maybe it won't come through foreign ownership. But we should be open to those possibilities.

[The Chair, Conservative, Michael Chong]

Thank you very much, Mr. Globerman and Monsieur Cardin.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair, and thanks to the witnesses for coming today.

Mr. Morrison, I'll start with a question for you. Currently broadcasters in Canada operate under fairly specific broadcasting regulations under the Broadcasting Act. I'm wondering if you can specify the most critical of those regulations and their importance to the broadcasting industry.