Thanks, Andrea.
Good morning. This is at least the fourth time in seven years that there has been a major review of the foreign ownership restrictions for telecom. All three previous reviews recommended liberalization of these rules. The Telecommunications Policy Review Panel and the Red Wilson report both recommended a phased-in approach to the relaxation of the rules.
The first phase recommended by Red Wilson and the TPR would see the Telecommunications Act amended to give cabinet authority to waive the foreign ownership and control restrictions on Canadian telecommunications common carriers where it deemed the foreign investment to be in the public interest. The panel also noted that any investments in a new start-up telecom carrier, or one with less than 10% of the revenues in any given telecom services market, should be presumed to be in the public interest.
The second phase of liberalization would only take place after the completion of a careful review of broadcasting policy in Canada. Both reports were the culmination of careful review and consultation processes, each lasting a year, and both represent fair, balanced, and thoughtful responses to the realities of Canadian telecom. They do so without weakening any of the current protections for broadcast. In our considered view, we can do no better than to endorse these careful recommendations.
These policy reviews have provided good road maps to ensuring that Canada develops a strong competitive telecom industry. The recommendations made to this committee over the last few weeks are not realistic, nor could they achieve the widely acknowledged need for more competition in Canadian telecom. To be clear, we will not be making any recommendations about broadcasting today. We are a telecom company. We provide the pipes, not the content. Content and pipelines have different roles in the ecosystem; hence, they can have different regulatory frameworks.
We recognize that there is a converging environment between broadcast and telecom. We also believe it is important for cultural sovereignty that there are effective measures to promote the creation and distribution of Canadian content. A future broadcast policy review can resolve issues related to the separation of broadcast and content policy from telecommunications carriage. In the meantime, recommendations for a phased liberalization of foreign investment restrictions in telecom should not be delayed or forced to await a review of broadcast policy. Consumers need help now.
In our view, the key issue to increasing competition in telecom is facilitating access to foreign capital on reasonable terms. The existing restrictions on foreign control were never intended to discourage foreign capital investment in Canada, but this has unquestionably been the effect. The telecom business is extremely capital-intensive. Even having been successful in securing foreign investment, we know how hard it is, and the very expensive terms upon which it was secured reflects this reality. Under the existing regime, we also know it is very challenging to replace this expensive capital with capital on better terms.
CRTC chairman Konrad von Finckenstein has argued that Canada will attract enough foreign capital to create a competitive telecom environment if the percentage of voting shares in a Canadian telecom company that can be owned by a foreign entity is increased to 49% directly and indirectly. We disagree. Think about it. Simply increasing the amount of permissible foreign voting equity to levels that still do not confer voting control will not make investment in Canadian telecom companies substantially more attractive.
Worse still, Chairman von Finckenstein has recommended maintaining the highly subjective “control-in-fact” test. If our experience has taught us anything, it is that such a highly subjective test and the regulatory uncertainty that it creates is a disincentive to foreign investment. Canadian capital markets are relatively small, and in our experience the players are quite reluctant to jeopardize relationships or potential relationships with the big three. To grow our business to its fullest potential within the existing regime, we will need to access third-party capital, and securing that capital exclusively, or even primarily, in Canada will be a challenge. Doing it on terms competitive with the terms enjoyed by the incumbents will be impossible.
Many Canadian telecom carriers started up their businesses as foreign-controlled companies using foreign capital, including Bell and TELUS. It's ironic to hear those same companies complaining now that someone else might be looking to a major foreign investor to do exactly what was done to build this country's legacy telecom networks at an earlier stage in our history. The competitive imbalance in Canadian wireless was the impetus for the advanced wireless spectrum set-aside, but the set-aside itself is not enough. Companies need capital, and telecom start-ups not just capital, but lots and lots of capital.
As we have seen in the early days of wireless competition, absent quick robust growth, new entrants sometimes just hang around, make a little competitive noise, and wait to be bought out when circumstances permit. Competition is good for Canadians seeking wireless services, but capital is critical for companies like WIND that are seeking to compete long-term.
The existing telecom foreign control restrictions are, in our view, an overly broad and inefficient regulatory tool. In today's global environment, Canada needs a more nuanced and effective tool as soon as possible. The TPR panel and Red Wilson reports show the way.
This concludes our opening remarks, and we're of course happy to answer any questions.