Thank you, Mr. Chairman.
I will make a brief opening statement. We will then be happy to answer your questions.
The committee is examining issues related to foreign ownership in the telecommunications sector. These issues have taken on greater importance with the arrival of convergence. The convergence of telecom and broadcasting has now been widely recognized as a fact of life. What is still being debated, however, is its impact on Canada's legislative and regulatory structure.
In 2006 the Telecommunications Policy Review Panel recognized that:This convergence of telecommunications and broadcasting markets brings into question the continued viability of maintaining two separate policy and regulatory frameworks, one for telecommunications common carriers like the incumbent telephone companies and one for their competitors in most of the same markets, the cable telecommunications companies.
This scene was repeated by the Competition Policy Review Panel, commonly known as the Wilson panel, which stated the following in its 2008 report: The Internet and other information and communications technologies have changed the business landscape for these industries. In essence, with convergence, it is increasingly difficult to define distinct “telecommunications” and “broadcasting” industries or sectors, particularly when it comes to delivery or distribution networks.
Despite these observations, both the TPRP and the Wilson panel proceeded to recommend only the liberalization of the foreign ownership restrictions governing telecommunications. In addition, both panels recommended that the liberalization should initially be applied only to new entrants.
Where the commission stands on this issue is quite clear: we want vigorous competition. Canada would benefit from having additional facilities-based carriers. Foreign investment, properly regulated, can play a key role in supporting such carriers. The present rules are too restrictive and complicated. A liberalized and simplified policy to govern foreign investment is essential to improving competitiveness.
However, some considerations have to be kept in mind in any attempt to liberalize the rules.
First of all, requiring a regulator to apply two sets of rules for broadcasting and telecom introduces artificialities into a converged company's corporate conduct and produces artificial corporate structures. This obviously runs counter to the natural benefits of convergence.
Second, in view of the convergence of telecom and broadcasting, any liberalized foreign ownership rules for telecom should give due consideration to the social and cultural objectives of the Broadcasting Act.
Third, while market liberalization should be pursued vigorously, it should not discriminate between potential new entrants and incumbent firms.
Finally, we believe that it is widely agreed that, given its economic importance, control of the communications sector should remain in Canadian hands.
In short, the challenge for you as legislators and for us as regulators is to strike the right balance to achieve liberalized foreign investment while maintaining Canadian control.
The present rules and regulations make up a complicated web of boundaries, categories and constraints. They are in urgent need of an overhaul. They do not at all address the reality of convergence. Broadcasting distributors now deliver telephone service. Phone companies deliver television service. The Internet delivers everything and mobile devices bring it all into your hand, wherever you are. Technological convergence has led to corporate convergence: mergers and acquisitions bring all of these services together under large ownership groups.
At the CRTC, we have been doing what we can internally to implement regulatory convergence. We have created the policy development and research branch, which brings together activities common to broadcasting and telecom. We also conduct joint telecommunications and broadcasting hearings whenever possible. For instance, we examine the accessibility of both types of services in a single hearing.
But the legislative and regulatory structure we administer still preserves the old distinctions of broadcasting and telecommunications, or in other words the distinctions between content and carriage. For Canada to remain a leader in a converged world, we need to abandon these artificial and outdated concepts.
Canada clearly needs unified legislation to cover telecom, broadcasting, and radio communications. Other countries have already done this. It is time for us to do the same.
We also need more institutional simplification so that foreign investors don't face the prospect of being subject not only to different legislative regimes, but also to different regulators that make conflicting decisions. In short, we need a unified approach to clear the way for convergence, competition, and creativity.
But that is really for another day. Today you are considering foreign ownership rules. We need to simplify these rules. We should not be juggling complicated percentage requirements for operating and holding companies or dealing with percentages of board members and other such things.
Here is a simple approach consisting of two rules that we propose. First, no foreign entities should be allowed to own, directly or indirectly, more than 49% of the issued voting shares of a Canadian communications company. Second, no foreign entity should have “control in fact” of a Canadian communications company. This would apply to all communications companies, whether they're engaged in telecommunications or broadcasting. It would also apply both to incumbents and to new entrants.
I would like to stress the importance of keeping that “control in fact” in Canadian hands. The CRTC is mandated to promote and protect Canadian cultural and social values. This mandate is even more challenging in a world where digital information doesn't recognize any national borders. I'm confident that Canada can simplify and clarify the rules for foreign investment in communications, while still ensuring that culturally or socially sensitive areas remain firmly Canadian in character. I'm equally sure that you cannot instill Canadian values by regulation.
Before giving you my closing remarks, I would like to propose to the committee a change that should be part of any regulatory reform.
The CRTC should have the ability to assess administrative monetary penalties, or AMPs, under both the Telecommunications Act and the Broadcasting Act. In telecom, we are now applying smarter and lighter regulation. We are moving away from the old approach that prescribed in advance to the players what they were permitted to do. We now prefer to prohibit certain conduct and only step in if somebody breaks the rules.
But in order for us to make an effective intervention, we need the right tools to ensure compliance. Let's say a radio station violates the terms of its licence, or a telecom carrier is not complying with the ownership rules. Currently, the punitive actions we can take are either too light or too harsh. But with AMPs authority, we could impose a penalty that is appropriate for the violation.
We currently have such a tool in enforcing the national do-not-call list and the regulations made thereunder. The spam bill that was debated during the previous parliamentary session proposed to give us similar powers. But rather than following this piecemeal approach, I hope the committee, while considering liberalization of ownership rules, will also recommend the adoption of comprehensive AMPs with respect to all CRTC responsibilities.
Thank you very much. We will be pleased to answer any questions.