I have sent a paper. I'm not sure if it was distributed. It was sent in English and could have arrived a bit late for you to have it in both languages.
Let me begin by benchmarking Canada's foreign investment restrictions in the context of the OECD. There are 30 OECD member countries, and only three countries have investment and ownership restrictions that apply to all public telecommunication operators. These countries are Canada, Mexico, and Korea. Of the three countries, Canada has the most severe restrictions.
Some of the other OECD countries have restrictions in the sense that the state has to be a majority owner of the incumbent telecom carrier. For example, in Switzerland, the Swiss confederation must have majority ownership of Swisscom. France is required to have partial ownership of France Télécom, but not necessarily majority ownership. In the case of France, the state shares are down to about 23%. Canada is the most restrictive in terms of foreign investment in the telecom sector.
For me, the most important questions to address regard the benefits of these restrictions and, if there are benefits, how you can ensure that these benefits do not require a heavy regulatory burden. In fact, if I try to find arguments in favour of maintaining these restrictions, I've only come across two main arguments that are fairly general.
The first states that telecommunications is very sensitive, that the communications sector is sensitive, and to me it's unclear what in fact this refers to.
The second argument is that if Canadian control is not maintained there will eventually be an impact and a threat to Canadian culture and the creation of Canadian content. This is, in practice, an idea that there's a sort of domino effect that goes from the telecom sector to the broadcasting sector and then has a negative impact on culture and content.
With respect to the sensitivity of the telecommunications sector, in all OECD countries the telecom network is considered to be critical information infrastructure, and all countries have regulations in place to protect that infrastructure. However, these regulations do not actually need to prevent foreign entities from investing in those countries. There are more direct regulations to ensure that there is a protection of the infrastructure. Obviously in cases of national emergency, all countries have laws that give governments significant powers to ensure adequate control of networks, so the argument about sensitivity is, to my mind, fairly spurious.
What about the link to cultural issues and values? Telecom networks are carriers of content. The regulations that govern network development and the offer of communications services to the public are quite different from those regulations that govern the provision of broadcast content. In my mind, there is no reason to believe that foreign telecom network operators will necessitate a change in regulations governing the diffusion of online content.
Canada is, in fact, one of many OECD countries that have regulations favouring local content and the diffusion of domestic broadcast content, yet these other countries do not seem to find the need to restrict investment in the telecommunication sector. If they want to protect the content sector, they do so directly with other laws and regulations.
What about the costs of foreign investment restrictions on the telecommunication sector? I believe these costs are quite high. First, there's a higher cost of capital and the potential difficulty for new entrants to get access to equity capital. Canada, relatively speaking, has a fairly small capital market, and in a capital-intensive sector such as telecommunications, it is important for companies, even if they're Canadian-based companies, to go outside to obtain equity capital.
Lower investment performance also has implications for the development of competition in the telecommunications sector. I believe that by limiting investment only to Canadian-owned/controlled companies, you're actually reducing the level of competition in the telecommunication sector in Canada. This has implications in terms of higher prices for businesses and the competitiveness of businesses, both in Canada and overseas, and of course there is a negative impact on consumers and a slower diffusion of new technologies.
The foreign investment restrictions, I believe, also go against government objectives such as improving connectedness, enhancing innovation, or improving productivity.
In conclusion, Chairman, I would in fact argue that there is a greater danger to national welfare in Canada and to Canadian cultural heritage by slowing down the process of investing in high-speed ubiquitous networks, which results from limiting foreign investment in Canada. There is a danger to Canada and Canadian welfare from higher access and usage costs in the telecommunication sector than would occur in a more competitive market. I believe that Canadian culture will thrive much more in a market where access and use of network resources is cheaper and where users have more choice among service providers.
Thank you very much for this opportunity, Chairman.