Summary of Recommendations

On April 28 2003 Canada's House of Commons Standing Committee on Industry, Science and Technology concluded a review of the foreign ownership and control restrictions imposed on telecommunications common carriers operating in Canada with the release of its Opening Canadian Communications to the World report.

Foremost among the committee's proposals is the removal of legislative provisions that currently limit foreign ownership and control of telecommunications common carriers and broadcasting distribution undertakings.

Canada's existing restrictions on the foreign ownership and control of telecommunications common carriers are intended to maintain a balance between encouraging investment in the telecommunications industry and meeting Canada's sovereignty and security objectives. However, concerns have been raised that these restrictions limit the ability of telecommunications carriers to gain access to capital, and act as a barrier to innovation and growth in the sector. In response to these concerns, the minister of industry announced a review of the restrictions on November 19 2002 and tasked the committee with examining the impact of foreign direct investment restrictions on the telecommunications industry, as well as assessing whether changes could be made to these restrictions without compromising Canada's national interests.

Summary of Recommendations

If implemented, the committee's recommendations could change the landscape of the telecommunications sector considerably. Specifically, the report makes the following recommendations:

  • The government should prepare all necessary legislative changes to remove entirely the existing minimum Canadian ownership requirements that apply to telecommunications common carriers (including the requirement of Canadian control). The committee believes that the removal of the current foreign ownership and control restrictions in their entirety is necessary to improve investment and innovation in Canada's telecommunications sector. The committee also indicated its expectation that the removal of the foreign ownership and control restrictions would attract more capital, jobs and research and development work to the domestic industry. Further, the committee expressed its confidence that the Investment Canada Act is an effective government tool to ensure that any substantial foreign investment in the sector is carried out in a manner consistent with the public interest. Finally, the committee noted that the Canadian Radio-television and Telecommunications Commission has the power to ensure that services are provided at affordable prices to rural and remote regions of the country.
  • The government must ensure that any changes made to the Canadian ownership and control requirements applicable to telecommunications common carriers apply equally to broadcasting distribution undertakings. Although the committee's mandate did not extend to the foreign ownership and control restrictions that are imposed on the broadcasting sector, the committee's view is that technological convergence among telecommunications common carriers and broadcasting distribution undertakings has made these entities inseparable on the basis of their underlying distribution networks or the services they provide. Consequently, the committee believes that full liberalization of foreign ownership rules on a symmetrical basis for all carriers of signals competing in the same markets is the best way of achieving the objectives set out in the Telecommunications Act and the Broadcasting Act.
  • The government should introduce a special parliamentary committee to undertake a comprehensive review of the governance structure of both telecommunications and broadcasting sectors in Canada in light of the technological convergence of these sectors. The review should include, as a minimum, an examination of: (i) the regulatory framework governing Canada's telecommunications and broadcasting sectors; (ii) approaches that the federal government could adopt to continue to facilitate broadband deployment in rural and remote communities; (iii) federal departmental organization (Industry Canada and Canadian Heritage); and (iv) the jurisdiction, role and mandate of the Canadian Radio-television and Telecommunications Commission. The committee indicated that the changing landscape of the sector justifies a broad review that goes beyond the committee's current mandate.
  • The government must amend the Telecommunications Act to require a mandatory five-year review of the act by a parliamentary committee. The committee believes that a routine parliamentary review of the Telecommunications Act would permit the legislative framework governing the telecommunications sector to reflect, and even anticipate, changes in the sector, thereby ensuring that growth and innovation are not constrained by outdated legislation.


It is unclear whether the government will heed the committee's recommendations. A second report, prepared by the Standing Committee on Canadian Heritage, is anticipated shortly and is expected to recommend against lifting foreign ownership restrictions in the broadcasting sector. The fact that the recommendations of the two parliamentary committees may conflict, coupled with the ongoing federal leadership race within Canada's governing Liberal Party, make uncertain the timing of any changes to existing foreign ownership rules.

For further information on this topic please contact Lorne Abugov at Osler, Hoskin & Harcourt LLP by telephone (+1 613 235 7234) or by fax (+1 613 235 2867) or by email ([email protected]).