Over the next few months, federal lawmakers will attempt to spot symmetrical patterns as they squint through the kaleidoscope of shifting public attitudes and tangled public policies. Their challenge is to make sense of the complex foreign investment laws governing ownership and control of Canada's telecommunications, cable television and broadcasting sectors.

Parallel sets of parliamentary committee hearings are now underway, launched by political rivals within the Chretien cabinet. These hearings are expected to yield reports with recommendations on the federal government's controversial policies and legislation that currently restrict foreign investment in Canadian communications industry titans such as Bell Canada, Rogers Cable and Canwest Global, as well as smaller competitive telecommunications carriers.

Canada's decade-old telecommunications ownership and control laws are the latest investment framework to go under the policy microscope. On November 19 2002 federal Industry Minister Alan Rock tabled a discussion paper entitled "Foreign restrictions applicable to telecommunications common carriers", and announced a committee review proceeding to examine existing restrictions under the Telecommunications Act and regulations.

The hearings before the House of Commons Industry, Science and Technology Committee began in late January and a report is expected back to the industry minister by April. At the core of the minister's discussion paper on ownership, and central to the hearings, are 13 questions addressing three specific areas of inquiry, namely:

  • overall investment in the Canadian telecommunications sector;
  • experiences of other countries in restricting sectoral foreign investment; and
  • timing of potential changes to the current foreign investment restrictions.

Currently, a facilities-based telecommunications or wireless carrier is ineligible to operate in Canada or to hold a spectrum licence unless it is, among other things, Canadian owned and controlled. In order to be Canadian owned and controlled:

  • not more than 20% of the board of directors of the operating carrier may be non-Canadians;
  • not more than 20% of the voting shares of the carrier may be beneficially owned by non-Canadians; and
  • the carrier may not be otherwise controlled in fact by non-Canadians.

Similarly, not more than 33.3% of the voting shares of a non-operating parent corporation of the operating carrier may be owned by non-Canadians; nor can the parent be otherwise controlled in fact by non-Canadians.

Concerns over the erosion of national sovereignty have also been central to ongoing hearings before the House of Commons Canadian Heritage Committee, tasked in 2001 by Canadian Heritage Minister Sheila Copps with a review of Canada's 1991 Broadcasting Act. Although the committee's broad review mandate included existing foreign investment restrictions on Canadian broadcast and cable television holdings, debate began only in December 2002 following the release of the telecommunications ownership paper. Not to be outdone in the media wars, the heritage minister sought to accelerate hearings before the committee on broadcast and cable foreign ownership and control rules, and clashed with the industry minister over whether foreign investment rules applicable to the telecommunications carriers should apply equally to cable television undertakings. The Heritage Committee report is also expected in April 2003.

Further complicating the task of the two parliamentary committees are the strictures imposed by World Trade Organization multilateral agreements and by international trade law on Canada's freedom to enact new or amended domestic legislation addressing foreign investment within the communications sector. Closer to home, a December 2002 survey by Decima Research revealed that Canadians appear to have grown increasingly concerned over the past 18 months about non-Canadian ownership and control of the country's communications companies. The poll indicated that 72% of Canadians surveyed now oppose changes to the ownership laws that would enable non-Canadians to majority-own Canadian media and telecommunications companies, up from 68% in June 2001.

Whether motivated by concerns over public policy or partisan politics, or by industry players with views on every side of the debate, it is clear that the review of foreign investment into Canada's communications sectors is both timely and appropriate. Far less clear, however, is the likely outcome.

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]).