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In its report, "Compete to Win: Final Report – June 2008, the Competition Policy Review Panel" said, "there is considerable evidence that liberalizing foreign investment restrictions brings demonstrable economic benefit through increasing competitive pressure on all participants in the market." The Competition Bureau of Canada couldn't agree more. Foreign-ownership restrictions have been a thorn in its side for years. In a speech to the C.D. Howe Institute two years ago, Sheridan Scott, commissioner of competition at the time, reiterated the bureau's commit- ment to eliminate these restrictions. "We will continue to advocate for the removal of any barriers to entry by new players, including foreign entrants, who would provide Canadians not only with the benefits of an additional competitor or counsel in 1993 and 1994. "Wireless, for example, is one segment where the great- er ability for foreign ownership might have led to the entry by larger interna- tional players, bearing powerful brands, who could have driven prices down and offered more options to Canadians. "The open question is whether the foreign ownership restrictions effective- ly prevented these players from entering the Canadian market or whether they could have still done so through invest- ments in Canadian entrants under the existing rules, but chose not to do so for their own reasons. You will find people on both sides of that debate." Proponents of foreign-ownership requirements believe there are strong, indeed vital, reasons for leaving s. 16 in the Telecommunications Act. In its submis- sion to the Competition Policy Review If they were truly competitive they would be racing to get more services and products out there. KIRSTEN EMBREE, Fraser Milner Casgrain LLP. $2 billion into its coffers. It raised double that. Those in favour of Canadian own- ership view the auction as a vindica- tion that outsiders are not needed for a vibrant industry. Advocates of foreign ownership ask how much more could have been raised. There is little doubt that the tele- communications industry in Canada is healthy. According to Industry Canada, the information and communications technologies sector had revenues of $59.2 billion last year, a 2.7-per-cent increase from the previous year. Indeed, growth in the sector outpaced that of the Canadian economy. The share of the Canadian gross domestic product attributable to this sector has continued to grow. In 2008, it was the source of 4.8 per cent of Canadian GDP, a figure that has risen in each of the past six years. Given the economic impact of the competitors, but also with access to the innovative services and business acu- men that characterize their success." She pointed to a report by the McKinsey Global Institute in San Francisco, Calif., which included in- depth case studies in three countries of 20 industries, including telecommunica- tions. "And they reached a conclusion guaranteed to warm the heart of any competition lover," said Scott. The report said, "in sectors where competition was promoted, through the dismantling of regulatory constraints, primarily, innovation flourished and productivity soared. But wherever regu- lation or other forces warped the com- petitive environment, competitive pres- sures eased, innovations failed to develop or to spread rapidly, and productivity growth slackened." Allowing for foreign telecom provid- ers may mean lower prices and better service for consumers, says Koch, who served a secondment to the CRTC as legal Panel last year, the Communications, Energy and Paperworkers Union of Canada highlighted eight key reasons why control of the sector should remain in the hands of Canadians. The CEP contends foreign ownership is a bad idea because it threatens Canadians' privacy and security rights, it leaves Canada's telecommunications system vulnerable to external shocks, Canadian law does not apply to foreign investment dis- putes, and it is not required to increase capital investment. The latter is certainly contentious. "It is unrealistic to expect entrants in the market to rely solely on Canadian sources of funding. There is only so much of that you can do," says Embree. Industry Canada recently announced it was opening up the wireless market to new Canadian entrants and the first of those are expected to hit the marketplace as early as October. When the govern- ment auctioned off part of the wireless spectrum in 2008, it anticipated drawing industry, it is not surprising that at least three reports have explored foreign ownership recently. What is surprising is the apparent lack of interest to address recommendations for a relaxed regime. "This was a bigger issue when the wire- line market was originally opened to competition in the '90s and there was greater hope for the building of com- petitive networks," says Koch. "Since that time, most of those foreign entities with a major presence in Canada have left, whether they be Sprint, AT&T, or BT [formerly British Telecom]. Today the industry is more entrenched, largely along the lines of a wireline duopoly between telcos and cable. It is less clear how increased foreign ownership, per se, would result in changes to the industry structure that we are currently seeing, although there might be some entry in specific niche markets." Ultimately, says Roman, "this is really a matter of legislation and government policy preventing non-Canadians from owning Canadian telecoms, not a matter of industry preference." Such legislative amendments are unlikely, at least in the near future. "The most direct way to eliminate the rule is to amend the Telecommunications Act, [but] it just doesn't grab anyone," says Embree. "Most politicians won't want to stick their neck out on this one." IH INHOUSE AUGUST 2009 • 29