Speech
Notes for an address
by Charles Dalfen
Chairman, Canadian Radio-television
and Telecommunications Commission
to the House of Commons Standing Committee on Industry, Science and Technology
examining "Foreign Investment Restrictions applicable to Telecommunications
Common Carriers"
Ottawa, Ontario
February 24th, 2003
(CHECK AGAINST DELIVERY)
Introduction
Good afternoon, Mr. Chairman, members of the Committee, and staff.
My name is Charles Dalfen and I am Chairman of the Canadian Radio-television
and Telecommunications Commission.
With me is David Colville, Vice-Chairperson, Telecommunications, as well as
Shirley Soehn, Executive Director, Telecommunications and Allan Rosenzveig,
General Counsel, Telecommunications.
We are pleased to appear before you as you undertake this important review of
the foreign ownership restrictions on telecommunications common carriers in
Canada.
I have been following the testimony of the other witnesses and I understand
the difficult challenge you face as a Committee.
The Role of the CRTC
At the CRTC, we are faced with similar challenges on a daily basis. Our job is
to consider the often conflicting interests of the parties who participate in our
proceedings and to try and make the decisions in the public interest.
The Commission was established by Parliament in 1968 as an independent
authority to regulate and supervise all aspects of the Canadian broadcasting
system.
In 1976, responsibility for regulating telecommunications common carriers and
service providers that fall under federal jurisdiction was transferred to the
Commission.
Our powers in this latter area derive from the Telecommunications Act
of 1993.
Our authority with respect to broadcasting comes from the Broadcasting Act
of 1991.
The two Acts set out different regulatory regimes and fall under
different Ministers of the Crown - the Broadcasting Act falls under the
Minister of Canadian Heritage and the Telecommunications Act falls under
the Minister of Industry.
Foreign Ownership Rules
As a creature of statute, the CRTC does not establish the rules pertaining to
foreign ownership, rather it administers them, with a view to achieving the
objectives set out by Parliament in each Act.
- The Telecommunications Act specifies, as one of its objectives, the
promotion of ownership and control of Canadian carriers by Canadians (Section
7(d)).
- The Broadcasting Act in section 3(1) (a) declares that "the Canadian
broadcasting system shall be effectively owned and controlled by Canadians."
The actual foreign ownership rules for broadcasting and telecommunications are
similar, however, two points are worth noting.
One is that on the telecommunications side, the rules pertaining to ownership
are defined in the Telecommunications Act itself.
On the broadcasting side, by contrast, the rules are set out not in the Act
itself, but are spelled out in a directive to the Commission from the Governor in
Council pursuant to the Broadcasting Act.
Secondly, on the broadcasting side, the restrictions on foreign ownership and
control are specifically tied to the licensing of broadcasters by the Commission.
Persons are not eligible to hold broadcasting licences unless they comply with
the Canadian ownership rules set out in the Directive.
The Directive is also applied in reviewing transfers of control and
large ownership interests in licensee companies, where the prior approval of the
Commission is required.
In the Telecommunications Act, the ownership rules are not tied to
licensing, but to the eligibility of a carrier to operate as a telecommunications
common carrier, which it may only do if it is Canadian-owned and
controlled.
The definition of a Canadian is set out in regulations adopted by the Governor
in Council, these regulations also empower the Commission to monitor and give
effect to the ownership rules.
These differences aside, however, as I've already mentioned the ownership
rules are similar for both telecommunications and broadcasting. In fact, on both
sides the rules specify that:
- At least 80% of the members of the board of directors of a telecom carrier
or a broadcast licensee must be individual Canadians.
- Canadians must beneficially own no less than 80% of the corporation's
issued and outstanding voting shares.
- And the corporation cannot be controlled directly or indirectly by persons
that are not Canadians.
- With respect to a telecommunications or broadcasting holding company, at
least 66 ⅔ % of the voting shares must be held by Canadians.
- Combining these two rules, the effective foreign ownership can be as high
as 46.6% of the voting shares.
There are some differences between the telecommunications and broadcasting
ownership rules. For example, the rules in broadcasting require that the CEO of a
broadcaster must be a Canadian.
The CRTC and Competition
A number of witnesses that have appeared before you have addressed the issue
of competition in the telecommunications industry.
The telecommunications policy objectives set out by Parliament in Section 7 of
the Telecommunications Act aim to ensure that Canadians have access to
reasonably-priced, high quality, varied and innovative communications services
that are competitive nationally as well as internationally.
Section 7(f) establishes the objective of fostering increased reliance on
market forces for the provision of telecommunications services and ensuring that
regulation, where required, is efficient and effective.
In the long distance, wireless, and retail Internet markets, we have forborne
from regulating because competition was found to be sufficient to allow market
forces to discipline prices.
However, in the local telephone market, we continue to regulate prices because
there is not sufficient competition at this time to allow for deregulation.
The Commission believes that ultimately the most sustainable form of
competition is what is referred to as facilities-based competition, whereby
competing telecommunications service providers offer services using their own
equipment and facilities, rather than having to rely on the facilities of others.
We believe that over the long-term, facilities-based competition will best
achieve the objectives set out by Parliament in the Telecommunications Act.
However, while our goal is to have facilities-based competition, it is
necessary to have a period of transition to that model.
This transition is characterized currently by a hybrid approach that allows
new entrants to use the facilities of the incumbent telecommunications companies
that are deemed to be essential to the entrants' operations at regulated rates.
(An example of such facility would be the wire that runs from the telephone
company's central office to the user's premises.)
We still have a long way to go in order to achieve our policy objective of
sustainable, facilities-based competition.
Competition, particularly in local markets, is certainly not evolving as
quickly as we had hoped.
As the regulatory authority for telecommunications, the Commission has a
responsibility to help improve this situation. Our recent decisions, particularly
the recent price cap decision and the follow-up proceedings to it, have sought to
remove obstacles to facilitate competition. We will continue to do so.
However, regulation is only one piece of the puzzle. Other pieces include the
recovery of the financial markets, technological developments and the quality of
business decision-making in the industry itself.
Conclusion
To sum up, I have very quickly sketched out the Commission's role with respect
to the ownership regimes of both the Canadian telecommunications and broadcasting
industries. I have also touched on the state of competition in the
telecommunications industry.
I would now be happy to answer your questions.
Thank you very much.
- 30 -
Contact: Denis Carmel,
Tel.: (819)
997-9403, TDD: (819) 994-0423, Fax: (819) 997-4245
e-Mail:
denis.carmel@crtc.gc.ca
Toll-free #
1-877-249-CRTC (2782)
TDD -
Toll-free # 1-877-909-2782
This document is available in alternative format upon request.
Date Modified: 2003-02-24 |
