Audio version of the presentation and questions (runs 35:40):

Mr. Chair and Committee members:

Thanks for the invitation to appear today! FRIENDS is a watchdog for Canadian programming on radio, television and new media supported by 100,000 Canadians. Our most recent appearance before this Committee was in 2003 during a hearing on foreign investment restrictions applicable to telecommunications common carriers. Plus ça change…

Section 7 of the Telecommunications Act states that “telecommunications performs an essential role in the maintenance of Canada’s identity and sovereignty”. The Act outlines objectives of Canadian telecommunications policy including:

• Facilitate the orderly development throughout Canada of a telecommunications system that serves to safeguard, enrich and strengthen the social and economic fabric of Canada and its regions,
• Promote the ownership and control of Canadian carriers by Canadians, and
• Stimulate research and development in Canada in the field of telecommunications.

Hence, Section 16 requires that Canadian carriers be Canadian owned and controlled. We support these provisions of the Act and note that, by a wide margin, so do Canadians. In a survey FRIENDS, ACTRA and the CEP commissioned from Harris/Decima in November 2007, 61% of Canadians had an unfavourable reaction towards foreign ownership of telephone companies.¹

Among our concerns regarding a possible loss of Canadian ownership and control of Canadian carriers are the export of high-end jobs, reduced protection of the personal privacy of Canadians through the intrusion of such instruments as the United States Patriot Act, loss of sovereignty through dependence on United States routes for data flow, reduced resilience in emergencies and a threat to service access on the part of Canadians living in rural and remote areas.

FRIENDS’ principal concern, however, relates to Canada’s cultural sovereignty.

Canada’s media and communication industries have converged in recent decades and the pace of this convergence has recently increased. For your convenience, we have reproduced CRTC data on the corporate structure of Canada’s biggest media and communications companies: BCE, CanWest, Cogeco, CTVglobemedia, Québecor, Rogers, Shaw and Telus.

Let’s take Rogers as an example. Beneath a holding company known as Rogers Communications – of which the Rogers family holds 82% of the voting shares – Rogers’ business lines include cable television, local and long distance telephone, Internet access, wireless, broadcasting, baseball and publishing. Last year its revenues approached $12 billion. Although Rogers may be the most converged media and communications company, it is by no means unique:

• Shaw operates in the cable and Internet business, and is entering wireless. Through the Shaw family’s common ownership and control, Shaw is related to Corus, a radio and specialty television company.
• Québecor controls Vidéotron, TVA and Sun Media, offers Internet access and plans to enter the wireless business.
• BCE controls Bell Canada, Bell Aliant, Bell TV and has a 15% stake in CTVglobemedia – which controls Canada’s largest television company and the Globe and Mail.

In this integrated communication business, changing the foreign ownership requirement for one sector – telecom – can be expected to impact on the other sectors. If BCE were foreign owned, it would become ineligible to control Bell TV. Rogers would have to dispose of Rogers Media and Rogers Cable, and so on.

Disposing of these key broadcasting assets would destabilize the Canadian broadcasting system by reducing the investor pool, as well as ending synergies between the component parts. It is reasonable to assume that the affected players would instead call for changes to ownership requirements under the Broadcasting Act, just as they did successfully when telecom ownership requirements were last changed in the 1990s.

The Montreal Gazette reported on November 23, 1995 that (quote) “the federal government is relaxing limits on foreign ownership of Canadian cable and broadcasting companies…. (Heritage Minister Michel) Dupuy said the rule changes put the broadcasting and cable industries on the same footing as telecommunications companies.”

Indeed, CanWest’s Leonard Asper told your predecessors during the 2003 hearings that (quote): “Any changes in the rules that apply only to telecom companies would soon be of competitive significance to broadcasters as telecom companies move increasingly into the BDU (broadcasting distribution undertaking) and broadcasting businesses”. And Cogeco’s Louis Audet told the Committee that (quote) “we are suggesting that competitive equity will require that cable companies and telephone companies be treated the same way under liberalized foreign ownership rules”.

The 2003 Industry Committee’s report underscored Mr. Audet’s comment in the following passage (quote):

“Technological advances and convergence of technologies, especially over the last decade, have blurred the lines that previously separated the services offered by telecommunications common carriers and broadcasting distribution undertakings ….Telecommunications carriers and BDUs are now competing for the same customers in some markets (e.g., high-speed Internet service). The telecommunications and broadcasting landscape is further complicated by vertical integration and by cross-media ownership. Clearly, defining an enterprise as a pure “telco” or “BDU” on the basis of their underlying distribution networks or the services they provide is becoming more and more difficult (see Figure 4.1).”

That “figure” or chart, which we have distributed, illustrates the blurring lines between these converged companies:

Canadian broadcasting is a public good which is essential to the communications infrastructure of local economies across the land. It facilitates the participation of citizens in the democratic process, and it contributes to building a distinct identity on the northern half of the North American continent. Allowing such an important instrument of Canada’s national development to fall into foreign hands would signal the demise of our cultural sovereignty.

While no patriotic Canadian would deliberately counsel such an outcome, tinkering with foreign ownership rules in one part of the media and communications industry will place other parts at risk.

Last week you heard from Marta Morgan at Industry Canada that relaxing foreign ownership rules in telecom would serve to bring Canada in line with other OECD countries. None of them are immediately adjacent to the huge cultural and economic influence of the United States of America. In view of Canada’s unique position, we urge you to heed the advice of the Lincoln report (quote): “that the existing foreign ownership limits for broadcasting and telecommunications be maintained at current levels.”

Thanks for your attention!

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For information: Jim Thompson 613-447-9592

¹Harris/Decima survey of 2,052 Canadians, November 15/25, 2007, margin of error: 2.2%, 19 times our of 20. Details are available at: http://www.friends.ca/poll/6939.