A necessary but inconsiderate condition

It is old news that Industry Minister Tony Clement announced last November that the government was going to delay making a decision on changes to the rules on foreign direct investment in the telecom sector. After all, just a few weeks after rejecting BHP Billiton’s takeover of the rock mining operations of Saskatchewan’s Potash Corp., how could the minority government face the opposition on critical telecommunications infrastructure.

So at the International Institute of Communications conference, the Minister stated: 

With respect to foreign ownership, I have been consulting throughout the summer on whether the current restrictions constitute an impediment to growth in the wireless sector. Those consultations will continue as we proceed with our discussions on the 700 MHz spectrum.

And this just makes sense. After all, how spectrum is allocated and who is eligible to compete for it — and pay for it — are interrelated issues. And so we will consider foreign investment rules and decisions around the 700 MHz auction together, as part of an integrated regulatory approach.

Of course it was necessary to understand how foreign investment plays in the 700 MHz auction. But the converse isn’t true. We don’t need to understand who gets to bid on 700 MHz to sort out foreign direct investment in the entire sector – we need clear investment rules that apply to all telecommunications services providers – wireless and wireline. As Terry Corcoran wrote yesterday, in a piece called “Ottawa drives backward down the infoway“, we’re looking at the issue backwards.

When the Minister announced the process to review foreign investment in the sector at last year’s Canadian Telecom Summit, he said:

In the next few days, I will be releasing a consultation paper on this subject as well, and I will be looking forward to hearing your views on this important issue. Let me give you a little taste of what this consultation paper will be about. First of all, we will be confirming that we are intending to move ahead with telecommunications reform when it comes to foreign direct investment, and of the need for that reform. Secondly, we will have a relatively short, but important, discussion period in the next few days, commencing with the release of the report, so that we can get feedback from both the industry and Canadian consumers.

Note the expression “relatively short.”

The Consultation Paper referred to 3 studies that had already examined the issue: a 2003 report from the House of Commons Standing Committee on Industry, Science and Technology; the 2006 report from the Telecom Policy Review Panel; and, the 2008 report from Competition Policy Review Panel. The Department solicited public comments last summer and it received more than 40 submissions from companies and organizations and more from individuals.

We cannot continue to anchor foreign investment decisions solely on spectrum, completely ignoring the impact of delay on the rest of the telecom sector.

Wireline service providers are investing billions of dollars in fibre infrastructure and ISPs seeking to expand to the next stage are caught in purgatory waiting for a decision. Want to mess up the capital markets for a critical sector? Open up a consultation on allowing foreign investment and then keep it festering.

Next week is when comments are due for the 700 MHz consultation. That paper asked for more input on foreign investment – outside of the original process from last summer.

It will be interesting to see which non-Canadian carriers participate in the 700 MHz consultation. Perhaps even more interesting will be to consider which carriers didn’t bother participating because of the uncertainty playing Calvinball in our telecom marketplace.