Telecoms: Is Canada Selling its Cultural Sovereignty Through the Back Door?

CCA Bul­letin 11/10

April 6, 2010

 

 

 

Why this issue mat­ters

For the past sev­eral decades, the oper­at­ing prin­ci­ple in Cana­dian cul­tural pol­icy has been that Cana­dian own­er­ship and effec­tive con­trol of our cul­tural indus­tries will ensure more Cana­dian con­tent is made avail­able to Cana­di­ans. This is the case because it is eas­ier to reg­u­late Cana­dian owned com­pa­nies than for­eign owned ones. More­over, Cana­di­ans are more likely than non-Canadians to tell our own sto­ries and to present our own view of the world based on our own values.

Given the con­ver­gence of tech­nolo­gies and the con­cen­tra­tion of own­er­ship in the audio­vi­sual sec­tor, open­ing up for­eign own­er­ship and con­trol of our telecom­mu­ni­ca­tions can only lead to tremen­dous pres­sures to enable a sim­i­lar model in cable and broad­cast­ing. This could result in severe con­se­quences for Cana­dian cul­tural sovereignty.

The absence of appro­pri­ate reg­u­la­tion in the movie indus­try is the best illus­tra­tion of the neg­a­tive impacts of for­eign own­er­ship and con­trol of a cul­tural indus­try. Film dis­tri­b­u­tion pol­icy does not dis­tin­guish the dis­tri­b­u­tion rights for the Cana­dian mar­ket from North Amer­i­can rights for most of the largest dis­trib­u­tors. As a con­se­quence, for­eign film dis­trib­u­tors main­tain a lock on the major­ity of the film dis­tri­b­u­tion activ­ity in Canada. For­eign films (i.e. US movies) occupy over 98% of screen time in Eng­lish Canada, whereas the sit­u­a­tion is some­what bet­ter in Québec cin­e­mas. This demon­strates how for­eign con­trolled cul­tural indus­tries can suc­cess­fully shut Cana­dian cul­tural goods and ser­vices out of the mar­ket with impunity as the result of inef­fec­tive policy.

Just the Facts

Last week, the gov­ern­ment intro­duced Bill C9 in the House of Com­mons, An Act to imple­ment cer­tain pro­vi­sions of the bud­get tabled in Par­lia­ment on March 4, 2010 and other mea­sures. Buried in Sec­tion 2184 of this omnibus Bill is an amend­ment to Sub­sec­tions 16 (1) and (5) of the Telecom­mu­ni­ca­tions Act to allow for­eign own­er­ship of Cana­dian satel­lite com­pa­nies. By tying such an amend­ment to a money Bill, the gov­ern­ment is dar­ing Oppo­si­tion par­ties to launch an elec­tion on this issue, thus vir­tu­ally ensur­ing that this impor­tant pol­icy change, announced in the Throne Speech and the Bud­get Speech, will pro­ceed with­out much of an open pub­lic debate.

Some­what iron­i­cally, Oppo­si­tion par­ties have ensured that the Stand­ing Com­mit­tee on Indus­try, Sci­ence and Tech­nol­ogy hold a series of hear­ings on Canada’s For­eign Own­er­ship Rules and Reg­u­la­tions in the Telecom­mu­ni­ca­tions Sec­tor. On April 1, the CCA appeared along­side other cul­tural orga­ni­za­tions to urge Par­lia­men­tar­i­ans to main­tain the cur­rent set of restric­tions on for­eign own­er­ship in this strate­gi­cally impor­tant sec­tor. It is more than likely that allow­ing for­eign own­er­ship of Cana­dian satel­lite telecom­mu­ni­ca­tion com­pa­nies will be a mat­ter of fact before the Committee’s hear­ings are over.

Tell me more

In its pre­sen­ta­tion, the CCA insisted on the dan­ger of a domino effect which could jeop­ar­dize the real­iza­tion of the cul­tural objec­tives ensconced in the Broad­cast­ing Act (1991).

The first breach to the for­eign own­er­ship reg­u­la­tions was made by the CRTC in 2007 when it allowed the acqui­si­tion by Can­West of Alliance Atlantis despite the fact that, accord­ing to many crit­ics, the effec­tive con­trol rested with US investor Gold­man Sachs. The sec­ond domino fell in Decem­ber 2009 when the gov­ern­ment reversed a CRTC deci­sion find­ing that Glob­alive Wire­less Man­age­ment Cor­po­ra­tion was inel­i­gi­ble to oper­ate a wire­less tele­phone ser­vice in Canada because it is de facto con­trolled by Oras­com, an Egypt­ian com­pany. The third domino to fall will be allow­ing satel­lite com­pa­nies to be sold to for­eign interests.

Con­trary to posi­tions expressed by both Con­ser­v­a­tive and Lib­eral mem­bers on the Com­mit­tee, the CCA believes that it is vir­tu­ally impos­si­ble to change for­eign own­er­ship rules in tele­com and iso­late broad­cast­ing from the con­se­quences of doing so. Some of Canada’s largest cor­po­ra­tions oper­ate in all these fields. Those com­pa­nies would apply tremen­dous pres­sure on pol­i­cy­mak­ers to “level the play­ing field” with their com­peti­tors and to obtain access to for­eign invest­ment on the same terms.  How will it be pos­si­ble to deny one pro­tag­o­nist access to for­eign invest­ments granted to its main com­peti­tor?  Where can we draw a clear line between the tan­gled inter­ests of BCE, Rogers, CTV­globe­me­dia, Shaw, Telus or Québécor?

Canada cur­rently per­mits for­eign invest­ment in Cana­dian broad­cast­ing and telecom­mu­ni­ca­tions ser­vices; it sim­ply pro­hibits for­eign nation­als from con­trol­ling these ser­vices.  There is no evi­dence that lack of for­eign invest­ment has hurt either indus­try. Dur­ing the com­mit­tee hear­ing, the ques­tion was raised as to whether telecom­mu­ni­ca­tions com­pa­nies have even maxed out on allow­able lev­els of for­eign investments.

Cul­ture and Inter­na­tional Trade

The main rea­son why the CCA does not believe it will be pos­si­ble to enforce Cana­dian laws and reg­u­la­tions on for­eign con­trolled com­pa­nies has to do with Canada’s inter­na­tional trade agree­ments. The CCA is very con­cerned about the impli­ca­tions of NAFTA, and specif­i­cally Chap­ter 11, which pro­vides for­eign investors with a right to sue the Cana­dian gov­ern­ment and seek com­pen­sa­tion for gov­ern­ment actions. Investors could sue the gov­ern­ment for the deci­sions of reg­u­la­tory agen­cies like the CRTC, if they believe the deci­sions vio­late their rights under NAFTA.

1. First, in rela­tion to NAFTA, the CCA would point out that the cul­tural exemp­tion is lim­ited in scope to the cul­tural indus­tries that existed at the time NAFTA was cre­ated.  Impor­tantly, this does not include the new media sec­tor, such as inter­ac­tive tele­vi­sion, com­puter games, etc.
2. Sec­ond, Chap­ter 11 rights could poten­tially come into play in two ways in this mat­ter. If the rules in Telecom­mu­ni­ca­tions are changed, a for­eign com­pany that decides to invest in a Cana­dian cable com­pany or broad­caster could struc­ture a deal in a way that mir­rors the new tele­com rules.  If the CRTC were to pre­vent them from pro­ceed­ing, they could launch a Chap­ter 11 chal­lenge on the basis that they are being treated unfairly in rela­tion to a direct com­peti­tor oper­at­ing in the same marketplace.
3. Finally, if for­eign com­pa­nies are per­mit­ted or force entry into Canada’s broad­cast­ing sys­tem, exist­ing rules and reg­u­la­tions relat­ing to the pro­duc­tion and dis­tri­b­u­tion of Cana­dian con­tent pro­duc­tions may be sus­tain­able, since the for­eign com­pany is enter­ing the mar­ket where those rules exist.  But if the CRTC or the gov­ern­ment were to try to update the rules to reflect a new envi­ron­ment, the for­eign com­pany may have a cause of action under Chap­ter 11.

The CCA con­tin­ues to believe that some reg­u­la­tory require­ments should apply to all dis­tri­b­u­tion plat­forms with regards to the pro­duc­tion of Cana­dian pro­grams. Such reg­u­la­tion, if adopted, may be unsus­tain­able with respect to for­eign owned companies.

This sce­nario is not improb­a­ble. A domino effect within Canada’s tightly knit telecom­mu­ni­ca­tions and broad­cast­ing sec­tor could knock down any pre­tence of cul­tural pol­icy in the audio­vi­sual sector.

Of course, there are other rea­sons to main­tain the cur­rent restric­tions on own­er­ship, par­tic­u­larly with regards to poten­tial threats to Cana­dian sov­er­eignty. In this vein, it is worth not­ing that most of our major trad­ing part­ners (includ­ing the EU and the U.S.) also main­tain for­eign own­er­ship lim­its, par­tic­u­larly in broad­cast­ing, which is deemed to be a sec­tor of vital national interest.

What can I do?

Express your con­cerns to Her­itage Min­is­ter James Moore, to Indus­try Min­is­ter Tony Clement, to your MP,  the Prime Min­is­ter, and all other Party lead­ers: Michael Ignati­eff, Jack Lay­ton and Gilles Duceppe.