BCE deal could finesse Canada’s foreign control rules for telecom companies

March 10, 2008

OTTAWA—CRTC Chair Konrad von Finckenstein is right to be skeptical about the proposed takeover of BCE Inc. by the Ontario Teachers’ Pension Plan and three U.S. private equity firms, say the contributors to a new book on telecom policy published by the Canadian Centre for Policy Alternatives.

With Teachers’ putting up 51% of the equity, the deal meets the provisions of the law on foreign ownership but questions remain over who would control the board and executive committee. The CRTC Chair is concerned that the deal would lead to “paper compliance” to Canadian federal legislation on foreign ownership of Canadian telecommunications carriers.

“That’s precisely the point,” says Mel Watkins, Professor Emeritus of Economics and Political Science at the University of Toronto. “If control de jure is with the majority Canadian owners, but control de facto is with the minority foreign owners, this deal has finessed Canada’s foreign control rules for telecommunications companies.”

“Private equity firms are in the business of restructuring companies, driving up their share value, and then selling them off for the benefit of their own shareholders,” explains Watkins. “The need for a strong Canadian telecommunications sector is not one of their priorities.”

Communications systems are, according to Canadian media guru Marshall McLuhan, part of a country’s collective nervous system. Their role in today’s heightened security environment cannot be overestimated.

Despite the various rumblings that the Canadian federal government would like to undo this requirement in the Telecommunications Act, it is not at all unusual for countries to require domestic ownership of the telecommunications industry.

“In fact, the U.S. requires domestic ownership of its telecommunications companies,” notes Watkins.

Watkins’ article is one of several in For Sale to the Highest Bidder: Telecom Policy in Canada, edited by Marita Moll and Leslie Regan Shade, that deal with potential changes to foreign ownership of Canadian telecommunications carriers inherent in various federal initiatives as well as other telecommunications issues such as Net Neutrality and Spectrum Management.


For Sale to the Highest Bidder: Telecom Policy in Canada is available from the CCPA. http://www.policyalternatives.ca

For more information contact Kerri-Anne Finn, CCA Communications Officer, at 613-563-1341 x306.