UPDATE 1-Canada regulator sees tight broadcast-telecom links

*CRTC head says the two can’t be treated separately

*Sees risk to Canadian content rules on broadcasters

*Incumbents back CRTC, say their networks not for hire

*Newcomer stresses need to gain access to foreign capital
(Adds comment from telecom and broadcasting operators in
paragraphs 7-9, 13, 16-19)

By Alastair Sharp

TORONTO, June 8 (BestGrowthStock) – Canada’s telecom and broadcast
industries are tightly linked and the government should not
consider them separately in any legislative changes, the
chairman of the regulatory body covering both sectors said on

“I don’t think you can meaningfully separate broadcasting
and telecom in the age of convergence,” Konrad von
Finckenstein, chairman of the Canadian Radio-television and
Telecommunications Commission (CRTC), said at an telecom
industry conference in Toronto.

Industry Minister Tony Clement said on Monday the
government would soon launch a consultation paper on opening up
Canada’s telecom industry to more foreign involvement while
retaining protection for the broadcasting sector. [nN07189359]

The paper is a step toward the government’s goal of
bringing more investment and competition to the telecom sector,
now dominated by Rogers Communications (RCIb.TO: ), BCE Inc’s
(BCE.TO: ) Bell Canada and Telus Corp (T.TO: ).

All three companies also have interests in broadcasting or
cable television, at least on the distribution side, and in
some cases in creating content. Canada has requirements on
minimum amounts of home-grown content carried by media, aiming
to protect its national identity.

“If you take away ownership restrictions, I think
inevitably you are going to have to go to a regime of massive
subsidization and promotion of Canadian content,” von
Finckenstein said.

In a spirited panel discussion that followed his remarks,
regulatory executives from the three main incumbents and
newcomer Globalive exchanged views on what changes to the
current structure should be permitted.

The incumbents variously described their telecom networks
by analogy as branded car dealerships, airlines or hotels, and
questioned why upstarts should be allowed to sell their
services via expensive infrastructure paid for by the
established operators.

“When you’re in the network business, you have got to have
a network. How do we get people into shoe manufacturing if they
don’t have a shoe factory? You can’t,” said Ken Engelhart,
senior vice-president for regulation at Rogers.

Speaking to lawmakers in Ottawa in April, von Finckenstein
urged the government to simplify rules for the communications
sector to just two.

He recommended a rule to bar foreign entities from owning
more than 49 percent, directly or indirectly, of the issued
voting shares of a Canadian communications company; and barring
foreign entities from controlling a Canadian communications

The rules should apply to both telecom companies and
broadcasters, which are currently governed by different acts,
and should apply to both incumbents and new entrants, he said.

Mirko Bibic, senior vice president of regulatory affairs at
Montreal-based BCE, agreed. “The rules on foreign ownership
should apply on large and small carriers in broadcasting and
telecom,” he said. “We can talk about the virtues of open
competition, as long as the Broadcasting Act isn’t opened —
it’s not going to happen.”

Von Finckenstein, who previously served as head of the
Competition Bureau, said most Canadians were unconcerned about
the nationality of their network provider but that a consensus
exists on the need to protect Canadian content.

The government late last year overruled a CRTC decision
blocking Egyptian-backed wireless start-up Globalive, which
operates under the Wind Mobile brand.

Edward Antecol, Globalive’s vice-president for regulatory
affairs, said his company had invested heavily but as a startup
found it hard to raise capital within Canada.

Domestic investors prefer the safer returns of the
incumbents, he said, adding that the proposed raising of
foreign ownership limits to 49 percent from 46.7 percent
amounts to tinkering.

“Let’s get real — we have spent $1 billion to date
building out our network and we’re just getting started,” he
said. An increase to 49 percent “for a new entrant is not going
to attract one iota more foreign capital”.

MTS Allstream, the main subsidiary of Manitoba Telecom
Services Inc (MBT.TO: ) and a provider of business IT services,
also questioned established operators opposition to allowing
foreign funding.

“Not only does Bell Canada say ‘build your own damn
network, we’re not sharing with you,’ they are also saying,
‘get that money from Canada’,” said Chris Peirce, MTS
Allstream’s chief corporate officer.

Stock Market Advice

(Additional reporting by Nicole Mordant in Vancouver; editing
by Peter Galloway)

UPDATE 1-Canada regulator sees tight broadcast-telecom links