Remove foreign ownership limits: cable firms by Ian Jack

by Ian Jack

OTTAWA – The cable, satellite TV and telecommunications industries should be thrown open to foreign ownership, the cable industry recommended yesterday.

The limit on foreign ownership is an effective 47% in the sector, and there is no benefit to capital-starved cable firms in raising it a few percentage points, the industry's biggest players told the House of Commons heritage committee.

"Once you're up over 50%, what's the difference between 51% and 100%?" said Janet Yale, president of the Canadian Cable Television Association. Asked if her members want foreign ownership restrictions removed, she replied "yes."

The industry argued it needs billions of dollars in new capital to finance high-definition TV and broadband Internet access, but the Canadian market is too small to provide the investment.

"The Canadian banking system has started to limit exposure to telecom and cable companies," warned Jim Shaw, CEO of Shaw Communications Inc.

"The equity and debt markets in Canada are very small. There comes a point where your requirements as an industry are so large they can no longer be satisfied. That's been the case in the debt market for a while and we've been able to go to foreign markets," added Louis Audet, chief executive of Cogeco Inc. "There has to be a reasonable balance between debt and equity."

The three cable executives were joined by John Tory, chief executive of Rogers Cable Inc., on a panel examining foreign ownership limits. The House industry committee will examine limits in the telecom sector and this was the cable industry's opportunity to plead for a continued level playing field if any changes come.

"Anything short of equal treatment would be dangerous and unfair," said Mr. Audet, since the phone companies compete with the cable business for high-speed Internet and TV customers.

The cable executives said they are not advocating a complete selloff, just the ability to raise money on equity markets.

Mr. Tory admitted the industry is not about to go belly up, but he said it is a matter of remaining a global leader. "Nobody's arguing we will go out of business. But when you achieve a world leader position it's something you want to maintain," he said. "Does Canada want to be a leader in broadband infrastructure? We're saying there's no downside to opening up, only more expansion, more jobs for Canadians."

But Bernard Courtois, executive counsel at BCE Inc., said in an interview the cable industry position is "too simplistic."

He argued cable is a content business that must remain Canadian-controlled since cable companies, like their satellite competitors Bell ExpressVu and StarChoice, have some influence over what channels people buy.

Phone lines also have the ability to carry TV signals, further blurring the lines, he said. "We have not taken a position at Bell as to whether the rules should be changed for telcos," Mr. Courtois said.

The industry's arguments also failed to impress another witness, Ian Morrison, spokesman for Friends of Canadian Broadcasting. He suggested the real reason cable companies are pressing for foreign investors is a desire by the controlling Shaw, Rogers, Peladeau and Audet families to maximize profits if they sell out.

Allowing more foreign ownership would be a windfall for the four families but would not provide benefits to Canadians, he said, adding he doesn't buy the argument that Canadian broadcasters owned by the cable companies would be unaffected if U.S. investors took over the cable operations.

"No amount of so-called structural separation will obviate the situation where John Malone [a U.S. cable mogul] owns the pipes and somehow also has a company which he controls which is a Canadian broadcaster," he said.

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