Canada mulls liberalized telecom rules

Wed Mar 14, 2012 3:22pm EDT
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OTTAWA (Reuters) - Canadian Industry Minister Christian Paradis will make an announcement just after market close on Wednesday, expected to be about liberalizing the telecommunications market.

A government advisory did not disclose the topic of the announcement, to be unveiled at 4 p.m. EDT (2000 GMT), with a Paradis news conference 15 minutes later.

But Paradis has been working on new guidelines for the telecoms sector, specifically on whether to ease restrictions on foreign investment in Canadian companies, and plans for an auction of 700 MHz wireless spectrum.

The driving idea appears to be to boost competition, perhaps by allowing more foreign capital and perhaps by setting aside some of the valuable spectrum for new entrants, in order to improve service and reduce costs to consumers.

Canadian law currently limits foreign ownership of a telecom company to 20 percent of voting shares and direct and indirect control to 46.7 percent, and Paradis is highly unlikely to lift the limits completely.

One option is to allow foreigners to control all but the largest telecom companies. Canada's Big Three - Rogers Communications, Telus and BCE Inc - together control 95 percent of the sector, and boosting foreign investment in small players could add competition.

Another possibility, probably less likely, is simply to make minor increases in the foreign ownership levels without ceding control.

Connected to the issue of small players is how to set the rules for the wireless auction. The 700 MHz frequency is considered key to the introduction of a mobile broadband technology known as long-term evolution (LTE), which is already being introduced into U.S. markets after an auction of the same spectrum in 2008.

The low-frequency airwaves are better able to penetrate walls, making for a strong signal in urban environments, and can also travel longer distances between cellular towers, making rural coverage less cost-intensive.

Industry participants see a strong possibility that Paradis will reserve a portion of the spectrum for smaller or new entrants. He could also set conditions that some or all of the spectrum be used to expand service in rural areas.

(Reporting by Randall Palmer and Louise Egan; editing by Janet Guttsman and Rob Wilson)

A woman walks by a Rogers Plus store in Toronto February 16, 2011. REUTERS/Mark Blinch