OTTAWA--Industry Minister Tony Clement said Thursday that the federal government will have to “stick handle” around the challenges posed by convergence as it pursues the liberalization of the foreign ownership restrictions for the telecom sector.

“There’s no question there’s been convergence in the industry between those providing telecommunications and broadcasting,” Clement told the House industry committee, where he appeared to discuss foreign ownership and the government spending estimates.

“I’m not saying it’s easy, but it’s certainly not impossible to draw a distinction between telecommunications, as a field of networked activity, and broadcasting and the content that goes into broadcasting.”

He said in the government’s view, broadcasting and telecommunications can be dealt with separately.

“It’s going to require some stick handling, there’s no question. We are in shades of grey, there’s no question. But I think we can, with good public policy … allow for investment to occur in the sector.”

Clement’s comments come as several witnesses have told the committee that liberalizing the foreign ownership restrictions for the telecom sector would create an uneven playing field between broadcasters and vertically integrated telecom companies.

“In this integrated communication business, changing the foreign ownership requirement for one sector—telecom—can be expected to impact the other sectors,” Ian Morrison, a spokesman for Friends of Canadian Broadcasting, a watchdog group for Canadian programming, told the committee at the end of March.

Morrison pointed out that Canada’s major communications companies hold telecom and broadcasting assets.

Rogers Communications Inc., he noted, operates cable television, local and long distance telephone, Internet, wireless, broadcasting, and publishing services—as well as the professional baseball team Toronto Blue Jays. 

Shaw Communications Inc., which offers cable television, digital phone and Internet services, and has plans to launch mobile wireless services in late 2011, is awaiting regulator approval to acquire Canwest Global’s broadcasting assets. The deal will see Shaw become a major broadcaster with a suite of specialty channels and the Global TV network.

Other major companies, such as Québecor Inc. and BCE Inc., offer both Internet and television services.

But liberalizing the foreign investment rules for only the telecom sector could force vertically integrated communications companies to comply with two foreign investment regimes, creating separate ownership structures for their carriage and content assets.

“Anything that falls under the Broadcasting Act you would have to put under a separate entity with a different ownership structure,” Lawson Hunter, Stikeman Elliott counsel and a former Bell Canada executive, told The Wire Report.

“If the government forces people to create artificial corporate structures, it creates a lot of hassles and headaches.”

Hunter has previously suggested that an important question to address before moving on significant regulatory reform is how to promote Canadian content in the digital age, when much of the communications system is converging online.

For now, Clement said the government does not intend to touch the Broadcasting Act.

“With respect to broadcasting, I can tell you that we will not consider anything that might impair our ability to pursue our Canadian culture and content policy objectives, period, full stop,” Clement said. “We’re not here to change the Broadcasting Act.”

He added that he has been following the committee hearings, which will be weighed in the government’s evaluation of how to proceed on the issue.

Clement has said he wants to apply the Investment Canada Act to telecom companies. That would mean scrapping the stricter test now in the Telecommunications Act, which limits foreign investment to 20 per cent of the voting shares in the Canadian carrier and 33 per cent of the voting shares in the holding company.

CRTC chairman Konrad von Finckenstein has suggested increasing each of those levels to 49 per cent to maintain Canadian control at a minimum of 51 per cent.

The Industry Department intends to hold consultations with the public and stakeholders on the government’s pledge to open up the telecom sector to foreign investment.

On Thursday, Clement told The Wire Report that the minister’s office is working internally on the nature of the consultations, and that it will make an announcement “pretty soon.”

Von Finckenstein has called repeatedly for an overhaul of the telecom and broadcasting regulatory framework to address industry convergence.

He told the House industry committee that the federal government should merge the Broadcasting Act, the Telecommunications Act and the Radiocommunication Act into a single statute.

When asked Thursday whether he supports von Finckenstein’s calls for a merged act, Clement said, “We haven’t made any decisions. We’re in the midst of starting our consultation on the liberalization of the telecom sector. Obviously we’ll take note of all testimony before the committee.”

Liberal MP Marc Garneau, his party’s industry critic, also questioned Clement Thursday about the Conservative government’s broadband plan, which is providing $225 million over three years to extend and improve broadband coverage to Canada’s rural and remote areas.

Ontario Economic Development Minister Sandra Pupatello has questioned whether Canada is doing enough on the issue when the U.S. Federal Communications Commission (FCC), under direction from the United States Congress, has released a National Broadband Plan that proposes $15.5 billion US over 10 years to make 4 Mbps broadband available to every American.

Garneau asked Clement whether he believes the department is providing enough funding to extend broadband access to all Canadians.

Clement said the broadband plan is targeted to rural and remote areas most in need of government assistance, and that the government cannot be expected to act on the issue alone.

“Two-hundred and twenty-five million [dollars] is never going to do it, because it’s not just a federal government issue. Provincial governments are investing. The private sector is investing,” Clement said, noting that companies are collectively investing billions of dollars in their networks.

“I hope your question isn’t predicated on the belief that the federal government can solve this problem on its own.”

sdoyle@thewirereport.ca

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