Canada eyes end of foreign ownership

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TORONTO -- The Canadian government has established a blue-ribbon panel to examine a possible reduction or end to foreign ownership restrictions on domestic broadcasters.

The review of Canada's competition policy moves the country one step closer to first-time foreign control of over-the-air TV channels.

"The panel will focus on the impact of such restrictions and limitations on Canada's competitiveness and will be interested in whether there are alternative, and equally effective, mechanisms that have less impact on Canada's competitiveness but nevertheless meet the objectives of the various sectoral investment regimes currently in place," a 50-page paper released Tuesday by the federal government reads.

Current Canadian law bars foreign interests from exercising effective control over domestic media assets -- limiting foreign companies to a 20% direct equity investment in domestic media companies and a 33% indirect investment.

In the past, Canadian media players have managed to remain in Canadian hands by issuing class-A nonvoting shares to controlling shareholders, while allowing non-Canadians to acquire unlimited amounts of equity in the form of class-B nonvoting shares.

While it mentions persistent public concerns about a "hollowing out" of corporate Canada following waves of mergers and acquisitions, the federal panel has been charged with finding ways to open the Canadian border to more inward investment and innovation.

"In the 21st century, economic success will not be achieved by being backward or inward looking," the consultation paper says.

The paper notes that some developing countries have no restrictions on foreign stakes in domestic broadcasters, while other countries, including the U.S., Japan and France, retain foreign ownership limits on over-the-air broadcasters.

"In Canada, our relatively small, diverse population and the availability of U.S. broadcasters limit the degree to which market forces alone can ensure the provision of a range of Canadian news and entertainment programming in both official languages," the paper says.

Canadian foreign ownership rules over domestic broadcasters are already being tested by a pending takeover of Alliance Atlantis Communications by rival broadcaster CanWest Global Communications and U.S.-based equity partner Goldman Sachs & Co.

The country's broadcast regulator in mid-November will begin public hearings to consider approval of the CAN$2.3 billion ($2.23 billion) takeover.
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