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### Viewing cable 03OTTAWA1079, TELECOM POLICY:

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
03OTTAWA1079 | 2003-04-15 14:02 | 2011-04-28 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ottawa

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 02 OTTAWA 001079

    SIPDIS

    SENSITIVE

    STATE FOR EB/CIP, EB/BTA/DCT - FAIRFAX/SHEEHAN
    AND WHA/CAN

    STATE PASS USTR FOR J.MCHALE AND S.CHANDLER

    FCC FOR INTERNATIONAL - D.ABELSON, J.MANN AND P.COOPER

    USDOC FOR 4310/IEP/OOC/WH/J.BENDER

    USDOC ALSO FOR NTIA - BURR

    GENEVA FOR USTR

    E.O. 12958: N/A
    TAGS: ECPS ETRD CA
    SUBJECT:  TELECOM POLICY:
           GOC SIGNALS A MORE PRO-COMPETITIVE STANCE

    REF:  (A) 02 OTTAWA 3290

          (B) 02 OTTAWA 1488

    ¶1.   (U) This message is sensitive, but unclassified.
    Please treat accordingly.

    ¶2.   (U) SUMMARY:  Canada is clearly shifting its policy on
    telecommunications competition toward a more pro-competitive
    model.

    -- Following extensive public hearings, in late April a key
    Parliamentary committee is expected to call for a sweeping
    re-examination of the GOC's foreign ownership restrictions
    in communications industries.

    -- During March the Minister of Industry called on the GOC's
    telecom regulator to promote greater competition in local
    phone service.  Accordingly, on April 10 the regulator
    issued a public notice saying that major incumbent telcos
    had broken various regulations in a pattern of anti-
    competitive conduct, and that it will undertake spot
    inspections to uncover and prosecute such behavior.
    END SUMMARY

    ¶3.   (U) BACKGROUND:  Canada's communications regulatory
    agency is the Canadian Radio-Television and
    Telecommunications Commission (CRTC).  The GOC's Departments
    of Industry (for telecoms) and Canadian Heritage (for
    broadcasting) determine policy.  In telecoms, the shift from
    monopoly to competition began in the early 1990's, but
    progress slowed after a few years: the major incumbent firms
    retained dominant market shares, and newer entrants had
    difficulty becoming profitable.  The latter complained in
    particular of two barriers to competition:  (1) restrictions
    on the degree of foreign ownership of telecom carriers, and
    (2) the level of "contributions" which new entrants had to
    pay to incumbents for the use of their facilities.

    ¶4.   (SBU) In January 2002, Charles Dalfen became Chairman
    of the CRTC.  Observers have been consistently positive
    about the prospects for a more pro-competitive regulatory
    regime under Dalfen's leadership.  On May 30, 2002, in a
    decision that made both sides about equally unhappy, the
    CRTC set out ground rules for competition in local telephone
    service (ref B).  Since then, observers say, CRTC
    decisionmaking on telecoms has begun to move more quickly
    and has shown signs of becoming more favorable to smaller
    competitors.

    ¶5.   (U) OWNERSHIP RESTRICTIONS:  Foreign ownership of
    telecom carriers in Canada is restricted to direct ownership
    of no more than 20 percent of voting shares, and no more
    than one-third of indirect ownership, effectively limiting
    foreign ownership to a maximum of 46.7 percent of any
    carrier.  U.S.-based telecom interests pressed the GOC in
    1999-2001 to review these restrictions, without immediate
    success.

    ¶6.   (SBU) In late 2002 Industry Minister Allan Rock asked
    the House of Commons Committee on Industry to examine this
    issue (ref A).  Having held extensive hearings, the
    Committee will release its report on April 28.  According to
    press reports and contacts, the report will take a favorable
    view of relaxing the restrictions.  In light of the
    inextricable competitive links between telecommunications
    and other media which are outside the Committee's (and
    Minister Rock's) mandate, the report will advise the GOC to
    hold a broader review covering ownership restrictions
    affecting all these industries.

    ¶6.   (U) LOCAL SERVICE COMPETITION: In a speech on March 26,
    Minister Rock said that the GOC "expects that the CRTC will
    continue to show its commitment to maintaining pro-
    competition momentum . . .  (L)ocal competition is virtually
    non-existent in all but our largest cities. We would like to
    see the CRTC consider what additional measures it can take
    to promote competition . . . the Government of Canada will
    closely monitor the evolution of competition to ensure that
    it does not deteriorate."

    ¶7.   (U) On April 10, the CRTC issued a public notice on
    regulatory compliance (no. 2003-4 at crtc.gc.ca) which
    listed a variety of known infractions of tariffs, rules
    and/or legislation by incumbent telecom firms.  Suggesting
    that a complaints-based enforcement system had not been
    adequate, the CRTC announced that it would designate
    inspectors to verify compliance by conducting unannounced
    inspections of these firms, which could begin anytime after
    June 19, 2003.

    ¶8.   (SBU) COMMENT:  While industry observers and
    competitive firms received this announcement favorably, the
    extent to which the CRTC will follow through remains to be
    seen.  A spokesperson for the largest incumbent, Bell
    Canada, was quoted arguing that determinations of past
    "infractions" had been based on "erroneous" information from
    competitors, and that it would be more accurate to say that
    the CRTC and incumbent firms are in "disagreement" over
    "complex and arcane" rules.  Skeptics would note that the
    large incumbents have been perennially effective at winning
    the "regulatory affairs game" vis--vis smaller firms,
    mainly by casting themselves as instruments of public
    policy.  In post's view, while Minister Rock's call for
    greater competition provided a short-term push, progress
    depends on the appetite of CRTC Chairman Dalfen for
    substantial change.  Higher-level GOC policies, including
    the foreign ownership issue, will likely be hostage to the
    coming Liberal Party leadership transition and subsequent
    election, which will distract GOC ministers until sometime
    in 2004.

    CELLUCCI

`