Telecommunications Act

¶ … Canadian Telecommunication Act

Telecommunication Act

Amendments have been made in Canadian Telecommunication Act in order to liberalize the telecommunication for foreign investors. The goal of this policy is to increase revenue, develop technological infrastructure and to increase competition in the telecommunication sector.

Analysis of Canadian Telecommunication Act

In recent times, amendments have been made in Canadian Telecommunication Act. These changes concentrated on removing foreign ownership restrictions that "previously restricted foreign telecommunication service providers to hold less than a 10% share of the total Canadian telecommunications market based on revenue"(Iacobucci & Trebilcock, 2012). According to the policy, restrictions in the telecommunication sector ensured that Canadian companies remained in competition and earth stations, submarines cables and satellites had to be owned by Canadians and not by any foreigner (Beaudry, 2010). Voting shares also had to be owned by Canadians. It also required that the board of directors of that carrier had 80% of Canadians and that non-Canadians did not have the power to exercise any control over it.

Overview

According to the reports complied by Canadian Radio television and Telecommunication Commission, the total revenues of Canadian telecommunication, for the year 2010, was found out to be $41.7 billion (Beaudry, 2010). The recent amendments in the Telecommunication Act had been lifted in order to increase competition in the Canadian telecommunication sector. Furthermore, the goal of lifting these restrictions on foreign owned carriers was to ensure that investments were being made in the sector. Sasktel, MTS Allstream, Public Mobile, Globalive, etc. are some of the new carriers in the Canadian market (Iacobucci & Trebilcock, 2012). The restrictions had been removed in order to generate revenues and to increase profitability of the telecommunication sector. The goal of the telecommunication sector is to allow foreign investors to make foreign investments and to increase their presence in the market, which would allow them to attain "voting power commensurate with their current equity ownership" (Laffont & Tirole, 2012a).

Telecommunication Authority in Canada

The governing telecommunication entity in Canada is Canadian Radio-Television and Telecommunications Commissions. This body is responsible for looking after the telecommunication sector and regulates it. Telecommunication Act and Radio communication Act are the two laws that are applicable in the industry.

Opportunities

During the twentieth century, the Canadian telecommunication sector was not a liberal market for foreign investors. In order to deal with this issue, Telecommunication Act was modified and amended to allow foreign investors to penetrate the Canadian telecommunication sector. Firstly, this liberalization policy is important for Canada in terms of economic growth and development and creating job opportunities for its citizens (Laffont & Tirole, 2012a). The goal of removing this restriction was to increase telecommunication market power and to promote competition.

The Canadian telecommunication industry is an important part of the economy and growth. It has been successful in generating revenues and increasing employment opportunities in Canada. The growth and development in telecommunication industry is dependent on innovation and technological development as well as on competition (Laffont & Tirole, 2012 b). Liberalization of foreign investments can allow the industry to grow and flourish and benefit the consumers by offering them diverse products and affordable prices. Beaudry (2010) asserts that the modifications made in the telecommunication act would "the saturated nature of markets in Canada, followed by the deregulation of the telecommunications industry, as well as the increase in the number of wireless service providers, would also contribute in raising the level of competition."Previously, the industry lacked the innovation as policies regarding the foreign investments were restricted. However, modifications made in the telecommunication act would allow the Canadian telecommunication sector to grow in a positive manner through technological development and innovation.

Previous studies indicated that Canadian telecommunication sector lagged behind its international counterparts because of its strict telecommunication policies, which restricted foreign investors to directly penetrate the market (Beaudry, 2010, Iacobucci & Trebilcock, 2012). Past research reveals that foreign ownership has gained significant attention in past studies for several reasons. According to Ofir & Alexander (2012), the Government of Canada had asserted that the significance of foreign growth and development and the need for foreign investments, more specifically in the telecommunication industry in order to increase competition and profitability. Direct foreign investments would assist in allow Canadian organization to work collaboratively with foreign companies to gain financial resources and expertise needed to flourish in the telecommunication sector (Ofir & Alexander, 2012).

Literature suggests that several studies had been conducted in order to understand the restrictions that had been applied on foreign investments in Canadian telecommunication sector (Beaudry, 2010). Over last decade, several independent studies recommended that the Canadian government should remove these restrictions in order to increase capital and to allow transference of knowledge related to technology. Furthermore, it would provide better choices to consumers through affordable pricing. In the year 2003, the House of Commons Standing Committee on Industry Science and Technology, proposed to modify the Telecommunication Act and liberalizing foreign ownership in the industry. Same proposals were made by Telecommunications Policy Review Panel and Competition Policy Review Panel in the year 2006 and 2007 respectively.

Digital Economy

The liberalization of foreign ownership in Canadian Telecommunication sector would allow the country to become the next global leader in the digital economy. With foreign investments, the Canadian telecommunication sector can successfully create new products and services. Reports suggests that as compared to other countries such as United States, Britain and France, Canada lags behind its international peers as it has been unsuccessful in taking failed to modify its Telecommunication Act ( Ofir & Alexander, 2012). However, with the restriction remove, foreign investments can make direct investments on small telecom companies that are present in Canada. According to Ofir & Alexander (2012), it was suggested that foreign direct investments cost can decrease the operational costs and assists in increasing productivity. Furthermore, it is believed that foreign investments can allow the telecommunication industry to strengthen itself through enhanced competitiveness and income.

Analysis

From research, it is predicted that the liberal policy would allow the telecommunication sector to grow and it is expected that in the future, direct foreign can further accelerate this growth. Canadian government had understood the significance of foreign investors and therefore, had concentrated on removing the restrictions that were previously applied on non-Canadians owning telecommunication sectors. For growth and development, foreign investors are required to increase competition and efficiency. By liberalizing the telecommunication sector, Canadian government anticipated that it would attract foreign investments as this is the strategy used by other developed countries such as United States, Britain, France, India, Nigeria, etc. Liberalization policy is important strategy implemented by the Canadian government to attract foreign investment.