Executive Summary
Regulatory approval of the application by Shaw Communications Inc. (Shaw) to effectively acquire all the broadcasting assets of Canwest Global Communications Corp. will make Shaw the largest vertically integrated media company in Canada. This has serious implications for the Canadian broadcasting system given the potential for self-dealing and anti-competitive behaviour which may negatively impact access and diversity. Given the unprecedented scope of vertical integration which would be created in the approval of this transaction, TELUS submits that the CRTC must adopt, as conditions of approval of this transaction, safeguards to limit any abuse of market power and anti-competitive behaviour by Shaw and its affiliates, particularly with respect to matters such as agreements with non-affiliated producers, programmers and broadcast distributors on linear and new distribution platforms. These safeguards must take the form of clear, unequivocal and enforceable rules.
Moreover, TELUS submits that the Commission must proceed with caution as it approves this transaction which will significantly alter the landscape of the Canadian broadcasting industry. Accordingly, as further discussed in a parallel submission filed by TELUS today with respect to the renewal of Shaw’s cable licenses, TELUS submits that the Commission must retain its powers to make amendments to conditions of license and thus it should renew Shaw’s cable licenses for a two-year term only. This prudent approach would follow that taken in A group-based approach to the licensing of private television services in which the Commission indicated that it would renew for a one-year term only the broadcasting licenses of all television licensees controlled by a designated group in order “to allow the broadcasting industry to adapt to both the new group-based approach set out in this regulatory policy and the Commission’s determinations resulting from the additional proceedings
With respect to tangible benefits, both Shaw’s assessment of the value of the transaction and Shaw’s proposal for a “pseudo” benefits package makes a mockery of the Commission’s policy which was established to ensure contributions to the broadcasting system as a tradeoff for the concentration that flows from such merger and acquisition activity. For all intents and purposes, Shaw’s application contains no tangible benefits package at all (as will be further explained below). While Shaw argues that the Commission should look at the so-called “intangible benefits” of this transaction, TELUS submits that this argument is severely flawed and that a full and proper tangible benefits package is warranted in this case to help offset the reduction in diversity that will result from the approval of this transaction. Without such tangible benefits, there would seem to be little value and considerable risk in approving this transaction.
Canwest’s recourse to creditor protection has skewed the reality of a very lucrative deal. The problems in which Canwest found itself were mostly the result of its crippling debt load as we entered the worst recession since the 1930s.
The demise of the former ownership group had nothing to do with the profitability of Canwest itself, especially as it started to reap the benefits and synergies resulting from the acquisition of the Alliance Atlantis specialty services. Rather, it had everything to do with bad timing, high leveraging of assets on the eve of a global economic crisis and, among other things, the coincident collapse of advertising revenues.
Shaw saw a great deal in buying Canwest and made a strategic investment in doing so. Shaw cannot be begrudged for making a possibly smart business decision (buying highly profitable but undervalued assets at a distressed price) but it should not be given special exemption from a long-standing and cornerstone Commission policy that supports the greater broadcasting system for having done so. This acquisition of very profitable broadcast properties, which we estimate at over a $2 billion value, must entail the payment of a full and proper benefits package, that amounts to at least $200 million, and exception must not be made based on the proposition that the so-called rescue of Canwest is benefit enough.
TELUS’ recommendations to the Commission in approving this transaction can be summarized as follows:
• Establish safeguards by way of conditions of license which should include at a minimum:
o The strict prohibition on content exclusives on all platforms
o A reverse onus for handling complaints of undue preference and interim relief such as providing access to content pending resolution of a complaint. Also establishment of a policy of taking into consideration the cumulative effect of multiple instances of preferences granted to an affiliate, undue or not.
o Filing of all existing affiliation agreements between Canwest and Shaw in order to set a baseline for the purposes of assessing undue preference and a requirement to file all future affiliation agreements between Shaw and its affiliated programming undertakings.
o Enable either party to elect to use commercial arbitration in the event of difficult negotiations to ensure access to content by competitors without undue delay.
o A moratorium on any value-for-signal regime for integrated broadcasters for two years after which time rates for Canwest Global would be set through commercial arbitration at rates which do not exceed rates paid carriage of CTV for same terms and conditions. Moreover, in order to guard against self-dealing. payment would be made by all distributors, including Shaw, into an independent production fund which would manage the money on Canwest’s behalf.
o Full structural separation between carrier and programming operations to prevent any sharing of board members or employees between any of the Shaw affiliated companies.
• The Commission should renew Shaw’s cable licenses for a two-year term only in order to retain the power to make changes to conditions of license in the short term as needed due to the quickly changing environment and the unknown potential consequences to the broadcasting system of this transaction.
• The Commission should require that Shaw consent to a full and appropriate tangible benefits package:
o It must be based on the full value of the transaction which is valued at over $2 billion;
o It must not include as part of the 10% calculation any benefits which were previously obligated under the Canwest/Alliance Atlantis transaction but Shaw must be obligated to perform those prior obligations in addition to the new benefits
o At least 75% of the benefits must be dedicated to third party initiatives such as independent production.
• The Commission should impose strict obligations on Shaw with regard to the auditing and reporting of all planned expenditures.
Monday, August 23, 2010
Friday, August 13, 2010
Intolerance around net neutrality does not augur well for diversity of thought
The recent attacks on Google and Verizon over their temerity to seek a reasonable compromise around what many view as a complex issue, struck me as further evidence that the concept of democracy that I grew up with is in trouble. In trouble in part due to the ease with which the Internet allows the like-minded to reinforce mutual ideology to the exclusion of other perspectives. That has to be a bit ironic given the wonderful promise of an open Internet is to promote freedom, choice and diversity.
Maybe my fear is just intellectual hyperventillation, but increasingly I worry that compromise and dialogue are being sacrificed to ever more partisan perspectives in all elements of society from our Parliament to the coffee shop.
It hit me today that the intellectual differences between those vocal Internet activists that can only accept a single vision of the Net and the Tea Party, that came out today attacking net neutrality, are not so great. Their political religion may be miles apart but both groups seem to feed on mutual intolerance for those that hold different views. And if that is right, then maybe both the Tea Party and some of the net neutrality zealots share kinship with the Iranian bullies that stone women who succumb to love in an atmosphere where hate governs. An atmosphere of hate derived from extreme orthodoxy that does not tolerate deviance in thought or action.
I have always believed that the golden age of democracy that spawned so many social programs occurred when people were able to debate, to accept that maybe the other side had a point and that it was ok to give up and compromise if there was a chance compromise might create something better, not perfect, but better,for society.
Now if I had to pick a vision to side with, I would want to help the net neutrality gang, because their heart seems in the right place, (and their overarching vision reinforces many of my own) :-).An an open network to facilitate a free flow of information is a very cool idea. But surely that is a goal that does not need to be fuelled by anger and intransigence given how many people would sign up to that principle.
However if that's the case, then don't the neutrality activists have a greater responsibility to stop sniping from the gallery and reach out to the other side to make this better world they seek, a reality. To me that requires finding ways to compromise with those you may not agree with. That's how to make things happen and make the world work in some degree of harmony. Google and Verizon did not get it all right for many but through compromise they moved the yardsticks a lot further than a polarized political debate has in the last 5 years.
Then again maybe that's just the view of a liberal democrat and that's an ideology too. But my gut tells compromise is what feeds diversity and diversity is what fuels democracy.
Diversity has to imply we all can't be right all the time, because if we were we wouldn't need open access to new ideas in the first place. So open the tent a bit on the net neutrality side or you may be waking up to Sarah Palin as your next President.
Maybe my fear is just intellectual hyperventillation, but increasingly I worry that compromise and dialogue are being sacrificed to ever more partisan perspectives in all elements of society from our Parliament to the coffee shop.
It hit me today that the intellectual differences between those vocal Internet activists that can only accept a single vision of the Net and the Tea Party, that came out today attacking net neutrality, are not so great. Their political religion may be miles apart but both groups seem to feed on mutual intolerance for those that hold different views. And if that is right, then maybe both the Tea Party and some of the net neutrality zealots share kinship with the Iranian bullies that stone women who succumb to love in an atmosphere where hate governs. An atmosphere of hate derived from extreme orthodoxy that does not tolerate deviance in thought or action.
I have always believed that the golden age of democracy that spawned so many social programs occurred when people were able to debate, to accept that maybe the other side had a point and that it was ok to give up and compromise if there was a chance compromise might create something better, not perfect, but better,for society.
Now if I had to pick a vision to side with, I would want to help the net neutrality gang, because their heart seems in the right place, (and their overarching vision reinforces many of my own) :-).An an open network to facilitate a free flow of information is a very cool idea. But surely that is a goal that does not need to be fuelled by anger and intransigence given how many people would sign up to that principle.
However if that's the case, then don't the neutrality activists have a greater responsibility to stop sniping from the gallery and reach out to the other side to make this better world they seek, a reality. To me that requires finding ways to compromise with those you may not agree with. That's how to make things happen and make the world work in some degree of harmony. Google and Verizon did not get it all right for many but through compromise they moved the yardsticks a lot further than a polarized political debate has in the last 5 years.
Then again maybe that's just the view of a liberal democrat and that's an ideology too. But my gut tells compromise is what feeds diversity and diversity is what fuels democracy.
Diversity has to imply we all can't be right all the time, because if we were we wouldn't need open access to new ideas in the first place. So open the tent a bit on the net neutrality side or you may be waking up to Sarah Palin as your next President.
Tuesday, August 3, 2010
TELUS calls for equal treatment for all carriers under open environment for foreign investment
The following is a summary of our submission to Industry Canada on liberalizing Canada's restrictions on foreign investment in communications
TELUS is not opposed to competing in an open market as long as the rules for Canadian enterprises are the same as for shareholders of foreign carriers. In fact TELUS has consistently supported liberalization of foreign investment rules over the past 10 years, while still investing $25 billion in a national growth strategy
The consultation paper presents the following three options for consideration:
1. Increase the limit for direct foreign investment in broadcasting and telecommunications common carriers to 49 percent;
2. Lift restrictions on telecommunications common carriers with a 10 percent market share or less of total telecom revenues; or
3. Remove telecommunications restrictions completely.
All of the Government’s proposals fail its stated objectives.
• Option#1 makes no real difference in terms of attracting new investment, as it only moves the real FDI threshold from 46% direct/indirect to 49% direct.
• Options #2 and #3 would discriminate against companies and shareholders that have contributed the most to telecommunications investment and innovation in Canada in favor of foreign enterprises.
We worry that any asymmetric law may remain in force for decades with deep and unintended consequences in terms of an erosion of the value of domestic carriers in Canadian communications.
For instance, such asymmetry could provide opportunities for large foreign carriers that already benefit from scale economies to leverage even greater North American-wide scale in a fashion denied to Canadian companies that have invested tens of billions of dollars in domestic infrastructure and employ tens of thousands of Canadians.
Fairness and competitive neutrality must prevail over any attempt to legislate short-term advantages for a select class of carrier shareholders that may be looking for a change of control or highly leveraged financing to support a risky business case.
TELUS also considers that an asymmetric law if passed could be subject to challenge under our international obligations in the WTO in that such a law would effectively discriminate against most shareholders of Canadian companies.
TELUS has proposed a fourth option:
Remove the restrictions completely on all telecommunications carriers and broadcast distributors, while maintaining restrictions on the ownership of broadcast channels and specialty services and adopting safeguards with respect to vertical integration of broadcast carriers.
The point of opening up foreign investment is not simply to obtain a lower cost of capital. The Canadian financial market can already deliver a lower cost of capital today. The problem is that both Canadian and international debt markets have dried up and foreign investors are only interested in equity positions that allow for a change of control.
Change of control is the logical outcome of the liberalization of FDI. That is why these rules are referred to as foreign ownership rules. That is not a bad thing. Most of our trading partners have already adopted open regimes without any adverse affect.
However we are not aware of any of our key trading partners, that have adopted rules that provide increased opportunity to foreign investors while denying it to domestic enterprises.
TELUS is not opposed to competing in an open market as long as the rules for Canadian enterprises are the same as for shareholders of foreign carriers. In fact TELUS has consistently supported liberalization over the past 10 years, while still investing $25 billion in a national growth strategy
The point of liberalization of FDI is to maximize the benefits of more open markets, increased scale and innovation, and investment for all consumers and all Canadian enterprises, not simply the shareholders of a handful of new wireless entrants.
Option#3 is equally asymmetric in that it would exclude any carriers and distributors of video that are regulated pursuant to Broadcasting Act from the benefits of liberalization.
Given the realities of convergence, Option#3 would effectively exclude virtually all Canadian telecommunications carriers from benefitting from reform since all carry voice, video and data services on integrated networks.
Further, all telecommunications carriers, even stand-alone wireless carriers and ISPs, now carry a mix of video, voice and data traffic on their networks, some of which may be considered broadcasting and therefore subject to the Broadcasting Act
If government cannot reform its rules in a fashion that does not discriminate against most existing Canadian carriers and distributors, it should postpone any change until it can enact real reform, in order to protect against changing the law in a fashion that favors a select few.
However, we believe that regulation and enforcement of broadcast carriage rules in a way that removes opportunities for self-dealing by integrated carriers regardless of nationality and requires clear divestiture of content properties prior to any change resulting in control by foreign owned entities should provide sufficient comfort for government to fully liberalize the carriage/distribution market without delay.
To enable this we propose that government endorse a clearer separation of carriage and content by granting the CRTC explicit powers to maintain protections for programming-related decisions, such as Canadian content rules or the implementation of rules relating to the structural separation of carriage and content businesses to prevent abuse of vertical integration.
It would seem easy therefore to make clear in the rules governing liberalization, that any sale of a telecommunications or cable company to a foreign entity can only be permitted where any common content assets (radio, TV and specialty channels) are first fully divested from the carriage and distribution assets. Under such a model it would be clear that broadcasting properties like radio, TV and specialty channels are not for sale to foreign entities, and if an integrated carrier wanted to avail itself of the benefits of foreign ownership, it must divest such assets prior to any sale taking effect.
If culture and diversity are to be respected then there must be clear safeguards in place to prevent self-dealing and undue preference/disadvantage arising from vertical integration even if there are not changes in foreign control. Vertical integration, and not foreign ownership, is of greater concern today in terms of access, choice and diversity.
Since self-dealing is more likely to occur where companies actually are vertically integrated than in circumstances where content is broadly controlled, perhaps the time for concern about access is now, as effective control over key broadcast content continues to be consolidated and integrated into Canada’s three largest cable companies.
TELUS is not opposed to competing in an open market as long as the rules for Canadian enterprises are the same as for shareholders of foreign carriers. In fact TELUS has consistently supported liberalization of foreign investment rules over the past 10 years, while still investing $25 billion in a national growth strategy
The consultation paper presents the following three options for consideration:
1. Increase the limit for direct foreign investment in broadcasting and telecommunications common carriers to 49 percent;
2. Lift restrictions on telecommunications common carriers with a 10 percent market share or less of total telecom revenues; or
3. Remove telecommunications restrictions completely.
All of the Government’s proposals fail its stated objectives.
• Option#1 makes no real difference in terms of attracting new investment, as it only moves the real FDI threshold from 46% direct/indirect to 49% direct.
• Options #2 and #3 would discriminate against companies and shareholders that have contributed the most to telecommunications investment and innovation in Canada in favor of foreign enterprises.
We worry that any asymmetric law may remain in force for decades with deep and unintended consequences in terms of an erosion of the value of domestic carriers in Canadian communications.
For instance, such asymmetry could provide opportunities for large foreign carriers that already benefit from scale economies to leverage even greater North American-wide scale in a fashion denied to Canadian companies that have invested tens of billions of dollars in domestic infrastructure and employ tens of thousands of Canadians.
Fairness and competitive neutrality must prevail over any attempt to legislate short-term advantages for a select class of carrier shareholders that may be looking for a change of control or highly leveraged financing to support a risky business case.
TELUS also considers that an asymmetric law if passed could be subject to challenge under our international obligations in the WTO in that such a law would effectively discriminate against most shareholders of Canadian companies.
TELUS has proposed a fourth option:
Remove the restrictions completely on all telecommunications carriers and broadcast distributors, while maintaining restrictions on the ownership of broadcast channels and specialty services and adopting safeguards with respect to vertical integration of broadcast carriers.
The point of opening up foreign investment is not simply to obtain a lower cost of capital. The Canadian financial market can already deliver a lower cost of capital today. The problem is that both Canadian and international debt markets have dried up and foreign investors are only interested in equity positions that allow for a change of control.
Change of control is the logical outcome of the liberalization of FDI. That is why these rules are referred to as foreign ownership rules. That is not a bad thing. Most of our trading partners have already adopted open regimes without any adverse affect.
However we are not aware of any of our key trading partners, that have adopted rules that provide increased opportunity to foreign investors while denying it to domestic enterprises.
TELUS is not opposed to competing in an open market as long as the rules for Canadian enterprises are the same as for shareholders of foreign carriers. In fact TELUS has consistently supported liberalization over the past 10 years, while still investing $25 billion in a national growth strategy
The point of liberalization of FDI is to maximize the benefits of more open markets, increased scale and innovation, and investment for all consumers and all Canadian enterprises, not simply the shareholders of a handful of new wireless entrants.
Option#3 is equally asymmetric in that it would exclude any carriers and distributors of video that are regulated pursuant to Broadcasting Act from the benefits of liberalization.
Given the realities of convergence, Option#3 would effectively exclude virtually all Canadian telecommunications carriers from benefitting from reform since all carry voice, video and data services on integrated networks.
Further, all telecommunications carriers, even stand-alone wireless carriers and ISPs, now carry a mix of video, voice and data traffic on their networks, some of which may be considered broadcasting and therefore subject to the Broadcasting Act
If government cannot reform its rules in a fashion that does not discriminate against most existing Canadian carriers and distributors, it should postpone any change until it can enact real reform, in order to protect against changing the law in a fashion that favors a select few.
However, we believe that regulation and enforcement of broadcast carriage rules in a way that removes opportunities for self-dealing by integrated carriers regardless of nationality and requires clear divestiture of content properties prior to any change resulting in control by foreign owned entities should provide sufficient comfort for government to fully liberalize the carriage/distribution market without delay.
To enable this we propose that government endorse a clearer separation of carriage and content by granting the CRTC explicit powers to maintain protections for programming-related decisions, such as Canadian content rules or the implementation of rules relating to the structural separation of carriage and content businesses to prevent abuse of vertical integration.
It would seem easy therefore to make clear in the rules governing liberalization, that any sale of a telecommunications or cable company to a foreign entity can only be permitted where any common content assets (radio, TV and specialty channels) are first fully divested from the carriage and distribution assets. Under such a model it would be clear that broadcasting properties like radio, TV and specialty channels are not for sale to foreign entities, and if an integrated carrier wanted to avail itself of the benefits of foreign ownership, it must divest such assets prior to any sale taking effect.
If culture and diversity are to be respected then there must be clear safeguards in place to prevent self-dealing and undue preference/disadvantage arising from vertical integration even if there are not changes in foreign control. Vertical integration, and not foreign ownership, is of greater concern today in terms of access, choice and diversity.
Since self-dealing is more likely to occur where companies actually are vertically integrated than in circumstances where content is broadly controlled, perhaps the time for concern about access is now, as effective control over key broadcast content continues to be consolidated and integrated into Canada’s three largest cable companies.
Wednesday, July 28, 2010
New math and CRTC Benefits ?
LETTER TO THE EDITOR: Confusion reigns over Shaw's Canwest benefits package
Cartt.ca
July 27, 2010
CARTT.CA'S UPDATED STORY on the Shaw/Canwest deal seeks to fill in “incomplete data” on Shaw’s proposed benefits package of $23 million for a transaction reported at $2 billion. That’s not a typo. We estimate that this comes to 1% of the value of the transaction. Since Commission policy dictates 10% for benefits it’s fair to ask: Are we missing $177 million? Let’s look at the numbers.
In their main application, Shaw ascribed a value of the transaction at $475 million. At that point, they were proposing a benefits of $23 million, which would be spent on the conversion to digital of some transmitters outside of the mandated areas for conversion. That is no benefit, but simply a cost of doing business.
Once the transaction became much larger with Shaw’s acquisition of Goldman Sachs’ interests in the former Alliance Atlantis specialty services, the value increased from $475 million to $2 billion, resulting in Shaw being set to become the largest vertically integrated communications company in Canada. However Shaw argues that the bulk of this increase in value should not be considered for the purposes of determining the appropriate amount of tangible benefits because what they purchased from Goldman Sachs did not give them any control, since Goldman was a foreign investor and thus did not have any control over the Canwest assets in the first place.
So according to Shaw, no transfer of control occurred in that part of the transaction thus reducing the value of the transaction from $2 billion to $506 million. But the question is, do we really believe that Shaw will not now control the full panoply of Canwest/AA assets?
Shaw stuck to its guns on the meagre $23 million in benefits and it is only after much prodding by the Commission in numerous deficiency questions that Shaw finally agreed to respond to the hypothetical question of what additional benefits package they would propose “if the Commission were to determine that [Shaw’s] proposal was not sufficient and/or appropriate.”
And what do they propose?
Shaw’s new spin on the benefits package is that they are offering $203 million, or just over 10% of the transaction, but that would include some $95 million in benefits money already owed by Global as a result of the Canwest/Alliance Atlantis merger. In effect, if forced by the CRTC to increase benefits from $23 million, Shaw would pay monies already owed by the company it is acquiring. In fact, Shaw has actually suggested that the Commission would itself be the one doing the double counting if they were to impose a benefits requirement on Shaw that didn’t include what was already promised as part of an earlier transaction.
Shaw also mentions several times the alleged financial hardship of Canwest as a rationale why benefits should not be paid. And yet didn’t Canwest just a few weeks ago report a solid return to profit in its third quarter. Indeed its operating profits have doubled to $150 million from $74 million in the third quarter of 2009.
Shaw also proposes to spend on additional programming content, new media content such as mobile and VOD applications and new morning news shows. It suggests that this adds yet another $85 million to the benefits pot. Sounds like another cost of doing business. Isn’t this money they would be spending in any event just to compete with CTV? There is no mention of any of these monies going to any third party initiative.
So, once one discounts from the proposed package all the monies which are already owed under promises made with respect to a previous transaction and monies merely associated with the cost of doing business, one has to wonder if Shaw has proposed any true tangible benefits at all.
You have to read the reams of deficiency questions and responses to get any sense of what Shaw is now alleging that they are proposing. That is a problem for the CRTC because as it moves to increase the level of vertical integration in broadcasting by enhancing the dominance of the top three cable companies, there are already concerns being raised by many non-integrated distributors, broadcasters and producers as to how to ensure access and prevent the exercise of undue preference.
On its face such vertical integration poses a threat to access and diversity, so it would be nice to think ,at least in return for upping that risk, that the CRTC got the minimum required benefits for independent creators, along with some safeguards to help the independents sleep at night.
Michael Hennessy
senior vice-president, regulatory and governmental affairs,
TELUS
Cartt.ca
July 27, 2010
CARTT.CA'S UPDATED STORY on the Shaw/Canwest deal seeks to fill in “incomplete data” on Shaw’s proposed benefits package of $23 million for a transaction reported at $2 billion. That’s not a typo. We estimate that this comes to 1% of the value of the transaction. Since Commission policy dictates 10% for benefits it’s fair to ask: Are we missing $177 million? Let’s look at the numbers.
In their main application, Shaw ascribed a value of the transaction at $475 million. At that point, they were proposing a benefits of $23 million, which would be spent on the conversion to digital of some transmitters outside of the mandated areas for conversion. That is no benefit, but simply a cost of doing business.
Once the transaction became much larger with Shaw’s acquisition of Goldman Sachs’ interests in the former Alliance Atlantis specialty services, the value increased from $475 million to $2 billion, resulting in Shaw being set to become the largest vertically integrated communications company in Canada. However Shaw argues that the bulk of this increase in value should not be considered for the purposes of determining the appropriate amount of tangible benefits because what they purchased from Goldman Sachs did not give them any control, since Goldman was a foreign investor and thus did not have any control over the Canwest assets in the first place.
So according to Shaw, no transfer of control occurred in that part of the transaction thus reducing the value of the transaction from $2 billion to $506 million. But the question is, do we really believe that Shaw will not now control the full panoply of Canwest/AA assets?
Shaw stuck to its guns on the meagre $23 million in benefits and it is only after much prodding by the Commission in numerous deficiency questions that Shaw finally agreed to respond to the hypothetical question of what additional benefits package they would propose “if the Commission were to determine that [Shaw’s] proposal was not sufficient and/or appropriate.”
And what do they propose?
Shaw’s new spin on the benefits package is that they are offering $203 million, or just over 10% of the transaction, but that would include some $95 million in benefits money already owed by Global as a result of the Canwest/Alliance Atlantis merger. In effect, if forced by the CRTC to increase benefits from $23 million, Shaw would pay monies already owed by the company it is acquiring. In fact, Shaw has actually suggested that the Commission would itself be the one doing the double counting if they were to impose a benefits requirement on Shaw that didn’t include what was already promised as part of an earlier transaction.
Shaw also mentions several times the alleged financial hardship of Canwest as a rationale why benefits should not be paid. And yet didn’t Canwest just a few weeks ago report a solid return to profit in its third quarter. Indeed its operating profits have doubled to $150 million from $74 million in the third quarter of 2009.
Shaw also proposes to spend on additional programming content, new media content such as mobile and VOD applications and new morning news shows. It suggests that this adds yet another $85 million to the benefits pot. Sounds like another cost of doing business. Isn’t this money they would be spending in any event just to compete with CTV? There is no mention of any of these monies going to any third party initiative.
So, once one discounts from the proposed package all the monies which are already owed under promises made with respect to a previous transaction and monies merely associated with the cost of doing business, one has to wonder if Shaw has proposed any true tangible benefits at all.
You have to read the reams of deficiency questions and responses to get any sense of what Shaw is now alleging that they are proposing. That is a problem for the CRTC because as it moves to increase the level of vertical integration in broadcasting by enhancing the dominance of the top three cable companies, there are already concerns being raised by many non-integrated distributors, broadcasters and producers as to how to ensure access and prevent the exercise of undue preference.
On its face such vertical integration poses a threat to access and diversity, so it would be nice to think ,at least in return for upping that risk, that the CRTC got the minimum required benefits for independent creators, along with some safeguards to help the independents sleep at night.
Michael Hennessy
senior vice-president, regulatory and governmental affairs,
TELUS
Monday, July 19, 2010
Did the save our local TV debate just jump the shark?
In Saturday's blog I asked I whether the focus on net neutrality might be obscuring more immediate issues of vertical integration in broadcasting. Today's blog asks whether, in light of increased vertical integration the whole fee for carriage /value for signal debate is about to go off the rails or "jump the shark" in terms of its storyline. Broadcasting regulation is not net neutral in the sense that there are all types of mandatory/priority carriage requirements and rules that prohibit the carriage of certain channels. The reasons for this go back to the goal of ensuring that there is an adequate contribution to Canadian programming. That is what the fee for carriage/value for signal issue is about. But what happens when the broadcasters negotiating fees with distributors are owned by the most dominant cable distributors? How do you prevent anti-competitive outcomes in terms of the fees negotiated when broadcasters owned by dominant carriers are negotiating with smaller competitors?
Where net neutrality and broadcasting intersect, is in adherence to the principle of access to ensure diversity and choice. There has long been a central premise under the regulated broadcasting system, that Canadian content providers, particularly independent producers, need access to broadcast distribution platforms, that exclusive distribution is discriminatory, that the system must promote diversity and choice in content and that both broadcasters and distributors cannot engage in undue preference to provide direct competitive advantage or advantage to affiliated properties. The CRTC has also signaled that issues of undue preference in broadcasting apply to exempt platforms like wireless and Internet. Ensuring compliance, we believe, is going to be the CRTC's biggest challenge as it allows the broadcasting industry to become more vertically integrated.
Increasingly there has been a move to increased regulatory support for more consolidation and vertical integration in order to achieve scale in content and to respond to increased competitive pressures from over-the-top Internet content. That led first to major consolidation in broadcasting (CTV/CHUM, Global/Alliance Atlantis) and now between broadcasting and cable integration. There are many issues that need to be addressed in terms of vertical integration including, the whole issue of fee for carriage.
Unless you never watched TV or read newspapers you can't have missed the "save our local TV" vs "stop the TV tax debate" that ultimately led to a national movement to shoot all broadcasters, distributors and regulators that were responsible for this endless exercise in annoying Canadians as they tried to watch TV in the privacy of their dens. The debate was so annoying that it led to an acceleration in the adoption of PVRs to avoid advocacy ads.
A year later you would be forgiven for scratching your head and asking what was it all about in the end. Cable and satellite providers were cast as evil destroyers of local voices and diversity, a position earned in part by efforts of some to kill the Canadian Television Fund. it was argued that only the recently consolidated broadcasters, like CTV and Global, could save Canadian voices by imposing a tax on rich cable companies to pay for local TV production . While broadcasters were making money, they clearly couldn’t afford to simultaneously pay the debt incurred by takeovers of half of the independent broadcast sector as well as increase spending on Hollywood product and still support local TV anymore.
Anyways the collapse of the system was near, unless the regulator stepped in to save local TV and tax cable and satellite. Since no one likes imposing taxes or fees the CRTC, in a flash of marketing brilliance, decided that fees were bad and cable guys et al. should negotiate with broadcasters on "value for signal".
But here is the rub. Somewhere in the middle of this never ending debate, the major broadcasting industry began to disappear. CTV sucked up CHUM and A-Channel and then had to spin off the local CITY properties to keep all the specialty channels. So CITY, the original independent, became part of the Rogers empire and A-Channel continues to exist on life support. TVA the largest private in Quebec was already owned by Quebecor the primary cable company in Quebec. And now Shaw is in the midst of a takeover of Global TV including all the old Alliance Atlantis properties.
Net result of all the regulatory shenanigans over the past 4 years . Half the independent broadcasters are gone along with whatever unique diversity they brought to the table and the separation of carriage and content is pretty much a spent idea. Unless of course you happen to be an independent distributor about to be forced to negotiate a tax with/and for your competitors or an independent broadcaster competing for platform space.
I would submit that the so-called value for signal approach is about the worst process to choose in a market dominated by vertically integrated distributors . In effect the top 3 cable companies now, or may soon own 3 of the top 4 private broadcasters. Any so called value for signal negotiations, assuming the Courts bless the concept, are not neutral like a tax or contribution fee would be. As an example the CRTC sets a telecom contribution fee on all carriers to support access to telephone service in high cost areas but that fee is applied as a percent of revenues and is thus competitively neutral.
Value for signal negotiations on the other hand favor the vertically integrated players and create all kind of opportunities for gaming. For example:
• The fee established between a vertically integrated broadcaster and its cable owner can be waived or set high to impose costs on competitors that the vertically integrated distributor can absorb through cost accounting or cost allocation.
• Since the vertically integrated owners are the largest cable distributors they could argue for a volume discount that smaller competing distributors cannot achieve.
• Vertically integrated carriers could negotiate nominal fees amongst themselves since their mutual payments net out and again it is in their common interest to increase costs of satellite or IPTV competitors.
Now it may be that if Quebecor, Rogers and Shaw are going to own most local TV in Canada there is no need for anyone from consumers to non-integrated carriers to pay a fee to save local TV anymore. Arguably the black knights have become the white knights and have over a billion in free cash flow to do the job for themselves. It seems to me that local TV just got "saved" by the three most profitable broadcast distributors in the country. Surely as part of the regulatory tradeoff in terms of loss of diversity and independent voices for vertical integration, the major cable companies could fix their new affiliates financial problems without the help of their competitors.
This is neither crazy nor completely self-serving. Rogers and Shaw hate fee for carriage, and oppose such in Federal Court. Quebecor wants fee for carriage but on a revenue neutral basis where independent broadcasters that compete with its own content properties would receive less in affiliation payments to offset significant increases in distributor charges. That plan is arguably still not so good if you are an independent distributor competing with Videotron or one of a small number of independent broadcasters competing with TVA.
However if it is determined that it is ok for the top 3 cable companies to own 3 of the top 4 private broadcasters and still receive a fee from competitors, and if the Court gives the go ahead to levy such a fee, then it is incumbent on the CRTC and/or Heritage Minister to make sure that (a) contribution is based on total broadcast revenues just like it is based on total revenues on the telecom side and that (b)the the revenues flow to an independent local TV fund that ensure the money flows to whatever is determined to be necessary to subsidize.
That is the easiest way to prevent undue preference and to increase diversity in the face of vertical integration. Perhaps the Shaw Canwest hearing is a good place to start this debate.
Where net neutrality and broadcasting intersect, is in adherence to the principle of access to ensure diversity and choice. There has long been a central premise under the regulated broadcasting system, that Canadian content providers, particularly independent producers, need access to broadcast distribution platforms, that exclusive distribution is discriminatory, that the system must promote diversity and choice in content and that both broadcasters and distributors cannot engage in undue preference to provide direct competitive advantage or advantage to affiliated properties. The CRTC has also signaled that issues of undue preference in broadcasting apply to exempt platforms like wireless and Internet. Ensuring compliance, we believe, is going to be the CRTC's biggest challenge as it allows the broadcasting industry to become more vertically integrated.
Increasingly there has been a move to increased regulatory support for more consolidation and vertical integration in order to achieve scale in content and to respond to increased competitive pressures from over-the-top Internet content. That led first to major consolidation in broadcasting (CTV/CHUM, Global/Alliance Atlantis) and now between broadcasting and cable integration. There are many issues that need to be addressed in terms of vertical integration including, the whole issue of fee for carriage.
Unless you never watched TV or read newspapers you can't have missed the "save our local TV" vs "stop the TV tax debate" that ultimately led to a national movement to shoot all broadcasters, distributors and regulators that were responsible for this endless exercise in annoying Canadians as they tried to watch TV in the privacy of their dens. The debate was so annoying that it led to an acceleration in the adoption of PVRs to avoid advocacy ads.
A year later you would be forgiven for scratching your head and asking what was it all about in the end. Cable and satellite providers were cast as evil destroyers of local voices and diversity, a position earned in part by efforts of some to kill the Canadian Television Fund. it was argued that only the recently consolidated broadcasters, like CTV and Global, could save Canadian voices by imposing a tax on rich cable companies to pay for local TV production . While broadcasters were making money, they clearly couldn’t afford to simultaneously pay the debt incurred by takeovers of half of the independent broadcast sector as well as increase spending on Hollywood product and still support local TV anymore.
Anyways the collapse of the system was near, unless the regulator stepped in to save local TV and tax cable and satellite. Since no one likes imposing taxes or fees the CRTC, in a flash of marketing brilliance, decided that fees were bad and cable guys et al. should negotiate with broadcasters on "value for signal".
But here is the rub. Somewhere in the middle of this never ending debate, the major broadcasting industry began to disappear. CTV sucked up CHUM and A-Channel and then had to spin off the local CITY properties to keep all the specialty channels. So CITY, the original independent, became part of the Rogers empire and A-Channel continues to exist on life support. TVA the largest private in Quebec was already owned by Quebecor the primary cable company in Quebec. And now Shaw is in the midst of a takeover of Global TV including all the old Alliance Atlantis properties.
Net result of all the regulatory shenanigans over the past 4 years . Half the independent broadcasters are gone along with whatever unique diversity they brought to the table and the separation of carriage and content is pretty much a spent idea. Unless of course you happen to be an independent distributor about to be forced to negotiate a tax with/and for your competitors or an independent broadcaster competing for platform space.
I would submit that the so-called value for signal approach is about the worst process to choose in a market dominated by vertically integrated distributors . In effect the top 3 cable companies now, or may soon own 3 of the top 4 private broadcasters. Any so called value for signal negotiations, assuming the Courts bless the concept, are not neutral like a tax or contribution fee would be. As an example the CRTC sets a telecom contribution fee on all carriers to support access to telephone service in high cost areas but that fee is applied as a percent of revenues and is thus competitively neutral.
Value for signal negotiations on the other hand favor the vertically integrated players and create all kind of opportunities for gaming. For example:
• The fee established between a vertically integrated broadcaster and its cable owner can be waived or set high to impose costs on competitors that the vertically integrated distributor can absorb through cost accounting or cost allocation.
• Since the vertically integrated owners are the largest cable distributors they could argue for a volume discount that smaller competing distributors cannot achieve.
• Vertically integrated carriers could negotiate nominal fees amongst themselves since their mutual payments net out and again it is in their common interest to increase costs of satellite or IPTV competitors.
Now it may be that if Quebecor, Rogers and Shaw are going to own most local TV in Canada there is no need for anyone from consumers to non-integrated carriers to pay a fee to save local TV anymore. Arguably the black knights have become the white knights and have over a billion in free cash flow to do the job for themselves. It seems to me that local TV just got "saved" by the three most profitable broadcast distributors in the country. Surely as part of the regulatory tradeoff in terms of loss of diversity and independent voices for vertical integration, the major cable companies could fix their new affiliates financial problems without the help of their competitors.
This is neither crazy nor completely self-serving. Rogers and Shaw hate fee for carriage, and oppose such in Federal Court. Quebecor wants fee for carriage but on a revenue neutral basis where independent broadcasters that compete with its own content properties would receive less in affiliation payments to offset significant increases in distributor charges. That plan is arguably still not so good if you are an independent distributor competing with Videotron or one of a small number of independent broadcasters competing with TVA.
However if it is determined that it is ok for the top 3 cable companies to own 3 of the top 4 private broadcasters and still receive a fee from competitors, and if the Court gives the go ahead to levy such a fee, then it is incumbent on the CRTC and/or Heritage Minister to make sure that (a) contribution is based on total broadcast revenues just like it is based on total revenues on the telecom side and that (b)the the revenues flow to an independent local TV fund that ensure the money flows to whatever is determined to be necessary to subsidize.
That is the easiest way to prevent undue preference and to increase diversity in the face of vertical integration. Perhaps the Shaw Canwest hearing is a good place to start this debate.
Saturday, July 17, 2010
Time to worry more about vertical integration than net neutrality
I was reading the submission, and it's a decent submission, from the Directors Guild of Canada on the Digital Economic Strategy and one of its recommendations, that gave me pause, was to have the CRTC proactively monitor net neutrality. Now I don't really care too much, assuming my company isn't buried in paperwork but I don't get the emphasis. To me net neutrality is a vague and nebulous concept that tends to mean different things to different people.
Why not hit the nail on the head and just lobby the CRTC under its existing powers to vigorously address vertical integration in terms of carriage and content? That is something that is more precise and more relevant . Heck why wait for a Digital Strategy (could be a long wait re content) and go right at the heart of the matter in the Shaw Canwest Global Hearing which we hear is scheduled for around Sept 25 (rumor)?
Think about it. Three/four years ago there was all this angst about threats to diversity in broadcasting if CTV took over the CHUM assets or Global took out Alliance Atlantis. Then we went through the angst of the save our local TV/fee for carriage debate because the allowed takeovers help put CTV/Global finances in the sink and someone (disributors) had to bail them out for spending too much and overpaying for Hollywood product. Flash forward to September, and all of a sudden there is now even more concentration and independent broadcasters are disappearing faster than the ice cap while the three largest cable companies now own,or are about to own, most of the broadcast assets in a more consolidated fashion than everyone was fussed about three years ago.
Seriously, why the fuss about net neutrality? When TELUS looks at the disintegration of carriage and content we worry about having to negotiate and pay fees to our cable competitors to support their integrated content properties, while they can write themselves a truly blank check.(Nice solution to FFC from their point of view).
We worry that broadcast content from those integrated properties will not be available on our mobile and Internet platforms even though the CRTC says its undue preference rules apply to these platforms. Heck we have to go to the CRTC today just to get access to broadcast content for VOD from at least one integrated broadcaster even though it is clearly obliged to provide it under the rules.
Given the negative attitude towards Canadian content , local TV and/or the CMF from some distributors you would think independent broadcasters, Associations and Guilds would be as, or more, worried about access for their content to platforms for broadcast distribution and less concerned about access to the Internet. The latter may soon be the easiest window to access for independents. Sadly making noise about net neutrality may be reasonable in principle but right now it seems to me like its barking up the wrong tree at the wrong time and in the wrong place.
Why not hit the nail on the head and just lobby the CRTC under its existing powers to vigorously address vertical integration in terms of carriage and content? That is something that is more precise and more relevant . Heck why wait for a Digital Strategy (could be a long wait re content) and go right at the heart of the matter in the Shaw Canwest Global Hearing which we hear is scheduled for around Sept 25 (rumor)?
Think about it. Three/four years ago there was all this angst about threats to diversity in broadcasting if CTV took over the CHUM assets or Global took out Alliance Atlantis. Then we went through the angst of the save our local TV/fee for carriage debate because the allowed takeovers help put CTV/Global finances in the sink and someone (disributors) had to bail them out for spending too much and overpaying for Hollywood product. Flash forward to September, and all of a sudden there is now even more concentration and independent broadcasters are disappearing faster than the ice cap while the three largest cable companies now own,or are about to own, most of the broadcast assets in a more consolidated fashion than everyone was fussed about three years ago.
Seriously, why the fuss about net neutrality? When TELUS looks at the disintegration of carriage and content we worry about having to negotiate and pay fees to our cable competitors to support their integrated content properties, while they can write themselves a truly blank check.(Nice solution to FFC from their point of view).
We worry that broadcast content from those integrated properties will not be available on our mobile and Internet platforms even though the CRTC says its undue preference rules apply to these platforms. Heck we have to go to the CRTC today just to get access to broadcast content for VOD from at least one integrated broadcaster even though it is clearly obliged to provide it under the rules.
Given the negative attitude towards Canadian content , local TV and/or the CMF from some distributors you would think independent broadcasters, Associations and Guilds would be as, or more, worried about access for their content to platforms for broadcast distribution and less concerned about access to the Internet. The latter may soon be the easiest window to access for independents. Sadly making noise about net neutrality may be reasonable in principle but right now it seems to me like its barking up the wrong tree at the wrong time and in the wrong place.
Friday, April 16, 2010
What we really said to Industry Committee
Yesterday TELUS called again for a complete removal of foreign ownership restrictions on carriers but not content .Here is the text
Remarks of Michael Hennessy, senior vice president
Regulatory and Government Affairs, TELUS
Corporation to the House of Commons Standing
Committee on Industry, Science and Technology
Foreign ownership
Introduction
TELUS appreciates this opportunity to present its views on whether or not to
liberalize Canada’s restrictions on foreign ownership of telecommunications. The
issue is obviously one of national importance, and it is an issue that only Parliament
can ultimately decide.
I can sum up the TELUS presentation in a few easy messages:
• New rules cannot advantage foreign investors to the detriment of Canadian
companies. Fairness requires equal treatment for all Canadian carriers;
• Parliament must recognize that communications today is an integrated
business and you cannot effect change without changing the
Telecommunications Act and part of the Broadcasting Act at the same time;
• Liberalization that does not include integrated companies will damage the
competitiveness of Canadian companies and reduce the benefits of
liberalization for consumers; and
• Culture is not impacted by liberalization because it is easy to separate the
ownership of broadcast channels from the transmission of these channels on
carrier systems.
TELUS has long supported liberalization of the rules for all carriers, including cable
and satellite companies, while still maintaining these restrictions with respect to
the ownership of broadcast channels.
The Canadian market, like the US, is unique in terms of a much greater degree of
competition between cable and telecom carriers across all markets. Virtually every
communications carrier in Canada carries voice, video and data traffic over
integrated networks. As a consequence, there is no way to fairly change our
2
ownership restrictions unless we liberalize both carriage under the
Telecommunications Act and carriage under the Broadcasting Act at same time.
We remain convinced that you can change the Broadcasting Act, only on the
carriage side, to achieve the full benefits of competition, without undermining our
cultural objectives. All that is required is a rule prohibiting foreign controlled
carriers owning broadcasting stations or TV channels.
TELUS has a record of investment
A principal argument supporting liberalization is that Canadian enterprises are not
competing or investing sufficiently. Even though we support liberalization we
reject this argument.
Ten years ago, TELUS did not exist as a national competitor. TELUS was just another
regionally based local monopoly telephone company operating only in Alberta,
British Columbia and eastern Quebec. Now, we compete across Canada for
wireless, small business and enterprise solutions, video conferencing, e‐health
services and business data services. In the west and eastern Quebec, TELUS
competes head to head for phone, internet, television and wireless customers.
We have accomplished this because over the last 10 years, TELUS has invested $20
billion in capital to grow from that regional telephone company into a multi‐service,
national competitor in business, wireless and e‐health services markets.
• TELUS has maintained the highest wireline re‐investment rate among major
telecom North American companies and competitors over the past few years
o capital investments since 2001 across our entire business exceed 20%
of total revenues earned over that period
o by comparison, Verizon and AT&T have not had even a single year
since 2006 in which their total capital investments reached 20% of
their revenues
3
We have invested in Canada, both when and where it counts, including in areas no
foreign investor is likely to ever consider
• In the depths of the recession, TELUS increased its 2009 capital spend by 13
percent to $2.1billion and built one the largest and most advanced wireless
networks in the world.
o TELUS’ 3G+ wireless network now reaches 93% of Canadians, with
world leading advanced wireless broadband services
o In 2010 we are investing over $1.7 billion in a fiber‐supported internet
TV build in western Canada and in eastern Quebec in order to increase
competitive intensity in the cable and internet market
These investments have produced real competition, real jobs and real consumer
benefits where none existed before.
Full liberalization of FDI restrictions on carriage can lower costs and
increase choice and innovation as long as Canadian companies are
treated fairly
Where Canada differs from the US today is a lack of similar scale. More scale
translates into lower costs, more investment and more opportunity to reduce
prices.
Therefore any change that does not allow all Canadian carriers to equally benefit
from scale opportunities will be changes for the worse since Canadian carriers have
the largest territory to serve and the smallest population to fund investment, of any
of our major trading partners.
And that is why any changes should ensure that the companies that continue to
invest in Canadian employees, Canadian infrastructure and Canadian communities,
rather than investing only in the most profitable business like wireless or the
biggest cities like Montreal or Toronto, are not harmed by any changes.
Canadian companies rely on integration, and the cross‐subsidies that allows, to
keep all of our businesses viable as much as we need scale to grow. If asymmetric
policy undermines that, in the name of wireless competition or cultural protection,
4
by restricting domestic carrier growth, the integrated Canadian model begins to fall
apart.
The Canadian system has always benefitted from a level of cross‐subsidy be it from
urban to rural or from growth business to high cost segments. That remains true
today. In Canada, wireless is currently the growth engine that generates the
revenues and earnings that support reinvestment in next generation broadband
and phone networks. This is a critical point to consider. Growth businesses like
wireless or Internet, support declining businesses like telephony. That does not
mean growth businesses should be insulated from increased competition but
rather competition, and particularly foreign competition should not be advantaged
by handicapping Canadian companies.
Liberalization has to be as fair to Canadians as it will be to foreign entrants.
That is why Parliament must support liberalization for all carriers, because unless all
carriers are able to benefit from liberalization, the opportunities from increased
scale like lower prices or more investment are diminished for many consumers and
communities.
That is also why fairness dictates that both broadcast distribution and
telecommunications carriage must be changed at the same time.
I look forward to your questions
Remarks of Michael Hennessy, senior vice president
Regulatory and Government Affairs, TELUS
Corporation to the House of Commons Standing
Committee on Industry, Science and Technology
Foreign ownership
Introduction
TELUS appreciates this opportunity to present its views on whether or not to
liberalize Canada’s restrictions on foreign ownership of telecommunications. The
issue is obviously one of national importance, and it is an issue that only Parliament
can ultimately decide.
I can sum up the TELUS presentation in a few easy messages:
• New rules cannot advantage foreign investors to the detriment of Canadian
companies. Fairness requires equal treatment for all Canadian carriers;
• Parliament must recognize that communications today is an integrated
business and you cannot effect change without changing the
Telecommunications Act and part of the Broadcasting Act at the same time;
• Liberalization that does not include integrated companies will damage the
competitiveness of Canadian companies and reduce the benefits of
liberalization for consumers; and
• Culture is not impacted by liberalization because it is easy to separate the
ownership of broadcast channels from the transmission of these channels on
carrier systems.
TELUS has long supported liberalization of the rules for all carriers, including cable
and satellite companies, while still maintaining these restrictions with respect to
the ownership of broadcast channels.
The Canadian market, like the US, is unique in terms of a much greater degree of
competition between cable and telecom carriers across all markets. Virtually every
communications carrier in Canada carries voice, video and data traffic over
integrated networks. As a consequence, there is no way to fairly change our
2
ownership restrictions unless we liberalize both carriage under the
Telecommunications Act and carriage under the Broadcasting Act at same time.
We remain convinced that you can change the Broadcasting Act, only on the
carriage side, to achieve the full benefits of competition, without undermining our
cultural objectives. All that is required is a rule prohibiting foreign controlled
carriers owning broadcasting stations or TV channels.
TELUS has a record of investment
A principal argument supporting liberalization is that Canadian enterprises are not
competing or investing sufficiently. Even though we support liberalization we
reject this argument.
Ten years ago, TELUS did not exist as a national competitor. TELUS was just another
regionally based local monopoly telephone company operating only in Alberta,
British Columbia and eastern Quebec. Now, we compete across Canada for
wireless, small business and enterprise solutions, video conferencing, e‐health
services and business data services. In the west and eastern Quebec, TELUS
competes head to head for phone, internet, television and wireless customers.
We have accomplished this because over the last 10 years, TELUS has invested $20
billion in capital to grow from that regional telephone company into a multi‐service,
national competitor in business, wireless and e‐health services markets.
• TELUS has maintained the highest wireline re‐investment rate among major
telecom North American companies and competitors over the past few years
o capital investments since 2001 across our entire business exceed 20%
of total revenues earned over that period
o by comparison, Verizon and AT&T have not had even a single year
since 2006 in which their total capital investments reached 20% of
their revenues
3
We have invested in Canada, both when and where it counts, including in areas no
foreign investor is likely to ever consider
• In the depths of the recession, TELUS increased its 2009 capital spend by 13
percent to $2.1billion and built one the largest and most advanced wireless
networks in the world.
o TELUS’ 3G+ wireless network now reaches 93% of Canadians, with
world leading advanced wireless broadband services
o In 2010 we are investing over $1.7 billion in a fiber‐supported internet
TV build in western Canada and in eastern Quebec in order to increase
competitive intensity in the cable and internet market
These investments have produced real competition, real jobs and real consumer
benefits where none existed before.
Full liberalization of FDI restrictions on carriage can lower costs and
increase choice and innovation as long as Canadian companies are
treated fairly
Where Canada differs from the US today is a lack of similar scale. More scale
translates into lower costs, more investment and more opportunity to reduce
prices.
Therefore any change that does not allow all Canadian carriers to equally benefit
from scale opportunities will be changes for the worse since Canadian carriers have
the largest territory to serve and the smallest population to fund investment, of any
of our major trading partners.
And that is why any changes should ensure that the companies that continue to
invest in Canadian employees, Canadian infrastructure and Canadian communities,
rather than investing only in the most profitable business like wireless or the
biggest cities like Montreal or Toronto, are not harmed by any changes.
Canadian companies rely on integration, and the cross‐subsidies that allows, to
keep all of our businesses viable as much as we need scale to grow. If asymmetric
policy undermines that, in the name of wireless competition or cultural protection,
4
by restricting domestic carrier growth, the integrated Canadian model begins to fall
apart.
The Canadian system has always benefitted from a level of cross‐subsidy be it from
urban to rural or from growth business to high cost segments. That remains true
today. In Canada, wireless is currently the growth engine that generates the
revenues and earnings that support reinvestment in next generation broadband
and phone networks. This is a critical point to consider. Growth businesses like
wireless or Internet, support declining businesses like telephony. That does not
mean growth businesses should be insulated from increased competition but
rather competition, and particularly foreign competition should not be advantaged
by handicapping Canadian companies.
Liberalization has to be as fair to Canadians as it will be to foreign entrants.
That is why Parliament must support liberalization for all carriers, because unless all
carriers are able to benefit from liberalization, the opportunities from increased
scale like lower prices or more investment are diminished for many consumers and
communities.
That is also why fairness dictates that both broadcast distribution and
telecommunications carriage must be changed at the same time.
I look forward to your questions
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