OECD says foreign investment in the telecom sector needed to lower prices in Canada


At a presentation yesterday in Montreal, Canadian Finance Minister Bill Morneau and Angel Gurria, secretary-general of the Organization for Economic Co-operation and Development (OECD), stated that Canada should reduce foreign ownership restrictions in the telecommunications and broadcasting industry.

This move, says the accompanying release, would “boost productivity growth and lay the foundation for future economic expansion.”

The OECD is an international forum headquartered in France that promotes policies aimed at improving economic and social well-being for consumers.

In its annual economic survey of Canada, OECD states: “Canada has restrictive foreign ownership rules in telecoms and broadcasting, which are intended to support Canadian cultural objectives but which also reduce competitive pressures.”

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In Canada, the organization notes, foreign companies are generally allowed to hold no more than 46.7 percent voting equity in any carrier or broadcast distribution undertaking. The government did away with those restrictions for smaller companies with a market share of less than 10 percent in 2012, though this has not resulted in any significant investment yet.

OECD cites a study done by its own researchers in which it estimates that fully eliminating ownership restrictions in telecoms could reduce price-cost margins by two percent from an average of 26 percent for public companies.

The organization expects that should the restrictions be lessened or dropped, the main source of foreign investment would be the U.S., where wireless services are much less expensive, though lower in quality.

Chart credit: OECD, Services Trade Restrictiveness Index database

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