It is only intermission in the debate on liberalized foreign ownership restrictions for telecommunications companies being waged by two federal ministries, say independent producers, whose fate hangs in the balance.

‘We’re waiting for the other shoe to drop,’ says Elizabeth McDonald, president and CEO of the CFTPA.

Already wincing from the cuts to the Canadian Television Fund, independent producers are concerned about how April 28 recommendations from the House of Commons Standing Committee on Industry, Science and Technology to increase foreign ownership will affect the prospects of Canadian-content producers. And that foggy answer awaits a second weighty report from the House of Commons Standing Committee on Canadian Heritage, which is expected to conflict with Industry’s report and could be published as early as this month.

‘The current environment is turbulent,’ says McDonald. ‘This is a very vulnerable sector. That [the Ministry of Industry] is so welcoming of foreign investment indicates to me that they are not supportive of Canadian content and Canadian cultural policy. It gives me pause. Is our content strategy all about highways or what we put on the highways?’

In the report commissioned by Allan Rock, minister of industry, Opening Canadian Telecommunications to the World, the parliamentary committee makes a series of recommendations based on a three-month investigation into foreign investment restrictions and their impacts on the telecommunications sector.

‘Most telecommunications companies seeking outside sources of capital for investment purposes that appeared at the committee’s hearings claimed to have encountered problems trying to raise capital in the past decade,’ says committee chair Walt Lastewka, Liberal MP for St. Catharines, ON. ‘They experienced either reduced access to capital, or higher cost of capital, or both.’

Today, foreign investors are restricted to a maximum 20% of operating stock of telephone and cable TV firms, and 33% of a holding company, producing an effective ownership of up 46.7%.

Convergence, concludes the committee, means that cable companies, satellite companies, multipoint distribution systems and telephone companies can no longer be separated on the basis of their underlying distribution networks or the services they provide.

The committee recommends that the government:

* ‘Remove entirely the minimum Canadian ownership requirements, including the requirement of Canadian control, applicable to telecommunications common carriers.’

* ‘Ensure that any changes made to the Canadian ownership and control requirements applicable to telecommunications common carriers be applied equally to broadcasting distribution undertakings.’

That’s sweet music for the Canadian Cable Television Association.

‘We’re delighted with the committee report and that it is so consistent with our recommendations,’ says CCTA president Janet Yale. That includes a nod to the content producers that carriage and content are distinct and should, in terms of foreign ownership restrictions and Canadian control, be handled differently.

‘Clearly, cultural policy needs protection,’ she says.

But who owns the ‘pipes’ is not important and Canada is one of the only major jurisdictions that has limits on ownership of infrastructure, a situation that makes raising capital expensive and growth slow, she adds.

Freeing up foreign investment rules makes access to equity capital and a larger potential investor pool much easier and less expensive because of the increased opportunities, says Yale. And because of the nature of the cable and telecom industries, where the investment in the ‘pipes’ is in Canadian soil and terminating in Canadian homes, the increased foreign investment will stay in Canada and create more Canadian opportunity, she contends.

The committee also recommended that another special parliamentary committee be struck to comprehensively review:

* The regulatory framework governing Canada’s telecommunications and broadcasting sectors

* Approaches that the federal government could adopt to continue to facilitate broadband deployment in rural and remote communities

* Federal departmental organization (Industry Canada and Canadian Heritage)

* The jurisdiction, role and mandate of the CRTC.

Yale says maintaining a split between content and carriage, while working to keep culture sacrosanct, means that some larger vertically integrated Canadian companies may face a forced breakup if, for instance, they want to sell their cable assets. In one example, Rogers Communications would have to hive off Rogers Cable, should it be sold to foreign investors, in order to protect the programming division of Rogers Media.

McDonald says she’s not convinced the regulatory safeguards can protect Canadian producers if control of the Canadian broadcast system shifted to foreign hands. She points to the 1999 television policy that was supposed to promote Canadian content creation, but has instead contributed to the precipitous drop in Canadian drama production.

‘I’m afraid we overlook the importance of the small- and medium-sized companies that contribute to our industry,’ says McDonald. ‘[With increased foreign investment,] are the guarantees there? I don’t know if I believe in them. The regulatory systems are not reliable. And I’m not confident in the assurances.’

Rock has 150 days to respond formally to the committee report. In the meantime, the issue is not expected to be resolved until after Prime Minister Jean Chretien resigns next February and the Liberal leadership hopefuls, like foreign ownership critic Heritage Minister Sheila Copps, have had a chance to debate this issue in their campaigns.