Darren Entwistle, president and CEO of Telus, says the removal of foreign ownership restrictions needs to be coupled with ensuring the Competition Bureau has the tools to stamp out anti-competitive practices and abuse of dominance.Rich Lam/The Canadian Press
Confession time: Darren Entwistle is my favourite CEO.
I’m not usually a fangirl of corporate suits. But the outgoing boss at Telus Corp. is the rare Canadian chief executive who is bold enough to publicly criticize bad government policy and the short-term thinking that keeps the country mired in mediocrity.
Mr. Entwistle may be nearing the end of his 26-year tenure at Telus – he is retiring on June 30 and moving to Britain – but he hasn’t lost his drive to create change in his birth country.
His signature fire was on full display when he recently visited The Globe and Mail’s headquarters in Toronto and was asked to opine on Canada’s reticence to dismantle foreign investment restrictions for large telcos in the face of a U.S. trade war.
The 63-year-old Mr. Entwistle has been one of this country’s most vocal advocates for the removal of foreign ownership restrictions since 2002, months before Ottawa officially conducted a review of the issue.
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Perhaps he was ahead of his time. More than two decades later, he holds fast to that conviction.
“I’ve not changed my view one iota in that regard,” Mr. Entwistle told The Globe’s Editorial Board last Friday.
“Let’s let free market forces reign,” he added.
Foreign ownership rules have been relaxed for small telecoms. However, for large carriers direct and indirect foreign investment remains capped at a combined total of 46.7 per cent. Canadian citizens must also occupy 80 per cent of their corporate board seats.
It is unclear whether the Carney government, which is preparing for a high-stakes review of the United States-Mexico-Canada Agreement (USMCA), is hung up on this issue.
Regardless, it’s time for Ottawa to give it a fresh look.
Foreign ownership restrictions for the large carriers – Rogers, Bell and Telus – are long-standing trade irritants that ultimately suppress market competition to the detriment of Canadian consumers.
Canada’s telecom ownership restrictions are a relic of the early 1990s. They were introduced in large part to thwart U.S. takeovers of Canadian telcos after the two countries signed the original North American Free Trade Agreement.
Although the House of Commons industry committee conducted a review in 2003, Ottawa’s continued inflexibility was a reason that Verizon Communications Inc. sold its 20-per-cent ownership stake in Telus back in 2004. Simply put, there was ultimately no path to control.
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In the ensuing years, at least two blue-ribbon panels recommended that Ottawa relax the foreign investment rules for both telecom and broadcasting, with the proviso that smaller telecom carriers should be given a head start.
The Telecommunications Policy Review Panel in 2006 and the subsequent Competition Policy Review Panel in 2008 both concluded that liberalizing restrictions on foreign investment would boost competition.
In 2012, the federal government made legislative changes to allow up to 100-per-cent foreign ownership of small telecoms that have a revenue market share of 10 per cent or less.
There was some expectation that Ottawa would do the same for large telecoms, but this issue has lost momentum over the past 14 years.
Instead of considering it strictly as a telecom policy issue, Mr. Entwistle suggests that federal legislators think laterally about its importance in the broader context of free trade.
“I think there’s a list of fair U.S. irritants,” Mr. Entwistle said.
“So, why don’t we address some of those and put ourselves in a better position to get a negotiated outcome?”
It is a logical concession for Canada to make as part of the USMCA review because, as he points out, it would create “a more symmetrical relationship north and south of the border.”
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As he first suggested in 2002, Ottawa should remove foreign ownership restrictions for large telecoms in a considered way.
“Do it cleanly,” he said. “Don’t monkey around with silly parameters.”
Critics have previously argued that it is self-serving for Mr. Entwistle to be a proponent of such a change since Telus does not own media assets like rivals Rogers and Bell. To his credit, however, he has long argued that foreign ownership rules for telecom and broadcasting ought to be harmonized.
What’s more, the removal of foreign ownership restrictions needs to be coupled with ensuring the Competition Bureau has the tools to stamp out anti-competitive practices and abuse of dominance, Mr. Entwistle said.
In doing so, he cited Articles 85 and 86 of the Treaty of Rome, an agreement signed in 1957, that increased the economic integration of some European countries.
“Bang! The Competition Bureau can lean in,” Mr. Entwistle said. “Hard teeth.”
This is consistent with his views that Canadian telecoms should benefit from unfettered access to international markets and less regulation.
Indeed, a more open and integrated border with the U.S. should enable more deregulation by Ottawa and harmonization with Washington on telecom policy.
When asked why more CEOs don’t agree with him (at least publicly), Mr. Entwistle said that change is difficult to achieve in part because outcomes are never guaranteed.
“There’s, I guess, a level of intransigence that comes with the status quo,” he said. “It’s known. It’s comfortable.”
It’s the same risk aversion that creates complacency on trade.