Rogers 2007 Annual Report Download - page 54

50 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
4. OPERATING ENVIRONMENT
GOVERNMENT REGULATION AND REGUL ATORY
DEVELOPMENTS
Substantially all of our business activities, except for Cable’s Rogers
Retail segment and the non-broadcasting operations of Media, are
regulated by one or more of: the Canadian Federal Department
of Industry, on behalf of the Minister of Industry (Canada) (collec-
tively, “Industry Canada”), the CRTC under the Telecommunications
Act (Canada) (the “Telecommunications Act”) and the CRTC under
the Broadcasting Act (Canada) (the “Broadcasting Act”), and,
accordingly, our results of operations are affected by changes in
regulations and by the decisions of these regulators.
Canadian Radio-television and Telecommunications Commission
Canadian broadcasting operations, including our cable television
systems, radio and television stations, and specialty services are
licenced (or operated pursuant to an exemption order issued) and
regulated by the CRTC pursuant to the Broadcasting Act. Under the
Broadcasting Act, the CRTC is responsible for regulating and super-
vising all aspects of the Canadian broadcasting system with a view
to implementing certain broadcasting policy objectives enunciated
in that Act.
The CRTC is also responsible under the Telecommunications Act for
the regulation of telecommunications carriers, which includes the
regulation of Wireless’ cellular and messaging operations and Cable’s
Internet and telephone services. Under the Telecommunications Act,
the CRTC has the power to forbear from regulating certain services
or classes of services provided by individual carriers. If the CRTC finds
that a service or class of services provided by a carrier is subject to
a degree of competition that is sufficient to protect the interests of
users, the CRTC is required to forbear from regulating those services
unless such an order would be likely to unduly impair the establish-
ment or continuance of a competitive market for those services.
Cable’s retail services have been deregulated by the CRTC. However,
any change in policy, regulations or interpretations could have a
material adverse effect on Cable’s operations and financial condi-
tion and operating results.
Copyright Board of Canada
The Copyright Board of Canada (“Copyright Board”) is a regulatory
body established pursuant to the Copyright Act (Canada) (the
“Copyright Act”) to oversee the collective administration of copy-
right royalties in Canada and to establish the royalties payable
for the use of certain copyrighted works. The Copyright Board is
responsible for the review, consideration and approval of copyright
tariff royalties payable to copyright collectives by Canadian
broadcasting undertakings, including cable, radio, television and
specialty services.
Industry Canada
The technical aspects of the operation of radio and television sta-
tions, the frequency-related operations of the cable television
networks and the awarding and regulatory supervision of spectrum
for cellular, messaging and other radio-telecommunications systems
in Canada are subject to the licencing requirements and oversight
of Industry Canada. Industry Canada may set technical standards for
telecommunications under the Radiocommunication Act (Canada)
(the “Radiocommunication Act”) and the Telecommunications Act.
Restrictions on Non-Canadian Ownership and Control
Non-Canadians are permitted to own and control directly or indi-
rectly up to 33.3% of the voting shares and 33.3% of the votes of a
holding company that has a subsidiary operating company licenced
under the Broadcasting Act. In addition, up to 20% of the voting
shares and 20% of the votes of the operating licencee company may
be owned and controlled directly or indirectly by non-Canadians.
The chief executive officer and 80% of the members of the Board
of Directors of the operating licencee must be resident Canadians.
There are no restrictions on the number of non-voting shares that
may be held by non-Canadians at either the holding-company or
licencee-company level. Neither the Canadian carrier nor its parent
may be otherwise controlled in fact by non-Canadians. The CRTC
has the jurisdiction to determine as a question of fact whether a
given licencee is controlled by non-Canadians.
Pursuant to the Telecommunications Act and associated regulations,
the same rules apply to Canadian carriers such as Wireless, except
that there is no requirement that the CEO be a resident Canadian.
The same restrictions are contained in the Radiocommunication
Act and associated regulations.
In April 2003, the House of Commons Industry Committee released a
report calling for the removal of foreign ownership restrictions for
telecommunications carriers and broadcasting distribution under-
takings. In June 2003, the House of Commons Heritage Committee
released a report that opposed the Industry Committee’s recom-
mendation. The Cabinet responded to the Industry Committee
report in September 2003 and to the Heritage Committee report in
November 2003. The government announced that officials from the
Industry and Heritage departments will convene to reconcile the
two positions. On July 12, 2007, the federal government appointed
the Competition Policy Review Panel. Among other things, this
panel is examining the foreign ownership rules in Canada’s com-
munications sector.
Proposed Policy Direction to the CRTC on Telecommunications
On June 13, 2006, the Minister of Industry tabled a proposed Policy
Direction on Telecommunications in Parliament. The Direction
signals the Government’s intention to direct the CRTC to rely
on market forces to the maximum extent feasible under the
Telecommunications Act and regulate, if needed, in a manner that
interferes with market forces to the minimum extent necessary.
Additional discussion of regulatory matters and recent develop-
ments specific to the Wireless, Cable and Media segments follows.