Canada's federal regulator has come out strongly against foreign control of the country's telecom sector, saying doing so risks turning Canada's communications industry into a "branch plant."

CRTC chairman Konrad von Finckenstein told a House of Commons committee that allowing foreign control of either telecoms or broadcasting risks turning Canada into a "branch-plant communications industry." (Pawel Dwulit/Canadian Press)CRTC chairman Konrad von Finckenstein told a House of Commons committee Tuesday that foreigners should be restricted to a maximum 49 per cent of controlling shares in any telecommunications firm.

"The control of the communications sector should stay in Canadian hands," he said.

"If you don't do this … we will have a branch plant communications industry."

The Canadian Radio-television and Telecommunications Commission head was testifying on a proposal in last month's throne speech that would see the government "open Canada's doors further to venture capital and to foreign investment" in "satellite and telecommunications industries."

But von Finckenstein said it was not possible to allow foreign ownership rules to relax on the telecoms without opening up Canada's broadcasters — the culturally-sensitive content part of the sector — as well.

Currently, Ottawa limits direct and indirect foreign ownership to 46.7 per cent, and requires that voting control remain in Canadian hands. Von Finckenstein said it would be acceptable to increase that to 49 per cent.

In a recent interview with The Canadian Press, Industry Minister Tony Clement said he wants to have consultations because of the complexity of the issues, particularly since the country's leading telecoms, such as Rogers Communications and Quebecor Inc., also own broadcast media.

As well, cable operator Shaw Communications has made a bid to buy Canwest Global's stations.

Clement stressed there is no intention to change the rules governing broadcasters, which are regarded as a cultural industry.

"There's been no change in our broadcast policy in terms of Canadian content and Canadian rules, but we're signalling a change in the telecom side," he said.

Industry analyst Eamon Hoey of Hoey Associates also disputed von Finckenstein's claim that telecoms and broadcasters are inseparable. He said it was possible to regulate Canadian content in broadcasting and still have foreign firms own the pipeline carrying the content.

Protectionism in the industry has served Canadians badly in terms of poor services and high costs, he said.

"In terms of wireless, we are about seven or eight years behind the rest of the world and we have higher rates. In terms of broadband, Canada is a tail-ender," he said.

"We've protected these guys from foreign competition, and we've protected them from competition at home."

In Tuesday's testimony, von Finckenstein said the sectors should be treated as one because some Canadian companies operate both as telecoms and broadcasters. As well, new media allows programs to be viewed on the internet or hand-held devices, and to be inter-active.

He said distinctions between the so-called pipeline and content may have made sense in the past, but they no longer apply. And with the advent of new media, he said the ability of the CRTC to regulate is diminishing.

For instance, the internet is not regulated and most programs carried on television can also be viewed through Canadians' computers.

As a result, von Finckenstein said, it was important that "the controlling minds are Canadian" in both sectors.

"They understand Canada, they understand our bicultural our bilingual situation. No matter what regulation you put together, you can't instill in them what Canada is all about, so they can reflect it in the program," he said.

"If you don't take away the ownership, [and] try to rule by regulation, you may not succeed and there's no way you can go back."

The best way of moving forward, he said, was to create uniform rules that would apply to both industries, and to keep control firmly in Canadian hands.