Liberals Waive Review of Chinese Norsat Purchase, but also Pledge Billions in Defence Spending & Revise Satellite Licencing Regs

          By Henry Stewart

When the major domestic stories for the week all revolve around the aerospace industry, it's a reminder of how important our aerospace and space based infrastructure has become for communications and national defence.

With that in mind, and for the week of June 5th, 2017, here are a few of the stories we're currently tracking in the Commercial Space blog:

Industry Minister of Tony Clement (left) along with Norsat CEO Dr. Amiee Chan (centre) at Norsat International HQ in January 2009. As outlined in the January 15th, 2009 Government of Canada press release, "Minister of Industry Invests in Innovative Research and Development Projects for Emergency Services," Clement visited to announce "a repayable investment in Norsat International Inc. (Norsat) to research and develop the next generation of portable ground satellite telecommunications technologies." More recently, and as outlined in the March 14th, 2017 Norsat press release, "Norsat Exhibits at Satellite 2017 Show in Washington, D.C.," the company had launched a series of new Ka-band BUC and LNB solutions. Photo c/o www.ic.gc.ca.

• The Federal government has decided "after a preliminary security screening" that further examination of the proposed sale of Vancouver, BC based Norsat International Inc. to Shenzhen, China based Hytera Communications is not required and the sale will be allowed to proceed.

As outlined in the June 8th, 2017 Globe and Mail article, "Liberals waive security review for Chinese takeover of high-tech firm," the Trudeau government "is allowing Chinese investors to buy a Vancouver high-tech firm without a formal national security review even though Canada and many of its allies use the company’s patented satellite communications technology for security, public safety and defence."

The article quoted several independent authorities, including Richard Fadden, the former Canadian Security Intelligence Service (CSIS) and University of British Columbia professor Michael Byers, as expressing surprise that no formal review was held.

Norsat CEO Chan. Photo c/o C. Carracedo.

The Norsat position, as outlined in the June 2nd, 2017 Norsat press release, "Norsat Announces Investment Canada Notice Regarding Proposed Acquisition by Hytera Communications Co., Ltd.," is that the current level of Federal due diligence "satisfies the Investment Canada Act condition for closing of the acquisition of Norsat by Hytera."

The press release also quoted Fabio Doninelli, a Norsat director and the chairman of the board as stating that, "the review of the proposed transaction under the Act has been extensive and we are very pleased that the notice received has removed a significant pre-condition to closing of the transaction."

This latest Federal government decision is a reminder that the governing Liberal party is far less reticent about the ownership of Canadian high-tech space companies than the previous Conservative government. 

This was recently demonstrated to the space industry as per the January 24th, 2016 post, "Did the Government Let COM DEV Go Because They Have Bigger Fish to Fry?" which discussed the 2016 purchase of Cambridge, Ontario based Com Dev International by American defence giant Honeywell International and re-enforced by the Federal government decision to ignore the changing structure of Richmond, BC based Macdonald Dettwiler (MDA) as it attempts to gain access to US military contracts.

For more on the hoops MDA is currently jumping through, check out the October 7th, 2016 post, "Iconic MacDonald Dettwiler is Now SSL MDA Holdings, a US Based Company with a Canadian Subsidiary," and it's follow-up, the February 27th, 2017 post, "MacDonald Dettwiler & DigitalGlobe, the Worldview Legion Constellation, Canada's RADARSATs & America's 'Deep State'."

As for Norsat, the company currently boasts various western civilian and military clients including the US Department of Defence, Boeing, CBC News, Reuters, NAV Canada and the Canadian Coast Guard. 

The Hytera acquisition is expected to close in the third quarter of 2017.

Defence Minister Harjit Sajjan announcing a new defence policy for Canada on June 7th, 2017. For the full text of the ministers speech, check out the June 7th, 2017 Macleans post, "Harjit Sajjan announces a new defence policy: Full speech." Photo c/o  Macleans.

• On the other hand, what's the loss of one smallish but innovative company, when compared to the opportunity to bid on up to $62Bln CDN worth of defence contracts, especially if there is a strong focus on new technology including:

• Eighty-eight new advanced fighters. 

• New "next generation" multi-mission aircraft (replacements for the Canadian Forces Lockheed CP-140 Aurora). 

• New air-to-air tanker-transports and new ships to replace the current "Halifax" class frigates.

• And even a replacement of the current RADARSAT remote sensing observation system along with the acquisition of other space-based capabilities, including global satellite communications, surveillance of space, and other intelligence, surveillance and reconnaissance contracts, at least if the June 7th, 2017 Aerospace Industry Association of Canada (AIAC) press release, "New defence policy supports Canadian aerospace innovation, industrial capability," is any indication.

But as outlined in the June 7th, 2017 Globe and Mail post, "Ottawa lays out $62-billion in new military spending over 20 years," the new plan, while expected to boost military spending by more than $30Bln CDN over the next decade (most of which will pay for the ballooning cost of new warships and fighter jets) will also push out the bulk of the new expenditures until after the next Federal election.

This delay places the new policy firmly in the same category as the 2008 Conservative government's Canada First Defence policy, which promised many of the same things, but was never implemented when the funding, also promised for "after the next election," never materialized.

It's a shame. The concept of the Canadian government actually paying for its own defence is the sort of thing which might even give the crazy people currently running Washington a slight pause. 

For more on Canada's new defence policy, check out the June 7th, 2017 National Defence press release, "Canada Unveils New Defence Policy," the new DND website on Canada's Defence Policy under the title, "Strong, Secure, Engaged: Canada’s Defence Policy," and its accompanying PDF report, under the same title.

June 8th, 2017 screenshot of the Federal government webpage on, "Decisions on the Licensing Framework for Non-Geostationary Satellite Orbit (NGSO) Systems and Clarification of Application Procedures for All Satellite Licence Applications." Screenshot c/o Government of Canada.

• The Federal government has also issued a series of substantial revisions to its satellite licensing rules. 

As outlined on the June 5th, 2017 Federal government webpage under the title, "Decisions on the Licensing Framework for Non-Geostationary Satellite Orbit (NGSO) Systems and Clarification of Application Procedures for All Satellite Licence Applications,"  the new regulations include, "changes to the licensing rules for non-geostationary satellite orbit (NGSO) systems and to the procedures for re-assigning spectrum when satellite spectrum authorizations have been returned or revoked."

The new rules are the result of a unexpected demand for commercial non-geostationary satellite orbit (NGSO) satellites and constellations. As outlined in the November 20th, 2016 post, "SpaceX, Telesat & Kepler Just Three of the Dozen Satellite Constellations Currently on the FCC Table," this evolving market "is expected to generate $175Bln USD ($236Bln CDN) in satellite manufacturing & launch revenues over the next ten years."

The changes are also the result of a consultation process with input from twelve companies and one "coalition" of firms, which began in March 2017. Participants included Boeing, GHGSat, Kepler Communications, Meridian Global/Northpoint, Microsat Systems Canada Inc. (MSCI), NorthStar Aerospace, O3b Networks (O3b), OneWeb, Planet Labs Inc., SpaceX, Telesat Canada (Telesat) and ViaSat Inc.

The "coalition" included Ciel Satellite LP, Meridian Global Connection Inc., Northpoint Spectrum Development, Parscom Management, and WorldVu Satellites Limited/OneWeb.

An existing moratorium on commercial NGSO satellite applications will be lifted at 08:00 ET on June 26th, 2017 and new applications will be treated in the order in which they are received. 

The Federal government will hold an information session on the changes on June 12th.

For more, check out our upcoming stories in the Commercial Space blog.

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Henry Stewart is the pseudonym of a Toronto based aerospace writer.