Canada’s broadcast watchdog has decided it has the right to control what is beamed into the country’s airspace via foreign satellite services. And U.S. direct broadcast satellite services must get permission from the CRTC before entering the Canadian marketplace, according to a report released Thursday.

The announcement was part of a package of regulatory reforms for the survival of the Canadian broadcasting system by the Canadian Radio-television & Telecommunications Commission. It stemmed from industrywide hearings in March that examined what regulatory changes were necessary to make the industry more competitive against U.S. DBS, nicknamed “deathstars.”

The CRTC plans to wield the Canadian Broadcasting Act like a club over any unlicensed foreign satellite service that violates Canadian airwaves.

“The commission has the (legal) right to decide what comes over the Canadian airwaves. If we hear of someone operating in Canada without a license, then we’ll go and get them,” said CRTC rep LisePlouffe.

Broadcasters applauded the protectionist agenda. But the move has drawn a negative reaction from Canadian cablers and U.S. DBS service DirecTv.

“Do they really expect they’re going to go after everyone doing business in Canada with an American background? Are they really going to go out and prosecute all these little satellite owners?” asked John McKee, veep of Hughes DirecTv Canada Inc.

DirecTv plans to launch two satellites over the next year that will each offer up to 150 channels to consumers who purchase a $ 700 (U.S.) satellite dish , decoder box and universally addressable remote. Last week, the U.S. firm announced a deal with pubcaster CBC and Montreal-based Power Broadcasting for the distribution of two new Canadian services.

McKee said negotiations with other Canadian services have been suspended until they can assess how Thursday’s announcement impacts DirecTv’s operations in Canada.

“We’ve always said we want to do business legally in Canada. But we’ve got to get a better understanding of what they want from us,” McKee said.

The CRTC has clearly targeted DBS operators, not individual consumers. And it puts Canadian cable operators at a competitive disadvantage.

“We are concerned that the CRTC feels it can regulate DBS,” said Ken Stein, prexy of the Canadian Cable TV Assn.

Canadian cablers won’t be allowed foreign signals that are carried on a DBS service that doesn’t have the CRTC’s blessing.

The CRTC report also called for applications for new Canadian services and the creation of a production fund estimated to generate $ C300 million ($ 2.4 million) over five years. Cable operators will contribute to the fund, based on a percentage of capital expenditures.

The CRTC has issued a call for comments on how the fund should be administered. And Canadian producers are guardedly optimistic about the initiative.