Mark Goldberg

Racing to the bottom

A thoughtful piece appeared in today’s Globe and Mail by Steven Shepard, the resident director of leadership programs at the University of Southern California’s Institute for Communication Technology Management. His concerns are similar to mine when he states:

It’s not the wireless carriers I worry about; it’s the ripple effect that a poorly thought-out and short-term strategy could create for customers, rural residents, pensioners and the Canadian investment community.

Since it was released early last year, I have had concerns about the 700 MHz policy, describing the compromises and lack of leadership as “700 MHz: Solomon cuts the baby“. The failure of this government to produce an overall national digital strategy leads me to the concern that there are potential ripple effects that could have a long term deleterious impact on Canada’s communications infrastructure, resulting in reduced opportunities for Canadian leadership in a global digital economy.

Just last week, there was an interesting discussion on CNBC of the dismal state of telecommunications carriers in Europe. The discussion talks about the trade-off between low prices and investment in improved services. Robin Bienenstock, Senior Analyst, European Telecoms at Sanford C. Bernstein said:

It’s the fault of the regulators, it’s no question. But what they got was really, really cheap services. The problem is that the services are now a lot worse than the services in the rest of the world and that’s what people care about. If you want better services, these companies have to make money and they have to have money to invest.

You should watch the entire video clip – it is only three and a half minutes. The end of the video takes a hard swipe at “legacy” regulatory environments that encouraged wholesale structures facilitating “free-riding” returns of 16-17% but “if you owned the infrastructure yourself, you made the cost of capital at best.”

Although some want to see Canadian wireless prices race to the bottom, there is merit to considering the impact on the investment climate that has enabled the deployment of world leading technologies in Canada’s networks.

Where is the thoughtful, evidenced-based leadership to drive Canada’s digital economy policy? With heavy intervention in the wireless sector coming from both Industry Canada and the CRTC, has there been sufficient analysis of the potential consequences?

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