In a recent newsletter, the Canadian Anti-Monopoly Project (CAMP) delivers an overly simplistic rebuttal to Sean Speer’s plea for increased liberalization of Canada’s telecom market.
You should read both. Both pieces have their shortcomings, especially in failing to consider the impact of foreign ownership restrictions in the Broadcast Act that would also need liberalization in order to accommodate broadcast distribution licenses (such as cable TV / IPTV).
The CAMP perspective fails to acknowledge real challenges faced by facilities-based companies that invest tens of billions of dollars in digital infrastructure each year. There is a cost associated with restrictions on the sources of capital, costs that inevitably factor into the prices paid by consumers. CAMP says “Current ownership rules block foreign stakes in large incumbents precisely to prevent further consolidating market power in the sector.”
Consider an alternate scenario. As a colleague recently observed privately to me, “Shaw sold to Rogers, increasing concentration, because they didn’t have the risk tolerance for raising the capital they needed to upgrade to competitive infrastructure. Obviously an American partner would have had the capital.” Liberalized foreign ownership might have provided an alternate option for the Shaw family to exit, resulting in more competition, not less.
Would a foreign buyer have emerged? Who knows. There are so many other problems with Canada’s telecom policy framework, not the least of which are considerations I discussed last week.
But we won’t know.
Each restriction on capital investment reduces degrees of freedom. Each translates into lost opportunities.
As I have written many times, we need to look at the industry like a chess master, thinking three or four moves ahead. Anticipate consequences of each path – intended and unintended. How would foreign ownership liberalization impact jobs? Ownership of intellectual property rights? Responsiveness to rural, remote, and indigenous investment?
It is worth noting that CAMP’s newsletter includes a line, “regulatory actions have supported strong independent carriers like Sasktel”. Sasktel is hardly an independent carrier. It is the provincially owned incumbent in Saskatchewan. The new entrants in that province are Bell, Rogers and TELUS, none of which received regulatory support for market entry.
Avoid overly simplistic takes. Telecom policy requires a much more sophisticated approach.