Ottawa is harming consumers of telecommunications services by encouraging artificial competition. That is the key finding of a research paper [pdf, 6.7MB] being released today by the Montreal Economic Institute that looks at “The State of Competition in Canada’s Telecommunications Industry”.
The last paragraph of the Executive Summary captures the essence of the paper:
The federal government has lost sight of the ultimate goal of promoting the development of a dynamic, efficient industry. It should set up fair rules for all that would allow fourth players to emerge if the market could support them. This would have the effect of actually encouraging sustainable competition in Canada’s telecommunications industry and consolidating the dynamism of this industry, to the great benefit of consumers across the country.
“Contrary to popular belief, with three national wireless players, and several regional ones, Canada is far from being an aberration among developed countries,” says Martin Masse, a former political advisor to Industry Minister Maxime Bernier, who co-authored the study with Paul Beaudry, who was a senior policy advisor to Minister Bernier. The authors say Europe’s wireless sector shows that high levels of government regulation and competition may bring down prices, but the European model discourages investment and innovation.
“The State of Competition in Canada’s Telecommunications Industry – 2014” is a 60-page report that provides data to counter a perception of “dismal performance” in the Canadian telecommunications sector. The authors explore the federal government’s attempts to fostering the emergence of a fourth wireless player and the results achieved in the wireline sector through mandatory network sharing policies. The authors conclude with proposals to further liberalize Canada’s foreign investment regime in the telecommunications sector (including broadcasting) and recommend relaxing restrictions in its new spectrum licence transfer rules.
Cultural nationalists are often quick to point out that eliminating foreign ownership restrictions in the broadcasting sector would lead to the elimination of Canadian content requirements. Such fears are unjustified. There is no reason why Canadian content requirements could not survive in a liberalized broadcasting market. Foreign-owned firms operate in many other sectors of Canada’s economy and must abide by the same laws and regulations as Canadian-owned firms. There is no evidence that foreign-owned firms are less likely to comply with Canadian laws and regulations than Canadian-owned firms.
The Montreal Economic Institute paper asks “how does one analyze competition in an industry like telecommunications?” This is precisely the question being explored in a special breakout session at The 2014 Canadian Telecom Summit, being presented in cooperation with the DeGroote School of Business at McMaster University on the morning of June 16. The session, “Competition in Canadian Telecom” will be moderated by Dvai Ghose of Canaccord Genuity and will feature:
- Robert Crandall [Senior Fellow, Brookings Institute]
- John Mayo [Professor, Georgetown University]
- Eli Noam [Professor, Columbia University]
- Roger Ware [Professor, Queens University]
- Len Waverman [Dean, DeGroote School of Business, McMaster University]
If you are involved in policy development or regulation, you won’t want to miss this session. The Canadian Telecom Summit takes place June 16-18 at the Toronto Congress Centre. Save $250 by registering before May 14.
Furthermore, the Feds have clearly signalled that even if a fourth player wanted to enter the market, they would find it very difficult to actually deploy a network.