Search Results for: incentives to invest

According to the Montreal Economic Institute (MEI), the CRTC has outlived its usefulness.

“Since Canada has successfully transitioned from monopoly to competition, there is a case to be made that the CRTC should be phased out as Canada’s telecommunications regulator.” That is one of the conclusions of the 5th annual edition of “The State of Competition in Canada’s Telecommunications Industry,” released today by MEI [pdf]. Instead of a sector specific regulator, the report says oversight of the telecommunications industry could move to a more general regulatory framework under competition law.

The report also contends that, despite what it calls “simplistic and misleading” comparisons, Canadian wireless prices are competitive.

“The average bill that Canadians pay for their wireless and internet services keeps increasing not because they have to pay more for the same services, but because they are paying more for more and better services.” The MEI report cites numerous international metrics that Canada has some of the highest quality wireless networks in the world, and comparisons of prices rarely account for service quality.

According to the report, “Wireless carriers in Canada invested on average US$78 per connection between 2010 and 2016, almost twice as much as their European counterparts, which only invested $40.”

Looking at the regulatory framework, the report observes, “The main concrete difference so far between the FCC’s and the CRTC’s approaches to net neutrality has been the steadfast opposition of the Canadian regulator to zero-rating. … In banning innovative and pro-competitive targeted pricing plans, the CRTC has not protected the integrity of the internet; rather, it has raised prices for certain consumers and lowered prices for no one.” This is a familiar refrain to my readers for whom I have made the same observation over the years.

A little over a week ago, I asked on Twitter “What if #CRTC had given market forces a chance to work?”

MEI points out the irony of the CRTC, having an agenda of increasing competition in Canada’s wireless marketplace, ended up banning an innovative pricing plan from a new entrant (Videotron). According to MEI, that ultimately hurts Canadian consumers. Similarly, the report takes aim at the CRTC’s overly prescriptive Wireless Code as having “reduced consumer choice and limited the ability of carriers to develop innovative customer offerings.”

In this instance — as in many others — Canadians would have been better off if the CRTC had relied on market forces instead of attempting to manage the competitive process.

The report points to the December 2017 wireless price war sparked by Freedom Mobile’s $50 per month 10GB plan as evidence of the market’s competitiveness. Quoting the 12-year old report of the Telecom Policy Review Panel (TPRP), MEI says “the Canadian telecommunications industry has evolved to the point where market forces can largely be relied on to achieve economic and social benefits for Canadians, and where detailed, prescriptive regulation is no longer needed in many areas.”

It has been more than 12 years since the TPRP’s report was issued and, as discussed above, the CRTC has shown few signs of restraint in its approach to telecommunications regulation. While it has abandoned its prior focus on retail regulation, it has also expanded mandatory network access schemes, created policies that dull incentives to invest, and rewarded product imitators instead of product innovators. If maintained, these policies are bound to hurt Canadian consumers in the long run.

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Although dismantling Canada’s telecommunications regulator might meet with stiff opposition from partisans of continued heavy-handed regulation, it would be of net benefit to Canadian consumers and to Canada’s economy. The CRTC—while a necessary actor in Canada’s telecommunications landscape during the transition from monopoly to competition—has outlived its usefulness.

No doubt, the assertions made in the MEI report will feature prominently in the Regulatory Blockbuster at The 2018 Canadian Telecom Summit, taking place June 4 – 6 in Toronto. The Regulatory Blockbuster will feature leading advocates from Bell, TELUS, Rogers, Teksavvy and Ice Wireless.

Have you registered yet?

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[Update: May 8, 11:50am] The MEI report author has an opinion piece on the Financial Post website, entitled “The CRTC should celebrate its 50th birthday by giving up telecom regulations entirely” with the caption “Martin Masse: You may be wondering why exactly we still need a dedicated telecommunications regulator. We don’t”.

Canadians benefit from some of the most advanced and efficient wireless and broadband Internet services in the world. Further, penetration and usage rates for newer wireless technologies like tablets, smartphones and LTE connections in Canada are among the highest for industrialized countries.

These are among the findings of The Montreal Economic Institute in the 2016 edition of its report on “The State of Competition in Canada’s Telecommunications Industry” [pdf, 5MB].

According to its authors, Martin Masse and Paul Beaudry, the publication of the report was motivated by the mistaken impression given by some observers that Canada’s telecommunications industry compares poorly with that of other jurisdictions.

The report attempts “to dispel the notion that Canadians pay uncompetitive prices for low quality services.”

It argues that government and CRTC interventions in the wireless and wireline sectors could lead to unintended consequences that might jeopardize investment and innovation.

The release is timely as parties prepare final written submissions for the CRTC’s Review of basic telecom services. The authors urge Ottawa to resist intervening in the broadband Internet sector as it has in the wireless sector.

Any CRTC attempt to declare broadband an “essential service” and to regulate and subsidize it would be a solution in search of a problem, as broadband is well on its way to becoming ubiquitous simply through the normal course of technology adoption.

The report charges that the CRTC’s wireline wholesale decision, under appeal to the Federal cabinet, ignores the lessons of Europe, “where two decades of network sharing regulations and an obsession with price competition has led to a decline in mobile revenues and underinvestment in network infrastructure.” The authors call for Cabinet to modify the CRTC’s decision, and in renewing a commitment to the 2006 Policy Direction, “remind the regulator that infrastructure deployment is key to Canada’s long-term economic prosperity and should be encouraged, rather than deterred.”

Interventionist policies aimed at helping smaller players gain market share can have harmful effects on innovation and weaken incentives to invest in and deploy new infrastructure.

The report concludes: “Canada already has dynamic and competitive markets in telecommunications, and there is no need for costly and counterproductive policies that merely promote artificial competition.”

In releasing the report, the authors endorse the Bell acquisition of MTS announced earlier this week.

These issues and much, much more will be explored at The 2016 Canadian Telecom Summit, taking place June 6-8 in Toronto. Have you registered yet?

David Paddon of The Canadian Press has a story on the wires providing a preview of one of the concurrent panels taking place Monday (June 16) at The 2014 Canadian Telecom Summit.

The Winnipeg Free Press version of the story is titled “Canada’s wireless policies has left industry skeptical: summit organizer“. It features our Competition in Telecom panel, “a panel of academics and other economists who will debate whether governments can actually create sustainable competition through their regulatory policies.”

As I am quoted, “On one hand, you might have lower prices. On the other hand, you may have reduced incentives to invest in new technology.”

We are expecting a lot of media coverage this year from the global business press, industry newsletters and websites. BNN-TV will be on site and CPAC is recording a few of the keynote addresses and panel discussions for broadcasting later this summer.

Paul Bagnell of BNN had a preview of highlights he is looking forward to hearing at the event. You can read his blog post and watch his clip on the BNN website. Paul is planning to interview a number of speakers throughout the day.

The Financial Post has an article this morning that also includes a preview of The Canadian Telecom Summit.

If you are interested in telecommunications, broadcasting and information technology, then you should be at The Canadian Telecom Summit. Check out the full program.

I look forward to meeting you there!

The University of Calgary School of Public Policy released an important paper today, providing what it calls the first study that assesses the state of competition in wireless services in Canada. Based on the authors’ analysis, “there is no evidence that there is a competition problem in wireless services in Canada.”

The paper takes aim at simplistic analysis that has led various critics to have accused the industry of being “woefully uncompetitive” and “dysfunctional and in desperate need of an overhaul.”

This paper establishes that there is not a competition problem in mobile wireless services in Canada. The government need not, and should not, intervene to promote competition on the basis that increased competition will lower prices; efforts to do so will likely be unsuccessful and inefficient.

The paper warns that in the long run, the effects of government intervention are likely to lead to “reduced investment, misallocated spectrum, lower quality, and perhaps even higher prices.”

Today’s report was authored by Jeffrey Church, a professor in the Department of Economics and the Director of the Digital Economy Program in The School of Public Policy at University of Calgary, together with Andrew Wilkins, a Research Associate in the School. Dr. Church has testified on behalf of the Competition Bureau in the 2006 CRTC hearing looking into Essential Services. Today’s report documents the results of a long standing research program in telecommunications markets and regulation in Canada. An OpEd that appeared in the Globe and Mail in early July provided a preview of some of the points that are expanded upon in today’s report.

Although it is 50 pages, the report is quite readable and it is an important scholarly contribution to the wireless policy debate. It directly targets naive claims that high ARPU and low penetration rates are evidence of an uncompetitive sector, saying “the facts are not consistent with this simplistic analysis.”

Those who single out high ARPU as an indicator that something is wrong with prices — and therefore competition — are fundamentally misinformed about the meaning of ARPU and why it is high in Canada.

The authors say that it is ill-advised for the government to try to enhance competition by committing to four competitors in every region, saying the policy is based on “unsophisticated and misinformed textbook economics — that more competitors are better — which is simply inappropriate for services where there are important economies of network size, including economies of scale and scope.”

Similar to ideas in a blog post I wrote a few weeks ago, the paper warns that low prices can lead to networks that are not funded sufficiently to support future generations of devices and services.

Efforts to create competition in the short run, that increase the number of carriers, will simply squeeze margins in the short run and likely will not be sustained in the long run, as carriers exit and consolidate to reduce competition and restore margins consistent with profitability and the natural limit. And, while consumers might gain in the short run from lower prices, everyone is likely made worse off in the long run from the misallocation of spectrum, reduction in scale of carriers, and reduction in incentives to invest from such intervention.

The authors recommend that the government should reverse course on policies that reduce or restrict incentives for investment by the incumbent carriers and their access to spectrum. Instead, the focus should be on measures that foster competition in investment and network characteristics, such as speed, reliability, and capacity.

The conclusion is that Canada does not have a problem with competition in Wireless, and steps being taken to artificially incent new competitors may provide short term pricing benefits but likely brings deleterious long term impacts.

Perhaps the Industry Minister could refer the question to the Competition Bureau for an assessment. That is Canada’s independent agency charged with ensuring “that Canadian businesses and consumers prosper in a competitive and innovative marketplace.”

With auction stakes measured in billions of dollars – as well as the possible negative impact on investment in digital infrastructure – should we be asking whether the Competition Bureau agrees with the presumption that policy measures to incent competition are appropriate?

The University of Calgary School of Public Policy report concluded there is no evidence of a competition problem in Canada’s mobile wireless industry. On such an important issue of sector competitiveness, will the Competition Bureau be engaged to confirm or reject this finding?

The CRTC has issued another update to Telecom Notice of Consultation 2009-261, which has been titled “Proceeding to consider the appropriateness of mandating certain wholesale high-speed access services.”

Today’s update, number 7, expands the scope and sets out a new schedule in order to incorporate the directions from Cabinet issued a week ago [Bell/TELUS Order and MTS Allstream Order].

The Order in Council states that the Governor in Council considers that the continued development and availability of broadband Internet infrastructure and services is important for Canadians and the Canadian economy. It notes that it is critical that the regulatory regime provide a cohesive, forward-looking framework that provides the proper incentives for continued investment in broadband infrastructure, encourages competition and innovation, and leads to consumer choice.

So, TNC-2009-261-7 reopens the paper proceeding and delays the oral hearings that had been scheduled to open in early January.

Specifically, the CRTC is seeking comments by February 8 asking:

1. the application of the existing essential service framework on a forward-looking basis such that it provides appropriate incentives for continued investment in broadband infrastructure, encourages competition and innovation, and leads to consumer choice; and
2. in the context of the discussion provided in response to A, above,
   1. whether the speed-matching requirement, mandating the provision of the high-speed access services under consideration, or mandating access to any new types of Internet access infrastructure does, or would, unduly diminish incentives to invest in new network infrastructure in general and, in particular, in markets of different sizes;
   2. whether, in the absence of the speed-matching requirement and the mandated provision of the high-speed access services under consideration, there would be competition sufficient to protect the interests of users;
   3. whether the respective wholesale obligations imposed on ILECs and on incumbent cable carriers are equitable or represent a competitive disadvantage; and
   4. whether the impact of these wholesale requirements unduly impairs the ability of incumbent telephone companies to offer new converged services, such as IPTV.

The hearings will now take place May 31-June 4, finishing up in time for everyone to attend The 2010 Canadian Telecom Summit, which opens on June 7. We are open through the holidays if you are looking to register early with your remaining 2009 budget.