{"id":6650,"date":"2013-09-12T10:00:18","date_gmt":"2013-09-12T14:00:18","guid":{"rendered":"http:\/\/mhgoldberg.com\/blog\/?p=6650"},"modified":"2013-09-12T10:02:30","modified_gmt":"2013-09-12T14:02:30","slug":"wireless-competition-in-canada","status":"publish","type":"post","link":"https:\/\/mhgoldberg.com\/blog\/?p=6650","title":{"rendered":"The state of wireless competition"},"content":{"rendered":"

The University of Calgary School of Public Policy<\/a> released<\/a> an important paper<\/a> 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.” <\/p>\n

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.”<\/p>\n

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.<\/p><\/blockquote>\n

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.”<\/p>\n

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<\/a> provided a preview of some of the points that are expanded upon in today’s report.<\/p>\n

Although it is 50 pages, the report<\/a> 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.” <\/p>\n

\nThose who single out high ARPU as an indicator that something is wrong with prices \u2014 and therefore competition \u2014 are fundamentally misinformed about the meaning of ARPU and why it is high in Canada.<\/p><\/blockquote>\n

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 \u2014 that more competitors are better \u2014 which is simply inappropriate for services where there are important economies of network size, including economies of scale and scope.”<\/p>\n

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

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.<\/p><\/blockquote>\n

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.<\/p>\n

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. <\/p>\n

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<\/a>.” <\/p>\n

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? <\/p>\n

The University of Calgary School of Public Policy report<\/a> 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?<\/p>\n","protected":false},"excerpt":{"rendered":"

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 …<\/p>\n

The state of wireless competition<\/span> Read More »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","two_page_speed":[],"footnotes":""},"categories":[1],"tags":[],"class_list":["post-6650","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nThe state of wireless competition • Telecom Trends<\/title>\n<meta name=\"description\" content=\"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 • September 12, 2013\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/mhgoldberg.com\/blog\/?p=6650\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" 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