Ottawa’s Goal of Four Wireless Carriers a “Waste of Resources” Says Study

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Martin Masse and Paul Beaudry from the think tank Montreal Economic Institute has released a study on the state of wireless competition in Canada. A brief summary of their report is below:

To the detriment of consumers across the country, the federal government has been encouraging artificial competition in the telecommunications industry for the past seven years. Fixated on the goal of promoting the emergence of a fourth wireless carrier in each of Canada’s regional markets, the government has lost sight of the ultimate goal of promoting the development of a dynamic, efficient industry, according to this Research Paper.

The Globe and Mail says the study’s authors believe Canadians are better off with the ‘Big 3’ controlling wireless instead of a fragmented market consisting of smaller and “feeble” competitors offering plans that are close to break-even pricing:

“It may be preferable for financial resources … to be concentrated in the hands of a few strong players willing to invest in new technologies and services rather than scattered among several small and feeble competitors trying to survive by selling at prices barely above marginal costs,”

Beaudry is a competition lawyer at Stikeman Elliott in Montreal and told the Globe in an interview Ottawa has wasted valuable spectrum by selling it to inefficient, unprofitable players that have failed to deliver better service to the country:

“We all want lower prices, but if the way we get to lower prices is through artificial competition, that has adverse effects on innovation [and] the deployment of newer technologies,”

Jake Enwright, Industry Minister James Moore’s press secretary, didn’t respond to the study but reiterated average wireless rates have dropped 20 per cent compared to six years ago, saying “Canadian wireless consumers know that competition is good for everyone.”

Masse and Beaudry say Ottawa should adopt numerous measures to better wireless competition in Canada, specifically opening up the industry “completely to foreign investors, and liberalize its spectrum license transfer policy,” referring to Industry Canada shutting down multiple Telus bids for Mobilicity.

What do you think? Do you agree Canadians are better off having its wireless sector controlled by a few companies as echoed by this think tank?

Founder and Editor-in-Chief of iPhoneinCanada.ca. Follow me on Twitter, and @iPhoneinCanada, and on Google+.

  • kkritsilas

    I am just going to state the obvious: how do you encourage competition by allowing the Big 3 to own the entire market? This was the case before the 1700 MHz spectrum auction in 2007, and we had the highest cell phone rates on the planet. The 1700 MHz auction brought out a few new entrants (Wind, Mobilicity, Videotron, and Public, chiefly). Two of those entrants are gone, some of the reasons being internal (in Public’s case, as their whole business plan was brain dead from the start), some external (as in the Big 3 launching flanker brands, Gov’t not enforcing the spirit of the tower sharing rules, and other reasons). Note, however, that two of those new entrants (Videotron and Wind (and Wind is stlightly profitable) are profitable). How does this fit in with the “….smaller and “feeble” competitors….” that the study talks about. If there is a merger of Wind and Videotron in the future, as I am thinking that there will be, this new carrier will be not only a strong competitor financially, it will most likely bring Quebec type plans to the rest of Canada (as in the $60-$75 unlimited everything across the board type plans that are available in Quebec).

    However, the 20% decrease in rates has been directly due ot the impact of these new entrants. There certainly wasn’t much by way of cell phone rate reductions prior to the new entrants coming into being.

    From the article and study:
    “……..
    Beaudry is a competition lawyer at Stikeman Elliott in Montreal and told the Globe
    in an interview Ottawa has wasted valuable spectrum by selling it to
    inefficient, unprofitable players that have failed to deliver better
    service to the country”

    “We all want lower prices, but if the way we get to lower
    prices is through artificial competition, that has adverse effects on
    innovation [and] the deployment of newer technologies,”

    A couple of points:

    1. If he is talking about the Big 3 as being inefficient, I am in agreement. However, if he is talking about the new entrants, I would say that he is wrong in every possible way. The reasons for the new entrants not being profitable has as much to do with the gov’t not enforcing their own policies and limiting the ability of the new entrants to compete by limiting them to only the relatively undesired 1700 (or AWS spectrum). Why, in 2007, or this year’s 700MHz spectrum, didn’t the gov’t take back the unused 850 spectrum that the Big 3 own but don’t use, and offer it up for auction? Why, again, did they not do this when they are continually bombarding us with messages regarding spectrum concentration did they not take back any unused spectrum being used by the Big 3?

    2. As for statement “…..that has adverse effects on innovation [and] the deployment of newer technologies,”, that is an absolute load of crap. Nothing kinder to say about that. Please, OH Holy Competition Lawyer, point to one thing that the Big 3 have done, in the entire history of the Cell phone market’s existence, have been innovative about. Point out to me where the Big 3 have deployed to any location in all of Canada where the Big 3 have deployed service just to provide service, as opposed to fattening up their bottom lines.

    The entire premise of this is flawed. It takes the approach that the Big 3 are in competition with one another, and that the gov’t maneuvers to encourage further competition would be counter productive. And in all honesty, IF the Big 3 were actively competing with each other, he would have a point. It has however, been abundantly clear that the Big 3 DO NOT compete with each other in any way. As a so-called compeitition lawyer (what in the name of sweet heaven is a “competition lawyer? in the first place? Competition is normally judged on economic factors, not legal ones ), he should have been able to recognize that the Big 3 are not acting as competitors. To suggest that they now have complete control of the market in order to make things better (as defined by cell phone rates being inline with world averages, and having coverage areas over 90% of the geographical area of Canada, vs. 90% of the population) defies all logic. And when I see logic disregarded in such a fashion, I can only conclude that this report must have had some funding from the Big 3. There is no way that an unbiased report could come to such a conclusion.

    Kostas

  • mcfilmmakers

    Problem is the big 3 are unwilling to invest in infrastructure. If they were, they’d stop developing cable and start offering gigabit connections at $45.

  • TSK

    I would rather use WInd than the Big 3. Their costs are now $80+ for voice and small amount of data. Wind outdoes that starting at $35 for unlimited data + voice. The big 3 don’t even come close to this.