MONTREAL – The federal government and CRTC should allow “competitive pressure” to spur the telecommunications industry’s investments in new broadband infrastructure, and not repeat the “mistakes" caused by intervening in the wireless sector, says a new report released Thursday by the Montreal Economic Institute (MEI).
“Critics who note that access to high-speed Internet is limited in some regions of Canada, or among less advantaged socioeconomic groups, invariably conclude that government intervention will be necessary to close the gap, but what they consider a market failure is actually just the normal course of technology adoption”, reads the 2016 edition of The State of Competition in Canada’s Telecommunications Industry. “The major difference today is that new information technologies reach a critical mass and become widely accessible to all not in a matter of decades, but in a matter of years.”
The research paper notes that 96% of Canadian households already had access to download speeds of 5 Mbps in 2014, with 77% of households subscribing to such a service, a trend that has shown strong growth in recent years.
“In this context, it is superfluous for the CRTC to try to duplicate what market players are already doing by imposing new regulations and taxing telecom company revenues to fund more broadband infrastructure rollout, as several groups suggested during the recent CRTC hearings,” said co-author Martin Masse, in the study’s news release.
“Soon, all Canadians will be able to connect to the Internet at very high speeds. And this is not because of any comprehensive national strategy devised by civil servants in Ottawa; it is because of competitive pressure on companies that need to adapt to consumer demand and attract more customers by offering faster broadband services at affordable prices,” added co-author Paul Beaudry.
The paper cites the decline in roaming rates as an example of the efficiency of markets, an event that has occurred not primarily because of the Wireless Code, as the CRTC claims, but because consumers asked for it and carriers saw an opportunity to solve "a major irritant" and to attract new customers.
The research also provides international comparisons that refute the impression that Canadians over pay for poor quality services in relation to other industrialized countries. Penetration and usage rates for newer wireless technologies like tablets, smartphones and LTE connections in Canada are among the highest for industrialized countries, continues the report. While the prices Canadians pay for wireless services remain generally higher than in Europe, they are lower than those in the United States or Japan.
Both authors offered their support of BCE’s proposed acquisition of MTS, accompanied by the transfer of one third of clients and stores to Telus. “Even though the number of wireless providers falls from four to three, (Manitoba) will now have three large, well-established players instead of just two”, continues the release. “Indeed, MTS and Rogers currently dominate this market with one half and one third of clients, respectively. Bell and Telus are two small providers with infrastructure that is not up to date. The transaction will make both of them major players, which will lead to increased competition.”
The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization that aims to stimulate debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
