VANCOUVER – A new report from The Fraser Institute this morning says that Ottawa will only achieve its stated goal of providing Canadians with more choice and competition in the wireless marketplace if it removes restrictions on foreign ownership of telecommunication companies.
“The goal of achieving and maintaining a competitive market is not the same as having a minimum number of competing firms,” said Steven Globerman, Fraser Institute senior fellow and Kaiser Professor of International Business at Western Washington University, in the official press release. “By setting up rules that handicap the three large Canadian telecoms and favour small or new players in the marketplace, the federal government is effectively subsidizing new entrants and promoting inefficient competition. This could make most consumers worse off, rather than better off.”
This is the argument many – led by the big three incumbent telecommunications firms Telus, Bell and Rogers – have been making over the past number of weeks. Rogers CEO Nadir Mohamed talked with Cartt.ca about this on Thursday. As most now know, the federal government has limited each of the three Canadian firms to bidding on only one of four available blocks of wireless spectrum while setting aside two blocks for smaller firms or new entrants.
Globerman, an expert on trade and investment and a former consultant to Industry Canada and the CRTC, says the Fraser release, concludes the existing Canadian wireless marketplace is competitive. An attempt to entice a fourth major telecom to enter the Canadian market by imposing rules and regulations that disadvantage the existing three large domestic firms will not necessarily improve things, he says in his report: An Assessment of Spectrum Auction Rules and Competition Policy.
He recommends removing the 10% restriction on foreign ownership of Canadian telecom, broadcasting, and cable companies to allow foreign investors to enter Canada on a larger scale through mergers and acquisitions, rather than as a startup or a the purchase of a much smaller firm. According to Globerman, such a move would increase competition and provide tangible incentives for wireless companies to improve service and pricing for Canadian consumers.
“Relaxing foreign ownership limitations would allow for new entrants to better compete with Canada’s big three telecoms,” Globerman said. “Just the threat of a takeover gives companies a greater incentive to provide customers with better pricing and service.”
Anti-competitive behaviour by large established wireless carriers could be dealt with through the existing Competition Act, says the report, which is better suited for dealing with resulting mergers or acquisitions that may arise from removing foreign ownership restrictions. This would also eliminate the temptation of governments to arbitrarily impose other regulatory prohibitions on spectrum acquisition or other assets, reads the release.
“There are more efficient ways to bring additional competition to Canada’s wireless market that don’t require unfairly handicapping the existing large Canadian telecom firms,” Globerman said. “If the Canadian government is willing to rely upon market competition to maximize the consumer benefits of wireless telecommunications, it could do so immediately by lifting foreign investment restrictions.”
