The federal government should apply the same rules to both domestic and foreign telecom firms if it wants to provide Canadian consumers with more choice and competition in the wireless market, according to a Fraser Institute study published today (August 26).
In An Assessment of Spectrum Auction Rules and Competition Policy, author Steven Globerman also argues that it would be beneficial to the Canadian marketplace if the government were to remove restriction on foreign ownership.
"The goal of achieving and maintaining a competitive market is not the same as having a minimum number of competing firms," said Globerman, a Fraser Institute senior fellow and Kaiser professor of international business at Western Washington University.
"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."
Competition in the telecom market is a hot topic as the federal government currently has rules limiting the bids of each of the three largest Canadian telecom companies – Telus, Bell and Rogers – to one block of wireless spectrum in an upcoming spectrum auction. New entrants – including U.S. giant Verizon – are entitled to bid on two blocks in the January 2014 auction.
Globerman argues that putting the existing wireless companies at a disadvantage compared with new entrants is not a guarantee that the consumer will be better off.
He also recommends removing a 10% restriction on foreign ownership of Canadian telecoms, broadcasting and cable companies, which would increase competition as more foreign investors could enter the market on a larger scale through mergers and acquisitions.
"Just the threat of a takeover gives companies a greater incentive to provide customers with better pricing and service," Globerman said.
Telus, Bell and Rogers have been vocal in their opposition to the government's stance on the issue, which they say provides an unfair advantage to Verizon.
