The wireless industry in Canada may not be as uncompetitive as publicly perceived, according to a new study by the School of Public Policy at the University of Calgary.
The study compared the wireless industries in countries worldwide and assessed competition, sustainability and the effect of new entrants into the sector.
The results of the study show that wireless prices in Canada are difficult to compare with those internationally because Canadians use their mobile devices differently, favouring monthly plans over pay-as-you-go services, and with fast networks that encourage smartphone use.
“This incorrectly leads to the conclusion that Canadians are paying more, when in fact they are demanding more in terms of mobile services,” the report states.
The study also found that profits for the large wireless companies in Canada are not high compared with those in other companies around the world when fixed costs and infrastructure are taken into consideration.
Report authors Jeffrey Church and Andrew Wilkins also state that efforts by the government to entice carriers to enter the Canadian marketplace may be “misguided.”
“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,” the authors argue.
“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.”
The study results are consistent with arguments telecom giant Telus (TSX:T) has been making in response to criticism of the state of the wireless sector in Canada.
