The Fraser Institute says Ottawa’s rules handicap Bell, Rogers and Telus. Government should open telco ownership to all and control things through the Competition Bureau
Opponents to the federal government’s wireless telecom policy have gained support from a conservative think tank that agrees Ottawa’s rules for the upcoming 700 MHz spectrum auction handicap the country’s three biggest carriers.
Bell, Rogers and Telus have mounted an intensive public campaign complaining that while the auction rules are aimed at increasing competition they unintentionally give huge international carriers like Verizon Communications — which is bigger than the three combined — an advantage over them, particularly if they buy Wind Mobile or Mobilicity.
The government says it has thought carefully about the rules it set up and any advantage a foreign company gets isn’t unintentional. Bell, Rogers and Telus control about 90 per cent of the market, it points out, and own over 80 per cent of the spectrum Ottawa has given out or sold.
Meanwhile Mobilicity is struggling financially and Wind’s prime investor, Amsterdam-based VimpleCom Ltd., is looking to sell the Canadian unit.
Until last year, foreign companies could only buy just under 50 per cent of Canadian-controlled carriers. In an effort to improve the ability of smaller carriers to get investment, the Harper government changed the rules to allow carriers with less than 10 per cent of the market to be completely bought by a foreign company.
“Relaxing foreign ownership limitations would allow for new entrants to better compete with Canada’s big three telecoms,” said report author Steven Globerman, a institute senior fellow who has done consulting reports for Industry Canada and the Canadian Radio-television and Telecommunications Commission (CRTC).
“Bell, Rogers and Telus have shifted their historical behaviour in response to the competitive challenges of the new market entrants (Wind and others),” Grant argues.
Eliminating the telecom ownership rule isn’t a new idea. In 2003 the House of Commons industry, science and technology committee recommended it, but the heritage committee opposed restrictions being lifted on content creators like broadcasters.
Ottawa has been sensitive to fostering competition in the cellular business because of the dominance of Bell, Rogers and Telus. There were more, but in 2000 Telus bought Clearnet Communications — which made it a national carrier — while in 2004 Rogers bought Microcell and its Fido brand.
In his report Globerman cites recently released studies for Industry Canada and the Organization for Economic Co-operation and Development (OECD) that Canada has a “workably competitive” cellular market.
The issue isn’t whether more competition is needed, he argues, but how the government does it. In his opinion Ottawa is promoting new competitors while handicapping incumbents.
Because there is “conclusive evidence” the industry is competitive, he added, there is no need for spectrum auction caps.
“There is a danger of promoting inefficient competition which makes most consumers worse off rather than better off. If there are gains at the margin from competitive entry and expansion, it is preferable to allow market incentives to encourage such entry and expansion,”