Canadian consumers need real and sustainable telecom competition. Although this has been a political slogan for more than a decade and a half it has never really materialized. Despite the rhetoric from the major political parties, Canadians are still largely stuck with the same players in the industry, and fewer choices and higher prices as a result.
Take cell phone plans for instance. Although there are various arguments and claims about prices, evidence generally shows that Canada is one of the more expensive jurisdictions in the world. According to a report compiled by HelloSafe, we find ourselves in the top 10 in terms of cost per one gigabyte of mobile data at $7.36. In comparison, Australia, by contrast, has an average cost-per-gigabyte of just $0.60. Similar data published by a different company, Rewheel, reinforces that Canadians generally pay more compared to several peer jurisdictions.
This pattern holds across nearly every category of cell phone plans—according to a 2021 report paid for by Innovation, Science and Economic Development Canada—and other areas like broadband services, and even web visits or download costs.
While some of these price differences are no doubt a consequence of Canada’s economic geography—namely, our large landmass and low population density—it doesn’t mean that we should just throw our hands up in the air.
We know from a large body of evidence that the best means to put downward pressure on prices is more competition. Successive governments have sought to induce greater competition in the telecommunications sector but they’ve been reluctant to fully open up the market.
This is a key policy omission because 90 percent of the Canadian population lives within 200 kilometres of the U.S. Yet we treat the border as a hard border when it comes to the telecommunications sector. Canadian consumers are the losers.
Why shouldn’t a company offering services in Seattle be able to offer those in Vancouver the same deals? Or companies in New York state servicing those in southern Ontario, Canada’s most populous region?
Arbitrary foreign ownership restrictions increasingly make no sense. In fact, some popular websites that compare plans already promote U.S. plans that include data, talk, and text anywhere in North America. There are entireReddit threads on the topic, highlighting the savings by going this route, with the one downside being that those who do this end up having an American phone number. Now, imagine a scenario where rather than trying to game the system with an American plan, Canadians could simply buy a Canadian plan from a U.S. provider.
As already pointed out in this series by Sean Speer, changing the foreign ownership rules for telecom companies operating in Canada doesn’t mean that the sector would be open to the world regardless of the consequences. In a scenario where the legislative restrictions were repealed, any transactions would still be subject to national security reviews. Foreign companies like Huawei for instance wouldn’t be permitted into the market by default.
It would, however, mean that companies from allied nations—including the United States—would be free to enter the market if they see an opportunity to compete and grow. The close proximity of most Canadians to the U.S. suggests that it would be worth considering for major American firms.
Now, as with any move to liberalize, some Canadians will worry that removing foreign ownership restrictions will ultimately mean that existing players in Canada will cease to exist and be run out of town by larger international companies. This view misses the mark for a couple of reasons.
The first is that removing foreign ownership restrictions allows for existing players in Canada to solicit capital from abroad, something that is significantly limited under our current regulatory structure. And, if the easing of restrictions were reciprocated, for example by the United States, there would be nothing stopping Canadian companies from entering the U.S. market. We’ve seen this trend before in other sectors and the naysayers were largely proven wrong.
When NAFTA was negotiated, we ended our protections for Ontario wines. At the time, the doomsdayers forecasted that it would be the end of the industry. Anyone who has been to the Niagara region knows that nothing could be further from the truth. At the end of the day, we allowed Canadian producers to stand on their own two feet, and we trusted consumers to make their buying decisions accordingly.
There is no magic formula for how many telecom companies Canada should have, but there is a mechanism to sort all of that out. Moving to a regulatory system that is more market-driven than mandate-driven is the best path to answering that question, and ultimately giving Canadians a better deal. One that they desperately deserve.
Originally published here
