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Telecommunications: Ottawa should not intervene in the broadband Internet sector as it has in the wireless sector

Montreal, May 5, 2016 – The federal government and the CRTC should not repeat the mistakes of recent years by intervening in the broadband sector as they have in the wireless sector, argues the MEI in the 2016 edition of The State of Competition in Canada’s Telecommunications Industry, a Research Paper published today.

The Paper notes that 96% of Canadian households already had access to download speeds of 5 Mbps in 2014, with 77% of households subscribing to such a service, a trend that has shown strong growth in recent years.

“In this context, it is superfluous for the CRTC to try to duplicate what market players are already doing by imposing new regulations and taxing telecom company revenues to fund more broadband infrastructure rollout, as several groups suggested during the recent CRTC hearings,” explains Martin Masse, co-author of the publication and Senior Writer and Editor at the MEI.

“Soon, all Canadians will be able to connect to the Internet at very high speeds. And this is not because of any comprehensive national strategy devised by civil servants in Ottawa; it is because of competitive pressure on companies that need to adapt to consumer demand and attract more customers by offering faster broadband services at affordable prices,” adds Paul Beaudry, co-author of the Paper and Associate Researcher at the MEI.

As for the wireless market, the two analysts consider that this week’s proposed purchase of Manitoba Telecom Services (MTS) by BCE, accompanied by a transfer of one third of MTS customers and stores to Telus, is good news for Manitoba consumers. Even though the number of wireless providers falls from four to three, the province will now have three large, well-established players instead of just two. Indeed, MTS and Rogers currently dominate this market with approximately 84% of subscriber market share, while Bell and Telus only have a limited presence with infrastructure that is not up to date. The proposed transaction will help make both Bell and Telus major players in the Manitoba telecom market, and provide more choices to consumers. The authors believe it should be allowed to proceed.

With the election of a new federal government in 2015, now is the time to reassess its wireless policy and reconsider the need for constant intervention. Ottawa’s fourth-player policy, in place since 2008, was more beneficial to the shareholders of certain new players, who were able to secure windfalls by arbitraging their government-subsidized spectrum, than it was to Canadian consumers. Not to mention that a substantial share of this spectrum went underutilized, or simply unused, for several years as a result of these policies.

“Starting now, the new federal government should stop giving advantages to new players and revert back to its traditional practice of holding open (i.e., non-preferential) spectrum auctions,” says Martin Masse. “Canadian wireless service providers will need to make significant investments in the coming years to stay ahead of the technological curve, and returning to a regime of light-handed regulation would help create an environment conducive to innovation and investment.”

The 2016 edition of the Paper also presents international comparisons that refute the mistaken impression that Canadians pay a lot for poor quality services in relation to other industrialized countries.

The Research Paper entitled The State of Competition in Canada’s Telecommunications Industry – 2016 was prepared by Martin Masse and Paul Beaudry, respectively Senior Writer and Editor and Associate Researcher at the Montreal Economic Institute. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Pascale Déry, Senior Advisor, Communications and Development, MEI / Tel.: 514-273-0969 ext. 2233 / Cell.: 514-502-6757 / Email: pdery@iedm.org

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