It’s good that governments are concerned about citizens’ purchasing power, as long as they know how to address the issue. Decreeing price cuts is the worst approach. Yet this is just what the federal government is doing by threatening to regulate cellphone operators’ prices if they don’t lower them by another 25%, thus keeping an electoral promise.
Applying the program for which one is elected is all well and good, but electors never agree with all of a candidate’s platform. They know that elections favour demagogic one-upmanship and don’t necessarily begrudge an enlightened government reneging on an electoral promise in the public interest.
We all want to improve our lives. The marvel of the division of labour is that while we work for income, others create ever better and less expensive products and services for us to buy. Prices are a function of the relative desirability and scarcity of products, and competition ensures their gradual reduction toward a minimal level. The prices of mobile phone services thus fell by an average of 28% between 2016 and 2018.
When the government arbitrarily imposes a maximum price, either it’s above the market price and the control is ineffective, or it’s below it and creates a shortage. If competition continues to encourage prices to fall by at least 25%, the governmental decree is futile. Otherwise, operators will reduce supply and develop themselves less quickly than planned.
Canadians enjoy one of the best services in the world despite the high cost of covering a territory with low population density. Prices have not discouraged the adoption or the use of telecommunications services, as Canadians are among the biggest users in the world.
At a time when billions of dollars of technological investments are again needed, a mandatory price decrease disconnected from the efforts imposed by competition runs the risk of seeing the industry lose ground, for which consumers will pay the price.