Liberalization of Markets

The CRTC needs to get out of the way

A recent CRTC decision would force companies that build telecom infrastructure to rent it out to rivals below cost. No surprise, then, that this decision is getting some pushback, with companies obtaining an order from the Federal Court of Appeal to suspend it while the case is before the court.

As the main issue is affordability it is worth remembering that prices here are relatively high because Canada has a spread-out user base, in part because of official encouragement to extend services to the remote North. Meanwhile, Canadians enjoy and expect world-class performance — Canada ranks sixth in the world according to Ookla in terms of mobile download speeds — that requires billions of dollars in new investment every year. Between 2010 and 2016 Canadian companies invested on average $78 per connection, nearly double the average of $40 in Europe.

The CRTC’s misguided attacks risk gutting this world-class system. Why would companies spend billions of dollars every year building networks only to have to rent them at a loss? Without steady new investment, Canadians might quickly lose their world-class speeds and be stuck with an increasingly outdated network that would come to feel like an old 56k modem would today.

Unfortunately, such ill-advised mandates in telecommunications are nothing new. Over the past 20 years, regulators have restricted competition while failing to benefit Canadian consumers. It was cable providers that finally entered as competitors in telecom services, increasing customer choice — not because of the regulatory landscape but in spite of it. Now the CRTC is stepping in to limit potential competition by once again commandeering profits.

The common thread in our telecoms history is that short-sighted regulators fail to understand how dynamic industries can be when competition is simply allowed to happen. Regulators tend to see industries as set in stone — which risks actually setting them in stone. Regulations that may have been intended to benefit consumers become straitjackets to new entrepreneurs. Ironically, it is these potential challengers who hope to disrupt those industries precisely by benefiting consumers. Regulatory guidance thus becomes regulatory stasis.

The advent of mobile phones was itself delayed by decades because regulators wouldn’t approve bandwidth for such a “niche” product. Instead, those same regulators laid endless mandates on monopoly landlines. They bullied the supposed monopolist even while they banned his competition. Consumers suffered on both counts.

This pattern still holds, as new telecom providers — satellite, mobile, and cable — are champing at the bit to provide internet and voice service to customers. Alas, to be really competitive, new providers would need to spend tens of billions building out networks — precisely the networks the CRTC seems bent on rendering worthless.

The best contribution the CRTC can make to Canadian consumers would be to develop a little humility about what it can and can’t do. Just as regulators in the 1950s couldn’t imagine mobile phones for the masses, today’s CRTC can’t imagine tomorrow’s innovations. It needs to get out of the way and let telecoms be “regulated” just like any other industry.

This means removing telecom-specific mandates and the enormous compliance costs they involve. That includes rolling back mandatory sharing policies, so that new infrastructure is actually incentivized, bringing new competition across the industry. Providers also need to be allowed to offer custom commercial deals to consumers, like the popular zero-rating policies that used to offer free traffic to select sites. After all, customers can decide for themselves whether or not they want a deal even if a regulator may not be able to see the benefit.

As Canadians spend more of their time and money on smartphones, it becomes increasingly important to get telecom competition right. With high-speed 5G mobile on the horizon, this is hardly the time to gut incentives for new infrastructure that can actually bring competition to the industry while delivering goods and services to Canadians that they can’t even imagine today.

Gaël Campan is a Senior Associate Researcher at the MEI and the author of “Permissionless Innovation: For an End to the Presumption of Regulation in Telecommunications.” The views reflected in this op-ed are his own.

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