Regulatory uncertainty could hurt innovation: experts

TORONTO — Ongoing interventions by Industry Canada, the Competition Bureau and the CRTC into Canada’s wireless industry are likely to harm future investments by telecom companies, Brookings Institute economist Robert Crandall told an audience at the Canadian Telecom Summit on Monday. Crandall was one of four presenters at a panel on competition in telecom, in which few kind words were spoken about the government’s attempts to encourage wireless competition. Crandall said that, as opposed to the mostly settled rules in the United States, Canada has many areas of telecom policy where uncertainty reigns, including spectrum allocation, wholesale wireless deals and foreign ownership limitations. “Going forward, I would think all this policy uncertainty would have a bad effect on the needed investment for LTE and other technology,” he said. Crandall said forcing wireless infrastructure owners to open up their networks to competitors as is being done in the European Union — one of the models the CRTC is studying in its wholesale wireless review — is a bad idea that ends up with “more sellers offering existing services at lower prices” but “sharply discourages network investment” in next-generation technologies. Georgetown University economics professor John Mayo told the audience at the panel that Canada’s government was going about regulation the wrong way. “The very best clear-eyed policies are built on simple foundations,” he said. “Competition should be based on real metrics, not high-level theories.” While proving how competitive a business sector is can be next to impossible, Mayo said the prices, choices and adoption rate of technologies such as LTE in Canada give ample evidence that there is robust competition between wireless providers. “The reality is markets are imperfect and governments are imperfect,” he said. “They must understand costs of intervention as well as the benefits.” Queen’s University economics professor Roger Ware said that intervention in support of building a fourth wireless carrier in every region, as the government has promised to do, is at odds with foreign comparisons, where three carriers is usually the norm. “Such intervention is likely to do more harm than good,” he said. “Forcing entry into an oligopolistic industry will lower prices in the short run but there is no evidence to show it will change the structure in the long run or lower prices for consumers.” Concentration, he said, isn’t necessarily a bad thing and doesn’t inevitably lead to higher prices. Ware noted that the abuse of power, as described in the Competition Act, is separate from simply having market power, which is inevitable in any industry that has significant barriers to entry and large capital costs. He said there is a role for regulators in the wireless sector to fight against abuse of market power, noting the wholesale market as an area that had a clear need for regulation. Leonard Waverman, who heads the DeGroote School of Business at McMaster University, stated flatly that the government’s pursuit of a fourth national carrier in every region is “not going to happen” and that there has been “much wasted effort and economic losses in encouraging entry.” Waverman pointed to the government’s 2008 AWS auction, in which portions of the spectrum were set aside for new entrants, and its blocking of multiple attempts by Telus Corp. to purchase struggling carrier Mobilicity as examples of these misguided efforts by Ottawa. “Everything that they’re doing is ensuring there will never be a fourth national wireless carrier,” he said. Waverman also criticized the big incumbent telecom companies for making collaboration with the government difficult, doing themselves no favours by running ads explicitly criticizing the government’s wireless policies in 2013. “The incumbents’ war with the government certainly hasn’t been helpful,” he said. — With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Regulatory uncertainty could hurt innovation: experts

News | June 16, 2014

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Regulatory uncertainty could hurt innovation: experts

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