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Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)
Jeffrey Simpson (Brigitte Bouvier for The Globe and Mail)

Jeffrey Simpson

Why the Conservative won’t give up attacking the Big Three telcos Add to ...

Politics rules when perception becomes reality, as Canada’s Big Three telecommunications companies have discovered.

Bell, Rogers and Telus are whipping boys for the Harper government. Rather than being held up as Canadian corporate success stories that compete among themselves, invest hugely in technology and infrastructure, and provide service across a vast land – a plausible narrative – the government castigates them for high rates and targets them in advertising paid for with taxpayers’ money.

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Consider the contrast with, say, the oil industry. For oil, the Harper government will turn itself into a policy pretzel, delay greenhouse gas emission regulations almost sine die, send ministers to Washington, New York and Europe to defend the industry, tout bitumen oil as a job- and revenue-generator for all Canadians, and use tax dollars to run ads telling Canadians about the merits of the industry.

For all the government’s whipping-boy approach to the telcos, the government’s stated aim of introducing more competition into the industry has largely flopped.

Some of the smaller companies the government has favoured are either under court protection from creditors or in poor financial circumstances. Recently, the backers of Wind Mobile pulled out of a spectrum auction of the 700 megahertz frequency, another disappointment for the government.

The government’s rather desperate attempt last summer to lure Verizon to Canada in the name of more competition failed, and failed spectacularly. The Big Three telcos got so alarmed at the prospect of the U.S. behemoth arriving in Canada, under conditions they considered unfair, that they launched their own advertising assault on the government. That campaign put them on the government’s “enemies” list, where they remain.

The Big Three telcos, notwithstanding the government’s flailing and failing, have a public relations problem, which is why the vote-hungry Conservatives have targeted them. After all, 63 per cent of Canadians have a smart phone, and every owner likely has an opinion about his or her plan.

Too many consumers have had too many bad experiences with service calls, a problem the companies insist they are addressing although memories of bad service linger in any industry. Worse, there is a widespread perception that wireless rates are too high, even though the international evidence for this is decidedly mixed, including when comparing Canadian and U.S. rates.

Cross-country comparisons are very difficult. They depend on which packages are being compared over what period of time. Simple slogans – rates are cheaper, rates are higher – are just that: slogans. But the Conservatives believe that the perception of excessive rates is now political reality and are aiming therefore with all guns blazing at the Big Three, posing as the defender of consumers.

There is no evidence – as opposed to perception – that the Big Three dominate the Canadian market more than large companies elsewhere. The largest provider in Canada (Bell) has 34.4 per cent of the market, according to a study by Bank of America and Merrill Lynch of the global telecommunications industry. This compares to a 42.4 per cent average share for the largest provider in 27 advanced industrial countries. Put another way, 21 of 27 countries have one provider with a larger market share than Bell.

The largest two Canadian providers have a 62.4 per cent share compared to an average elsewhere of 71.9 per cent. The Big Three in Canada have 90.1 per cent of the market, compared to an average elsewhere of 93.3 per cent. The market share by the largest companies is bigger in Canada than in the U.S., but not by a large amount.

Given the international evidence, it was unlikely that the Canadian market was big enough for another large, national provider – certainly not if that provider had to build the kind of massive infrastructure the Big Three had already implanted across Canada.

Moreover, if Verizon had come to Canada, it could not have “bundled” wireless, cable/satellite and telephone, as can the Big Three. It would have likely targeted business, with little benefit to the ordinary consumers.

Having been repeatedly rebuffed, and having changed policy approaches several times without success, the Conservatives nonetheless won’t give up attacking the Big Three telcos. The next gambit will be to pass legislation on domestic roaming fees charged by the big companies.

The war goes on.

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