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Canada is reverting to its pre-1992 telecom conditions

Some Canadians will recall the early days of Canadian telecom, prior to the introduction of competition 2 1/2 decades ago. Telephone companies such as Bell and Telus were 100-per-cent monopolies, part of a national consortium.

In those days, a voice call from Toronto to Vancouver cost $1 a minute, under a guaranteed-rate-of-return regime provided to the consortium companies by Canadian regulators. In essence it was a utility, like the electric power providers.

The evolution from 100-per-cent monopoly to today's regime benefited Canadians tremendously. It brought the cost of that $1 call to a few pennies, owing to the entry of competitive companies such as CallNet, Unitel, Clearnet, Microcell and others.

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Most of those competitors are long gone, though, purchased by the dominant players. And the benefits of equal-access competition, introduced in 1992, have been eroded to the point where they are nearly gone, too.

The kind of benefits that were achieved in long-distance pricing were supposed to occur in the wireless market, too, but failed to materialize. Under various failed government policies to promote competition, the dominant carriers were allowed to prevent rivals from getting access to their networks at reasonable wholesale rates. Today, more than 90 per cent of the spectrum and revenues are held by the three former monopolies – Bell, Telus and Rogers.

This spring's deal between Manitoba Telecom Services and Bell parent BCE, which is still being reviewed in Ottawa, may well eliminate what was achieved over the past 25 years. Recent and current regulatory proceedings before the Canadian Radio-television and Telecommunications Commission concerning the wireless wholesale market and essential services threaten to further diminish competition.

We are rapidly reverting to the conditions that existed before 1992, the year that saw the opening of the incumbents' networks to resale and sharing. Since that time, most of the telecom/media infrastructure and content in Canada has devolved to being almost totally under the control of the dominant three incumbents. If this trend continues, it will be disastrous to the evolving e-economy. The three incumbents have the power to block competitive access.

The most urgently needed digital innovations for the Canadian economy are, therefore, controlled mostly by private interests, which are not always aligned with the public interest.

How did we get here?

Many readers are aware of the critical importance of a reliable, ubiquitous digital media infrastructure, open and accessible to competitive innovative digital services. Between 1985 and 1995, spectrum allocation, the essential lifeline to the deployment of networks, was allocated by Ottawa when needed to create competitive networks open to new digital services. Later, a decision was made to hold spectrum auctions and allow the incumbents to buy the small new entrants. This resulted, once again, in the concentration of most of the available spectrum in the hands of the three incumbents. (They were the only players with a 100-year head start in the infrastructure deployments necessary for building wireless networks.)

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This created an insurmountable barrier to entrepreneurial new entrants and does nothing to encourage existing service providers to launch new wireless services.

In addition, this concentration and control created a dependency on the part of public safety, health-care and security agencies, all of which must rely on these privately owned networks. Ubiquitous interoperability and high quality of service are essential, and are not to be entrusted to private monopoly providers.

We believe the BCE/MTS deal offers a unique opportunity for the federal government, the CRTC, competition regulators and all Canadians to review the monopolization and market power held in the hands of a few, and to prevent Canada's reversion to precompetition conditions. We need an in-depth review to prevent the setting of a harmful and irreversible precedent.

This review should address the innovative approach taken by other countries. The concept of a "spectrum commons" facilitates network development where it is needed without auctions, while ensuring open and equal access to existing and evolving wireless and fixed networks everywhere, by all, at regulated and fair rates.

Canada is at a serious risk of falling further behind its competitors if its digital-economy infrastructure continues to be controlled by shareholders' private interests.

It is elected government, devoted to the public interest, that is entrusted with ensuring equal and fair access to promote innovative participation by all. We must address this before it's too late.

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Mike Kedar is an independent international telecom entrepreneur and founder of Mobilexchange Ltd. Stéphane Gagnon is a professor of business technology management at the University of Quebec in Outaouais.

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