Ottawa's "interventionist policies" in the wireless industry – including the pursuit of four wireless players in every market – are "wasteful" and counterproductive in a sparsely populated country such as Canada, a new study by the Montreal Economic Institute says.
While economic theory suggests that more competition always benefits the consumer, that may not be true in Canada's telecom industry, where concentration in the hands of BCE, Rogers and Telus is good for customers, argue authors Martin Masse and Paul Beaudry in a 60-page report released Tuesday.
"It may be preferable for financial resources … to be concentrated in the hands of a few strong players willing to invest in new technologies and services rather than scattered among several small and feeble competitors trying to survive by selling at prices barely above marginal costs," the report said.
MEI officials acknowledged that telecom companies are among the institute's paid members. But they said they conducted their work independently and no outside groups approved or reviewed the report.
In an interview, Mr. Beaudry, a competition lawyer at Stikeman Elliott in Montreal, said the government has wasted valuable wireless spectrum by selling it to inefficient, money-losing players, without delivering better serviceto Canadians.
"We all want lower prices, but if the way we get to lower prices is through artificial competition, that has adverse effects on innovation [and] the deployment of newer technologies," added Mr. Masse, MEI's senior writer and editor.
The report is a stinging indictment of the government's efforts to engineer more competition in the telecom industry, including the failed effort to woo Verizon Communications to Canada, the blocked sale of Mobilicity to Telus and the decision to set aside spectrum for new entrants.
Industry Minister James Moore did not respond directly to the report. But Jake Enwright, his press secretary, pointed out that average wireless rates are down 20 per cent since 2008. "Canadian wireless consumers know that competition is good for everyone," he said.
The report points out that Canada is hardly unique among developed countries in having just three national wireless carriers, saying Canadians enjoy "one of the most advanced telecommunications networks in the world," while generally paying prices that are "about average" compared to other industrialized countries.
The study said efforts to foster competition have failed.
"Instead of micromanaging competition . . . the government should remove the barriers that prevent real, dynamic competition from taking place."
The government, it added, has "lost sight of the ultimate goal of promoting the development of a dynamic, efficient industry."
For example, Ottawa should drop all remaining foreign ownership restrictions, including in broadcasting, as well as allow the transfer of existing wireless spectrum licenses, the authors said. Even the threat that a major foreign player entering Canada would lead to better service, Mr. Masse said.
The government should also "gradually abandon" so-called mandatory access policies, which allow new entrants to piggy-back on the networks of established players at favourable rates.