Canada Decides That Canadian Ownership Is More Important Than Real Telco Competition

from the regulatory-failure dept

The biggest problem in the telco world is the lack of competition. Most of the worst abuses by various telecom providers is because there really isn’t enough competition to make it worthwhile to treat customers better. The best thing that governments can do to encourage better broadband/telco services is to encourage competition. Apparently, Canada has different priorities. A new mobile firm was set to open up shop in Canada, called Globalive. However, Canada apparently has some rules about how telcos need to have Canadian ownership. And while Globalive was originally judged to meet the criteria in bidding on spectrum, a different government bureaucracy has now said that it doesn’t meet the Canadian ownership requirements. In other words, to the Canadian government, having local ownership is more important than real competition. This is basically a form of protectionism that (like most forms of protectionism) ends up harming consumers.

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Comments on “Canada Decides That Canadian Ownership Is More Important Than Real Telco Competition”

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30 Comments
Anonymous Coward says:

Actually, this is one of those situations where the rules keep Canada from just becoming “US north”. It isn’t beneficial to Canadians as a whole to have large companies from outside come into the market, hire as few people as possible, and take all the income and profits offshore.

Canadian ownership requirements, and the indications that the profits, jobs, and benefits of them will stay in Canada is key. Is it protectionist? Yup. Does it work? Yup.

Mike says:

Re: Re:

Have you ever seen that episode of The Simpsons where the town of Springfield gets a ‘bear patrol’? That worked too – no bears were to be seen. Bell couldn’t take competition when it was a government-sanctioned monopoly for decades. After removing that restriction, we have better service at a much better price.

Yes technology has changed dramatically at the same time, but does anyone really think any monopoly would have delivered that technology as widely, quickly, cheaply, AND reliably? Of course, there’s still room for improvement in all those dimensions anyway.

The idea that Canadian telcos cannot compete with outside competitors should be a profound embarrassment to their CEOs. Of course, it isn’t, because they have no interest in competing for customers tomorrow that are relatively captive today.

Marc says:

Re: Re: Re:

So the Asper sons are morons. Bet the old man is rolling in his grave.

Changing current policy to regulate Open Access and Network Neutrality effectively will invite domestic entrants.

Until this happens – we’re better of getting gouged by BCE or Rogers than AT&T or Comcast. Not that either of these two fine American businesses would do this.

DS says:

Re: Re:

Just like the content laws huh?

Here’s a hint, if you do better then the ‘other guy’, you don’t need to make a law to keep the ‘other guy’ out.

Don’t want to become the 51st state? Do something yourselves. Make you own good music, your own good TV shows, your own good companies, and you don’t need a law.

CJG (profile) says:

Re: Re: Re:

You said:

Here’s a hint, if you do better then the ‘other guy’, you don’t need to make a law to keep the ‘other guy’ out.

I say – when the ‘other guy’ has 10 times the money, 10 times the market, and 10 times the lobbying, then why the hell would any investor bother to TRY? And we saw how THAT worked in the automotive industry, didn’t we?

I’ll keep my Canadian Content laws, thanks.

Anonymous Coward says:

Re: Re: Re:

And it’s ignorance like this that makes America the worlds joke…
We have plenty of good media out their, however, if we didn’t have our content laws it would never be seen. Many Canadian broadcasters get some sort of financial benefit for allowing the playing of American media. If they had their way they would only play it.

Derek Kerton (profile) says:

Re: Re: Re:

Guys, there’s a vast difference between CanCon laws and telecom ownership. The CanCon debate has valid points on both sides, and involves value judgments on subjective issues like culture. In contrast, the telecom issue involves economics and has little to do with the culture issue.

You want Canadian ownership of telcos? You want those profits to remain above the 49th? So, to be consistent, does Canada limit the cars it drives to Canadian cars? Do you limit the kitchen faucets to Canandian-made, or computers, or J-cloth, or clothing, food, steel, etc? For the most part…no. Canada plays in global markets. So why would you require all those local industries to compete without borders, but give the telcos a free pass?

Yes, Canada is a smaller market, about 1/10 of the US in size. OK, so it follows that this market, internally, cannot support enough market entrants to provide adequate competition for wireless telecom services. But if you allow foreign operators to enter the market, they WILL leverage their global scale to compete in Canada…much as the steel, clothing, car, food, and computer-makers do. But that’s a GOOD THING! That will result in cheaper goods/services for Canadians, increased pressure on local competitors who must either get better, get more efficient, or get out of the business.

And if you think that foreign telcos can easily kill the incumbents, forget it. It is FAR harder for new entrants to win in telecom than it is in the other industries I mentioned. Telecom depends heavily on installed plant – that is the buried cables, existing towers, spectrum rights, etc. that Rogers, TELUS, and Bell already have. They have already invested in capital plant, and amortized a great deal of it. They have tremendous advantages to fend off new foreign entrants…and yet they are still offered additional protection?

The net result is Canadian consumers suffer higher costs and worse service for the benefit of a few oligopolists.

I’ll disclose that even though I am speaking against the interests of telcos here, I make much of my income consulting for them. So, I’ll add: No offense to Bell, Rogers, and TELUS. They are behaving as expected. Companies respond to incentives, and seek to optimize shareholder value. Let them continue to do so, but let’s not let Ottawa block out their competition.

Chargone (profile) says:

most countries go a bit crazy at the prospect of large corporations from outside their borders taking control of stuff. especially US and Chinese corporations, at least here abouts.

there’s a tendancy for such entites to bring with them diplomatic pressure to change conditions in their favour, which can be a lot harder to resist than internal lobbying…

this isn’t Just about economics, ya know?

also, i’ll tell you something for nothing: Foreign ownership and free trade in New Zealand, that I’m aware of anyway, have repeatedly resulted not in lower prices, but in loss of jobs, lower service quality, and more and more of the profits being funneled out of the country.

i’ve got a whole pet rant on the subject actually 😀

so, yeah, you’ll have trouble getting any sympathy for anti-protectionist stances in countries that have to put up with the crap that comes from removing barriers to unimpeeded US corporate operations there, even in countries that Like the USA. [you can tell they like the USA because they do things like this rather than blowing stuff up :D]

Sigh says:

Re: Re:

Look it is not “socialized medicine”, it is “socialized insurance”.

Canadian doctors are nearly all independent businessmen who bill their services to a provincial insurance company that is owned by the citizens of that province.

Frankly, the way that most commercial insurance companies operate (“The We Never Pay Up Insurance Company”) they need to be socialized.

rollinginsanity says:

I don’t think there is any real problem with it. The problem becomes when the government sells off the government run/backed telco and it becomes privately/publicly held. After telstra (in aus) was sold by the government things went downhill. Our network fell apart, prices went up and they refused to share lines with other providers.

c says:

Amen

Without the foreign ownership limits, reality is that US companies would eat the Canadian companies for breakfast. That’s just economics… US companies just plain HAVE MORE MONEY.

Now, a takeover of a Canadian company isn’t necessarily a bad thing, but since we’re talking about telecom… would replacing the existing Canadian monopolies with the existing US monopolies really increase competition, or would it just give us new monopolies who’re less likely to give a hoot about Canadian customers and Canadian government regulation?

I don’t know. But, honestly, I see little evidence that leaving telecom to the free market has been such a great thing for the US.

c.

Rick Harris (profile) says:

Keeps Canadian jobs...

An Anonymous Coward said: “Canadian ownership requirements, and the indications that the profits, jobs, and benefits of them will stay in Canada is key. Is it protectionist? Yup. Does it work? Yup.”

The large telcos are sending a lot of IT jobs offshore. I know from first hand experience. I think you should do a little home work before making unsubstantiated claims. Canadian ownership of telcos does not protect Canadian jobs.
It protects Canadian shareholders and management. Yup.

Victor says:

The cellphone carriers do need some competition here, I will admit. However I would much prefer we had another Canadian owned and operated cellphone carrier here, to keep Canadian jobs.
The major problem is the networks, right now they are privately owned. The government needs to step in and take over the physical networks, so startup companies don’t have to pay bucketloads to bell or rogers to use their networks.

Also I use Rogers and have never had a single problem with their service or the fees on my bill, never any suprises it has been a great company to be with. Just thought I’d put that out to the naysayers.

Anonymous Coward says:

Why are canadians not doing it by themselves?

At least in the case of broadband people could follow some good examples out there like the Greenlight initiative in Monticello, Minnesota 🙂

http://arstechnica.com/tech-policy/news/2009/10/want-50mbps-internet-in-your-town-threaten-to-roll-out-your-own.ars

I still feel that a town owned network is not ideal. I would like to see a real community private own network. The reasons are:

– You don’t need to wait for others to catter to your needs when you do it by yourself what others wouldn’t.

– You will actually have a say in how things are run.

– It does make others run for their money. Literally.

Governments and big telcos are cumbersome beasts an their are slow paced creatures. They will never deliver in time what the people need. So the people should take responsibility if possible, some governments don’t let others enter the market raising the bar so high that only the very wealthy can enter.

Anonymous Coward says:

“We have plenty of good media out their, however, if we didn’t have our content laws it would never be seen.”

because it sucks many large objects with great vigor.

American stations show ‘kids in the hall’ , ‘SCTV’ , and ‘canadian inuit porn’ without being required, because it draws viewers and makes money.
Airing regional content simply for the sake of having regional content is borderline retarded.

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