Last year featured a high-stakes battle between two protagonists over the issue of a fourth wireless carrier in Canada. On one side was the federal government, seeking to ease a fourth mobile carrier through spectrum policy and any other means at its disposal. On the other side, Bell, Rogers, and Telus. The issue? Who should govern the allocation of resources in the provision of wireless services in Canada? Should prices, quality, availability, and other terms of service — be determined by the market, or should the government intervene? The answer to these questions should depend on the extent of competition. A report released last year by economists Jeffrey Church and Andrew Wilkins at The School of Public Policy argued that the three wireless providers were, in fact, competitive, had not raised prices above the long-run costs of providing services and had not exercised harmful market power. Needless to say, the federal government disagreed.
The government fired back with research of their own, commissioned by the Competition Bureau, that made counter arguments in the defense of the need for a fourth carrier and the exercise of market power by the wireless carriers. Today, Church and Wilkins released a follow-up paper on this issue. The paper re-affirms the authors’ previous findings that the market has, in fact, worked when it comes to mobile wireless competition in Canada and the government should not be using government policy to try to force a fourth carrier in Canada.
Today’s report challenges many of the findings of the report commissioned by the Competition Bureau and its submissions on competition in wireless markets to the Canadian Radio-television and Telecommunications Commission. It argues “that the expert evidence ready for the Competition Bureau is simply insufficient to call for regulation and subsidization of wireless competition. The expert evidence findings on market power are small, as well as not robust, and it does not address whether entry is efficient. Instead it provides only an estimate of the competitive benefits of a fourth national entrant — not its costs — and it does not assess the financial viability of a fourth national competitor. The inaccuracies of the methodology used cast much doubt on its use to accurately forecast the effect of a fourth national entrant,” said Jeffrey Church today.
“Given the absence of compelling evidence demonstrating the real exercise of inefficient market power, the evidence that having more than three carriers raises concerns regarding financial viability without ongoing subsidization, and the evidence that an additional carrier would be inefficient, one wonders how long the federal government and its agencies will continue the policy of attempting to “enhance competition” in wireless markets? What will be the final cost to Canadians of the federal government’s commitment to the proposition that competition is measured by the number of competitors?” asked Church.