New spectrum auction in Canada: Government is trying to solve a nonexistent problem, say MEI authors

Montreal, Monday July 7, 2014 – The latest attempt by the Canadian government to encourage the deployment of a fourth national wireless player is wrongheaded and based on a faulty analysis of the situation, according to the authors of the paper “The State of Competition in Canada’s Telecommunications Industry – 2014.”

The minister of Industry, James Moore, announced this morning that a new spectrum auction will take place in the next few months with 60% of the frequencies set aside for new players.

“The government has been saying for years that Canadians pay some of the highest rates and don’t have the choice and quality of services that are available to consumers in other industrialized countries. The available international data show that this is actually not true. The government is trying to solve a nonexistent problem,” notes Martin Masse, one of the coauthors.

The study, published in May by the Montreal Economic Institute, showed that Canadians are among the biggest consumers of telecommunications services in the world, which is an indication that they enjoy competitive, quality services. Another noteworthy positive point is that the penetration rates of the latest wireless technologies are also among the highest for industrialized countries.

The study reviewed the long series of policy interventions instigated by the government since 2008 to increase the number of players in the Canadian wireless market, of which today’s announcement is only the latest. The only concrete result of these interventions is that billions of dollars have been invested in failed businesses.

The study concluded that although governments and regulators might help increase the number of competitors through regulatory measures, they cannot bring about real and sustainable competition beyond what the market can support.

“Artificially sustaining small new players and hampering the growth of larger ones does not lead to more sustainable competition. On the contrary, it leads to a waste of resources and delays the use of spectrum at a time when companies need more and more of it to meet growing consumer demand,” says Paul Beaudry, also coauthor.

The study is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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