Home > Digital Policy, Economics, Politics, Telecommunications > Why The Government Will Only Make Cosmetic Changes To Telecom

Why The Government Will Only Make Cosmetic Changes To Telecom

When I think about our telecom industry in Canada it reminds me of slimy grease haired used car sales men/women who will say anything under the sun to sell you that lemon on the lot and get their commission.  It makes me personally and a lot of would be investors sick.

I’ve done a lot of research over the years on how our economy works due to what has been taken place in the digital revolution.  Essentially what happens is that our economy goes through cycles.  When monopolies get too big, there’s usually some kind of technological innovation that comes along and basically dismantles the monopolies and makes innovation cheaper.  At the time of the cheap cost of innovation, we have an influx of start ups, and new jobs are created by doing things a new way.  There is also an explosion of  new technologies and innovations that occur during this time. Then these start ups start to become bigger as the market adapts, and some are weeded out by the markets, some are bought by competitors, and soon enough new monopolies are born by the new start ups, and the cycle repeats. This is how capitalist markets work.  When you have an artificial monopoly, you need to artificially create that environment if the motive is to bring in lower prices for a while, and create more competition.

Here are the issues around foreign investment in Canadian telecom.  If we are to follow free market principles, the government is worried about letting some foreign company owned or at a later date nationalized by another government climb to the top, become a monopoly in the Canadian market and essentially take over our network infrastructure.  That essentially gives a bargaining chip politically to countries who want to influence or sway political beliefs or our national security. Right or wrong, that’s the thinking behind foreign investment regulations.

There has been a lot of debate recently around foreign investment rules, and a 4th player.  Simply creating a 4th player in our current artificial monopoly of our telecom sector only adds one more to the big boys club.  It may lower prices on the very short term, but will do nothing to make the short term gains sustainable. What’s needed is a complete dismantling and disruption of the old monopoly, and at least 50 – 100 start ups if not more.  This would require the government nationalizing the networks, limiting the purchase power of Bell, Rogers, and Telus, and essentially give the priority over spectrum to new entrants at rock bottom prices (or better yet free initially and paid back later) and unregulated. If the government were to nationalize the networks, than government owns the networks, and the issues around foreign investment become mute.  And no I haven’t lost my marbles; well maybe a little bit.

So why will we not nationalize the networks?  A lot of this would be due to a public perception of government intervention in the market place.  This idea makes Conservatives not only see red, but vomit.  It won’t fly with the Conservative base.  However what most don’t understand is our system is currently regulated so government is already intervening, and current regulations go far beyond the stated approach of nationalization.  Another big issue is that government doesn’t want to make Bell investors mad.  A lot of Canadian money has gone into BCE, and large number of Canadians nest eggs rely on BCE including those who are about to retire. If we were to dismantle the current monopolies that would put in jeopardy Canadian economic investments.  These guys are too big to fail economic wise to a government focused on the economy, and I don’t think the government has the brass balls to essentially devalue their worth in the name of lowering Canadian cell phone bills, or internet.

So where does that leave Canadians?  Well foreign or even domestic investors looking at the telecom side see the attempt to be seen as pro-consumer by government for what it is, a pipe dream and not reality.  Therefore, foreign and domestic investors look at the situation, learn about it, then leave.  Unless Canadians are prepared to dismantle the current monopoly, and devalue BCE and Rogers, any changes to our telecom market will essentially be lipstick on a pig.

So what can government do besides nationalization, imploding and devaluing economic nest eggs? Not much, other than appear to be consumer and competition friendly by maybe courting outside investors for a 4th player willing to loose capitol for political gain, which essentially does NOTHING to solve the problems in our current telecom market.  The other option would be to heavily regulate the current telecom market we have now, which will cause even more problems since any regulations will appear consumer friendly on the outside, but on the inside, made sure to protect those retirement nest eggs in BCE and Rogers, by not focusing on competition.  No telecom provider in Canada indie, Bell, Telus, or Rogers can claim to be “consumer friendly” until the monopoly implodes, and free market principles are applied to this artificial market.  The devaluing of the big 3 must happen on a massive scale in order to attract sustainable telecom investment into Canada.

All of this is being sold by indie providers in Canada as an excuse not to innovate and create new ways of doing things, and attracting investment outside of the telecom sector to a reasonable degree that would offer different services than what the monopoly already offers.  They claim to be shackled by regulation protecting BCE and Rogers.  Some of that is true, but there are massive problems with the indie telecom market outside of telecom regulation concerning how they refuse to innovate and create new ways of doing business in telecom that don’t require regulation. There are always ways to innovate around regulation rather than just offering the same service for a reduced price.  There’s little to no incentive for consumers to switch other than price, however the Canadian consumer gives up superior technical support (to name one problem) in the process, so switching often becomes a negative for Canadian consumers, and the indie telecom industry in almost 20 years hasn’t innovated around regulations to create the needed positive. That’s not a problem with BCE or Rogers, that’s called business 101. We don’t have enough qualified CEO’s in the indie telecom market, and as a result, they are essentially bottom feeding off of BCE and Rogers due to no fault but their own.  To be continued in part 2 of this post.

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  1. January 15, 2014 at 5:42 PM

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