VANCOUVER _ When it comes to promoting competition in the Canadian wireless industry, the federal government is going about it the wrong way, according to the Fraser Institute.
In a new study, the Vancouver-based think-tank says if Ottawa wants to provide Canadians with more choice and competition in the wireless marketplace, it should apply the same rules to both domestic and foreign players operating in Canada.
And that means removing restrictions on foreign ownership of telecommunications companies in Canada while also ending policies that favour new entrants in the marketplace, it said.
That was a reference to Ottawa's plans to place restrictions on domestic telecommunications companies in an upcoming auction of wireless spectrum aimed at encouraging new entrants in the marketplace.
``The goal of achieving and maintaining a competitive market is not the same as having a minimum number of competing firms,'' said Steven Globerman, the study's author and a senior fellow at the Fraser Institute.
``By setting up rules that handicap the three large Canadian telecoms and favour small or new players in the marketplace, the federal government is effectively subsidizing new entrants and promoting inefficient competition.''
``This could make most consumers worse off, rather than better off,'' said Globerman, a professor of international business at Western Washington University.
Rogers (
TSX: T.RCI.B,
Stock Forum), Telus Corp. (
TSX:T.T,
Stock Forum) and Bell (BCE Inc.) (
TSX: T.BCE,
Stock Forum) have all launched public campaigns slamming what they say are unfair rules for the spectrum auction, which limits them to bidding on only one block of spectrum apiece. Two blocks have been set aside for smaller firms or new entrants.
In his study, An Assessment of Spectrum Auction Rules and Competition Policy, Globerman concludes that the existing Canadian wireless marketplace is competitive.
An attempt to entice a fourth major telecom to enter the Canadian market by imposing rules and regulations that disadvantage the existing three large domestic firms will not necessarily improve things, he said.
Instead, Globerman recommends removing the 10 per cent restriction on foreign ownership of Canadian telecoms, broadcasting and cable companies to allow foreign investors to enter Canada on a larger scale through mergers and acquisitions.
Such a move, he argues, would increase competition and provide tangible incentives for wireless companies to improve service and pricing for Canadian consumers.
``Relaxing foreign ownership limitations would allow for new entrants to better compete with Canada's big three telecoms,'' said Globerman, a former consultant to Industry Canada and the Canadian Radio-television and Telecommunications Commission.
``Just the threat of a takeover gives companies a greater incentive to provide customers with better pricing and service.''
Meanwhile, he says that any anti-competitive behaviour by large established wireless carriers could be dealt with through the existing Competition Act, which is better suited for dealing with resulting mergers or acquisitions that may arise from removing foreign ownership restrictions.
``This would also eliminate the temptation of governments to arbitrarily impose other regulatory prohibitions on spectrum acquisition or other assets,'' the study said.