Competition is the lifeblood of a capitalist economy, giving consumers greater freedom of choice and forcing businesses to offer the best products at the lowest prices. But by trying to force greater competition in the high-speed internet market, Ottawa is reducing the incentive for companies to build out and improve the telecommunications networks that now power our entire economy and virtually every aspect of our daily lives.
Picture this: You slave away at your job for years, trying to save up enough money to realize your dream of starting your own burger joint. You reinvest your profits and eventually your business grows into a chain of restaurants, some of which serve areas that don’t even have a McDonald’s.
Then, the government comes in and says that, in order to increase competition in the fast-food space, you have to open your kitchen to competitors, so they can resell your burgers. Suddenly, other restaurants open up, selling your food at a lower, state-mandated price. McDonald’s also steps in and begins offering your burgers under its globally recognized brand.
This example may seem far-fetched, but it’s essentially what the Canadian Radio-television and Telecommunications Commission (CRTC) is doing.
The regulator’s controversial
, which was announced a couple years ago and
by Industry Minister Mélanie Joly last week, will force large network providers, like Telus and Bell, to provide their competitors with wholesale access to their fibre-optic networks at regulated rates.
This idea in itself is not particularly novel. For more than two decades, the CRTC has forced large internet service providers (ISPs) to grant small competitors access to their networks, in order to increase competition in a market that has historically been dominated by Canada’s large cable and telephone providers. But that policy was always designed to make it easier for small businesses to enter the market given the immense cost of laying new cables.
Now, the CRTC is allowing Canada’s Big Three telecommunications companies to resell fibre-optic access to each other’s networks. Canadians should not be fooled into thinking this policy was born out of Ottawa’s altruistic desire to reduce their monthly internet bills. It largely came about as a result of Telus’ desire to expand into Central Canada without spending the billions of dollars that would be required to build a fibre-optic network to compete with Bell and Rogers.
The move has angered other network providers, both big and small. Regional players, like Quebec’s Cogeco and Nova Scotia’s Eastlink, are upset because it will allow larger telcos, like Telus, to compete against them by piggybacking on their own networks and bundling that service with their existing offerings.
Bell is also aggrieved because it says it has invested over
in the past five years to bring fibre to three-million homes and businesses in Manitoba, Ontario, Quebec and Atlantic Canada, and will no longer receive the rate of return it once expected.
Already, Cogeco and Eastlink
that they are “suspending further planned upgrades to many smaller communities across Canada,” and Bell says it has reduced capital expenditures by $1.2 billion since the CRTC made its initial decision in late 2023.
While it’s possible that these companies are simply posturing to make a political point, reduced investment is exactly what should be expected when governments introduce policies that reduce the rate of return companies can expect from their investments.
Last year, the CRTC noted that two expert reports found that the policy would “negatively impact the business case for deploying fibre to areas that have not yet received” it, and admitted that the finding was “credible.”
Yet the regulator thinks it can mitigate this risk by properly setting prices — something central planners have never been successful at — and by “delaying competitor access to any newly deployed fibre until 2029.” That will give network operators five years to recoup the cost of new infrastructure, but will not alleviate the disincentive to expand or maintain those networks in the future.
Like many telecommunications policies crafted or backed by our Liberal government, this one appears to be designed to solve a problem that may no longer exist in the near future. Twenty years ago it was absolutely the case that Canada’s big telecommunications companies had a natural monopoly over internet service, providing it over existing telephone and cable networks.
But nowadays, cellular networks are ubiquitous and can provide
that are at least theoretically comparable to fibre. Meanwhile, companies like Starlink are offering satellite-based internet that’s available from
and offer
that are perfectly adequate for most personal and business uses at increasingly competitive prices.
The Carney government was elected on a promise that it would do things differently, and that excessive regulation would not be allowed to stand in the way of attracting investment and building a more productive and resilient economy.
If it were at all interested in attracting investment, increasing competition and building the types of high-speed networks that are essential components of the digital economy, it would have removed foreign ownership restrictions. This would have allowed foreign companies that can afford to build their own networks to compete in the Canadian marketplace.
By instead backing the CRTC’s new policy, the Liberals have sent the message that it’s business as usual in Ottawa — and that Canada is not a safe place to invest.
National Post