Wireless Competition in Canada
Volume 7 • Issue 20 • August 2014 WIRELESS COMPETITION IN CANADA: DAMN THE TORPEDOES! THE TRIUMPH OF POLITICS OVER ECONOMICS† Jeffrey Church, Professor, Department of Economics and Director, Digital Economy Program, The School of Public Policy, University of Calgary Andrew Wilkins, Research Associate, Digital Economy Program, The School of Public Policy, University of Calgary SUMMARY Last year featured a high stakes battle between two mighty protagonists. On one side, allegedly representing the interests of all Canadians, the federal government. On the other side, Bell, Rogers, and Telus. The issue at stake: What institutions should govern the allocation of resources in the provision of wireless services? Should the outcomes — 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 and the ability of wireless providers to exercise inefficient market power — raise prices above their long run average cost of providing services. Do Bell, Rogers, and Telus exercise substantial inefficient market power? The accumulated wisdom of market economies is that state intervention inevitably is very costly, given asymmetries of information, uncertainty, and political pressure. At the very least the onus on those demanding and proposing government action is to provide robust evidence of the substantial exercise of inefficient market power. This paper is a contribution to the ongoing debate regarding the existence and extent of market power in the provision of wireless services in Canada. The conventional wisdom that competition in wireless services was insufficient was challenged by our earlier School of Public Policy paper.†† In that study we demonstrated that the Canadian wireless sector was sufficiently competitive.
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