Canada’s overall economy — not just consumers — would benefit if Canada were to open its telecom industry to greater competition through upcoming North American free trade talks, says a University of Toronto professor who’s been studying the industry’s impacts.
Getting to that point at the NAFTA negotiating table, however, may just be wishful thinking, says another academic who predicts U.S. demands for greater access to Canada’s telecom market won’t survive to the final round of bargaining.
In its objectives for the NAFTA renegotiation, the Trump administration included telecommunications among a list of trade irritants made public last week, saying it wants to promote the competitive supply of telecommunications services and secure commitments “to provide reasonable network access for telecommunications suppliers.”
University of Toronto professor Walid Hejazi says opening the telecom industry to foreign players would result in new jobs, increased productivity across a wide range of industries and cheaper wireless rates for consumers.
While Canada’s telecom market was partially liberalized in 2012 when the federal government opened the door to foreign ownership of Canadian cellphone service carriers that have less than 10 per cent of the Canadian market share, current regulations forbid foreign majority ownership of a major telecom company.
Removal of the foreign ownership restrictions would require an amendment to the Telecommunications Act.
The telecom ownership provisions are complicated further by the fact that Canada’s big three service providers, Bell, Telus and Rogers, are also intertwined with the country’s broadcasting networks, which have their own set of ownership and licensing restrictions.
Successive expert panels have over the years recommended ownership restrictions be lifted, but few actions have been taken amid concerns that a takeover of a Canadian telecom company by a U.S. or other international conglomerate would result in foreign interests controlling a Canadian broadcaster as well, potentially leading to a watering down of Canadian content.
Hejazi said the NAFTA talks present a perfect opportunity to lift the protections from foreign competition enjoyed by the trio.
“The telecom industry in Canada should not be protected. Full stop, end of story,” said Hejazi.
“You have three companies that are protected from international competition and the service they provide us is inferior.”
Paul Beaudry, the director of development at the University of Calgary’s School of Public Policy and a research associate at the Montreal Economic Institute, doubts that the Trump administration will push hard for greater access by U.S. players to Canada’s telecom market.
Beaudry said he doesn’t see telecom changes as a “hill to die on” and predicted the issue won’t make it to a final round of bargaining once the talks intensify.
“I don’t think we’re going to get to telecom,” he said.
“I don’t think that, if you were to grill an American negotiator at this stage, they would identify telecom as a critical aspect that kind of motivates the American government.”
At most, the U.S. government may be satisfied in gaining greater access to the Canadian market by small American resellers of telecom services, said Beaudry.
A failure to use the talks to further liberalize the telecom sector would be a wasted opportunity to create jobs, and would run counter to the Liberal government’s insistence that it makes decisions based on evidence, said Hejazi, who is also the academic director at the Rotman School of Management.
“Every company in the country has to work with the telecom industry,” he said.
“The productivity and employment across the entire Canadian economy are negatively impacted by the lack of efficiency and investments in that sector.”
The Organization for Economic Co-operation and Development called on Canada last year to open its telecom industries, along with airlines and broadcasters, to foreign ownership.
The OECD said such a move would “sharpen competitive pressures, raise productivity and reduce prices for consumers.”
Egyptian billionaire businessman Naguib Sawiris learned a bitter lesson about Canada’s telecom rules nearly a decade ago when his company, Orascom Telecom Holding, invested in Wind Mobile Canada, hoping to turn it into a major player. The investment soon turned sour after Ottawa blocked his bid to acquire Allstream from Manitoba Telecom Services Inc., through his investment firm, Accelero Holdings Inc.
Sawiris blamed Canada’s regulatory framework for his decision to back away from investing further in Wind Mobile, accusing Canada of stifling innovation and producing what he called a “closed market.” He vowed never to invest in Canada again.
There was also wide speculation in 2013 that U.S. telecom giant Verizon Communications Inc., could enter Canada’s wireless market, until company CEO Lowell McAdam definitively shot down the prospect, calling the rumours “way overblown.”
The lack of interest in Canada’s telecom market by an established foreign player is telling, said Beaudry, suggesting there is little appetite for investing in it without putting the big three players on the selling block.
None of the big three Canadian telecoms were willing to provide their perspective on the NAFTA negotiations, which are expected to begin Aug. 16. Spokespeople from all three said they would offer no comment.
And while the industry umbrella group also said it wasn’t prepared to speak, a spokeswoman acknowledged the key players are keeping a close eye on any potential developments in the coming weeks.
“We are monitoring the situation and discussing with our members,” said Sophie Paluck of the Canadian Wireless Telecommunications Association.
“We will want to ensure the Canadian wireless industry continues to thrive as a world leader.”
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