Telecom Trends

Mark Evans recently wrote that less regulation in telecom will mean less competition. It is an interesting viewpoint, but conversely, is it reasonable to believe that more regulation will lead to more competition?

From a consumer perspective, do we want to rely on a government-managed marketplace for communications services? Mark's posting says

The fundamental problem, however, with deregulation in Canada is it comes after decades of micro-management by the CRTC...

Surely the answer can't be continued regulation and government micro-management.

Would the marketplace for highspeed services be more competitive with someone else owning Inukshuk? Should someone other than Rogers have purchased Microcell? We would have had additional market participants, but where were the alternate bidders?

There was no government decree ordering Bell and Rogers to make these purchases. Microcell and Inukshuk were sold to the highest bidders. The shareholders and creditors would have insisted on that.

Any other potential buyers felt that they couldn't afford to pay the same price. Why then, would the government prohibit the sale of these companies to the highest bidder?

If the government had intervened, then the alternate buyer would have ended paying less than market prices for the companies, distorting the economics of the marketplace.

You might have been able to enjoy lower prices, but at what cost to investors and shareholders? Under that scenario, the buyer of this subsidized asset would have a lower than normal cost base with which to compete against the incumbents.

Would consumers benefit from lower prices through such an expropriation of shareholder value? Or would the new owners benefit from higher profits because a government restriction on one set of companies creates extraordinary value for the buyer? What kind of climate are we creating for investment in infrastructure?

On the surface, it may be appealing to have government intervention to try to increase the level of competition, but what are the unintended consequences?

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Inukshuk, mobile, Rogers, Bell, Microcell, spectrum auction