You Call that Competition?

In a crowded room, when everyone tries to talk at once, all those conversations might cause such a racket that no one can hear what anyone else is trying to say. Give a speaker a podium and a microphone, however, and the entire audience from the front row to the back can hear every last word.

This argument is a form of the Babel objection. It’s a trusted tool in the arsenal of companies like Bell, who for years have been using it to justify their privileged monopoly status.

They claim that the vast economies of scale they supposedly enjoy are the best way to bring prices down.They claim that only through end-to-end control over the networks can the quality of service that Canadians deserve be ensured. And they claim that only a company who controls the most profitable urban markets can afford to provide rural service where investments can’t be justified.

The Globe and Mail recently published an article by Kevin Carmichael titled “Competition best for wireless industry? Maybe not”. In this article, the author makes the argument that allowing an oligopoly of 4-5 companies to control the Canadian wireless market is the best way to bring prices down for consumers.

They used to say that having one company was the best way to provide Canadians with service. Today they’re saying 4 or 5 but no more. Let me tell you why they’re wrong.

Bell opened for business in Canada on April 29, 1880. Immediately it became locked in a long and drawn out struggle for control of the Canadian telephone market. After a period of steady consolidation, at the turn of the century it began to experience intense competition at the local level which lasted well into the 50’s.

By 1920, at the peak of this competitive period, 660 independent local phone companies served a combined 27% of customers in Ontario.[1] That’s more than one in four! These companies almost always had rates much lower than Bell’s. Often they were run by farmers who needed to coordinate with their markets or by doctors who needed a way to stay in touch with their patients.

For the most part, Bell was only interested in serving the most profitable urban areas. Locally owned independents mostly served rural communities where profit margins were too low for Bell to bother. Independent companies were and still are necessary to serve Canadians when big companies won’t.

Bell initially reacted by building long distance networks. These networks followed the railways into the country, although Bell refused to connect independents’ rural networks along the way. It then used long distance revenues to establish competitive local exchanges in rural areas. Predatory pricing schemes were used to drive local companies out of business, which Bell would then buy out of bankruptcy before jacking up rates on its helpless new customers.

By the time the CRTC forced Bell to connect independent networks to its long distance lines in 1978,[2] there were a mere 39 independents left, serving only 5% of Ontario’s customers.

It’s often said that when Rogers entered the market in the 80’s Canadian telecommunications became “competitive”. Today, just three companies control a combined 92% of the market. This leaves a handful of others to scramble for the leftovers, mostly in areas where costs are high and customers are scarce.

You call that competitive? Rogers does. In a recent submission to Industry Canada, it said “The Canadian wireless market has gone from being highly competitive to hyper-competitive.”[3] Earth to Rogers: there’s more to Canada than Toronto, Montreal and Vancouver!

Carmichael would have you believe allowing just one or two more companies into the market would solve all our problems. We need to see that argument for what it really is: the rhetorical wish of an oligopoly that takes Canadian consumers for granted, a justification used by companies who would rather sit back and watch the cash roll in than fight for your business.

Relying solely on big business to look after Canadians’ needs has never worked. Much as Carmichael wants you to believe it, you can’t reinvent the wheel.

We need to look to the past when planning for the future. History teaches us that locally owned businesses create jobs, stimulate innovation, and provide quality service at affordable prices to people who need it. We need a policy that allows us to stop lining Big Telco’s pockets and start putting money back into our own.

If Canadians really want to reap the benefits of competition, we need to demand more than just another big fish in the pond, hungry for minnows. We need a regulator that will work for us to see that this will happen, not one run by a former head honcho at Bell and Rogers. We need to demand a digital economy strategy that promotes locally owned business, so we can have fairly priced quality service in places as different as Toronto, Temiskaming and Norway House.

The Canadian wireless market is not like a crowded room, but companies like Rogers and Bell want you to think it is. With the suit on stage only talking about how he’s the best thing since sliced bread, you’d have a better time chatting with your neighbor anyway.

 [1] Babe, Robert E. Telecommunications in Canada, University of Toronto Press, 1990. p 116.
[2] ibid, p 124.
[3] p. 4
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