Industry Minister Christian Paradis was in the news this week (Globe, Post, Cartt.ca) urging foreign telecom companies to consider investing in the Canadian market in order to beef up the competitive environment. Paradis is right to court the big foreign players, who would bring capital, buying power that the current Canadian carriers can’t match (potentially leading to better deals on devices), and the ability to leverage their global networks to offer better roaming rates. Foreign telecom companies should view the Canadian market as attractive, given some of the highest ARPU (average revenue per user) rates in the world (see CRTC Figure 6.1.9). Yet they will likely give Canada a pass due in part to failed government policies. These include:
1. Ongoing foreign investment restrictions in the telecom sector. The government has removed restrictions for the smaller players (anyone with less than ten percent market share), but those companies are less than ideal as a market entry point given the use of spectrum that is incompatible with devices such as the iPhone, incomplete network coverage, and limited geographic footprint. The larger players – Bell, Telus, and Rogers – are far more attractive but are off-limits due to the continuing foreign investment restrictions. The solution is obvious: the complete removal of all foreign investment restrictions in telecommunications.
2. Ongoing foreign investment restrictions in the broadcast sector. Even if the restrictions on foreign investment were lifted in the telecom market, the restrictions in the broadcast sector would likely keep Bell and Rogers out of the hands of a foreign entity. As I’ve argued before, Canada should also remove the broadcast restrictions, since Canadian broadcast licensees will follow content regulations and regulatory obligations regardless of their nationality.
3. Failed spectrum policies. Paradis indicated that the 700 MHz spectrum auction will take place by the end of 2013. This is the same auction that was supposed to happen last year and that was completed by the U.S. in January 2008. If the auction slips to early 2014, that will place Canada six years behind the U.S. in allocating this spectrum. The conclusion for a foreign carrier looking at the Canadian market is clear: the government just isn’t serious about creating the framework to allow for vibrant wireless services.
4. Missing digital economy strategies. Closely linked to the other failures is the absence of a digital economy strategy, despite repeated promises of one. If the government can’t articulate its vision for Canada’s digital future, why would it expect a foreign company to do so?
Canada needs foreign investment to address the competitive shortcomings that plague the wireless sector. But it will take more than speeches to encourage entry. Rather, it will require policy action by the government to address the myriad of barriers and shortcomings in the Canadian legal and regulatory framework.