Consumers and politicians, alike, have created a stew of confusion respecting Canada’s telecommunication laws and regulations amid the teeth-knashing and finger-pointing on internet billing matters. Consumers appear to carry a common misunderstanding that the CRTC somehow prevents or limits competition in Canada, and that it is squarely in the pocket of the large incumbent telecos and calbecos, like Telus, Bell, Rogers and Shaw (the “incumbents”). This is quite misguided. If anything, the CRTC has received consistent political direction during the past twenty years to increase competition in Canada’s telecommunication sector. The CRTC has attempted to do so, by requiring the incumbents to provide network access to competitors at regulated rates. Internet service, like telephone service, is only useful to the end-user if it is connected to the entire, singular, global network. Thus, there is no economic case for a competitor to even attempt to replicate a parallel worldwide network: that’s impossible. Instead, competitors look to the CRTC to force incumbents to provide access to the larger networks of copper, fiber and wireless the incumbents have built and expanded through nearly half a century.
Unfortunately, this regulatory approach does little to introduce real competition. New “competitors” simply set-up small networks in dense population centres, places with condo towers, for example, to skim off as many customers as possible with limited investment. Such competitors are entirely reliant on their connections to an incumbent network, the cost of which is regulated by the CRTC. All the calls by consumers and politicians for “market forces” to prevail (heralded by the Hon. Tony Clement, no less), and those demonizing the CRTC as an inept economic meddler, miss the point. If the CRTC didn’t “meddle” as it has, at the encouragement of both Liberal and Conservative governments, we would not even have the current façade of competition. Without CRTC meddling, we would be back in the world of regulated monopolies and crown corporations, much like the telephone service of thirty years ago. Why? Because the nature of a single integrated network, to which everyone wants unfettered access, means that: a) each household or business only needs one connection, and b) that one connection offers precisely the same service as would any other connection. And thus, there is limited economic incentive to build parallel competitive networks.
Consumers must understand that the neither the CRTC, nor the incumbents, can be blamed for the potential rising cost of providing unlimited broadband service to Canadians. The incumbents bear the cost to build and maintain the backbone of the digital network, and of course, they wish to squeeze the most from those competitors who attempt to skim the cream from lucrative urban markets, while contributing little to the broader digital infrastructure. A few folks in dense urban markets may get access to cheaper competition, but only because the CRTC forces it upon the incumbents. The rest of us are forced to subsidize that competition by helping the incumbents, whose networks we are stuck with, absorb the cost of maintaining the broader digital network that serves those competitors. Why is broadband service in Nunuvat shockingly slow and expensive, with no competitors in sight? Because it’s expensive to provide broadband service to a small, isolated population: that’s the natural result of market forces.
If consumers and politicians want to have their cheap, unlimited broadband cake, and eat it too, they should consider a change of government policy. Perhaps, the old crown corporations and regulated monopolies make the most sense for providing all citizens with reasonably priced broadband access to the new digital network. At least we wouldn’t be paying for false competition, and we’d know, for certain, who to blame when the price is too high, or the service is poor.
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