Skip to main content
sean silcoff

ROB Insight is a premium commentary product offering rapid analysis of business and economic news, corporate strategy and policy, published throughout the business day. Visit the ROB Insight homepage for analysis available only to subscribers.

The federal government has decided to double down on its fourth-wireless carrier strategy by warning off the Big Three from buying wireless spectrum from the little guys. It is a sad example of how this government has proven to be conservative in name only. Of course, by continuing subsidies for aerospace companies, closing the Canadian market to foreign sellers of agricultural commodities, and haphazardly blocking foreign takeovers, the government has long proven it is no advocate of a hands-off approach to markets. But its continued interventions in wireless are their own special brand of interference that twists logic to its breaking point.

In order to provoke more competition in the wireless industry, the government decided five years ago to force open an entry point for other players by setting aside spectrum at an auction. That gave newcomers access to cheap spectrum. Five years later, three of the players are in financial trouble, one of which tried to sell out to Telus. Two others, Shaw Communications and Quebecor, wisely bid on this effectively underpriced spectrum they knew they would never need (at least in Quebecor's case, given that it covers an area outside the company's home market in Quebec), and which they knew well they could flip for a profit to an incumbent after a five-year moratorium ended, which they tried to do with Rogers Communications.

Now, all three transactions appear to be dead, after Industry Minister Christian Paradis, declared "we don't want to have undue concentration of spectrum in the hands of players that will diminish competition." He said the government would continue to push to protect consumers and promote competition and the existence of at least four wireless providers in every region of the country.

Here's what is likelier to happen. Without an exit strategy that involves selling to a major, at least two of the three troubled upstarts that lack clout and capital will likely perish (although they are not out of suitors yet). Neither outcome fosters competition or help consumers, so Mr. Paradis said the government "will not hesitate to use any and every tool at our disposal" to achieve that. Translation: You'll compete how and when we tell you to compete.

Ottawa can either continue down this path of increasing intervention infecting all corners of the wireless business (see Monday's introduction of a new wireless code by the federal telecom regulator), or the government can finally stop avoiding the foreign ownership question. Several studies – including a federal telecommunications policy review panel report seven years ago – have said opening the market to foreign giants would lead to lower subscriber costs, gains in quality and productivity, and increased technology transfers, putting us on par with most other OECD nations. "Based on the experience of other countries, it seems difficult to dispute that their presence would significantly improve the range, quality and pricing of wireless services available to Canadians," the panel said.

The government has already opened up foreign ownership restrictions for companies with less than 10 per cent of the market share, but opening it for the incumbents is a loaded weapon: as the 2006 panel pointed out, permitting foreign takeovers of Bell, Rogers and Telus would require liberalizing not only the telecommunications act, but in the case of the former two, also the broadcasting act – which drags Canadian culture into the debate.

Let the debate happen. The rise of Netflix is shaking up the broadcast side of the industry anyway. Surely there are better ways to promote Canadian content than sealing off corporate boardrooms from sophisticated, deep-pocketed global players, and to promote a competitive wireless industry than turning it into an elaborate policy experiment by government.

Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights , and follow Sean on Twitter at @seansilcoff .

The Globe is launching a Streetwise and ROB Insight newsletter, with content available exclusively to Globe Unlimited subscribers. Get the best of our exclusive insight and analysis delivered straight to your inbox in a daily e-mail curated by our editors. Sign up for it and other newsletters on our newsletters and alerts page .

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
BCE-N
BCE Inc
-0.82%33.98
BCE-T
BCE Inc
-1.01%46.03
NFLX-Q
Netflix Inc
-1.01%607.33
RCI-N
Rogers Communication
-0.49%41
T-T
Telus Corp
+0.37%21.67
TU-N
Telus Corp
+0.63%16.01

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe