Chris MacDonald (“Why the Big 3 telecoms’ opposition to Verizon is unseemly“) writes an interesting blog about the controversy surrounding the campaign by the big three Canadian telcos (Rogers, Bell and Telus) to thwart the entry of U.S.-based Verizon into the competitive pool in Canada. Various sources have opined on this topic, but Mr. MacDonald has based his arguments on ethics and fairness. Unfortunately his reasoning fails on both counts.
Let’s get some of the facts straight. The big three Canadian telcos are not trying to prevent Verizon from entering the Canadian market. To the extent that any business welcomes competition, that competition should be rooted in playing by the same rules. And at this point, the rules of engagement are not the same. Verizon, if it chooses, appears to have a lock on purchasing one or more of the smaller regional Canadian telcos such as Wind Mobile, Public Mobile or Mobilicity, an option so far denied the large Canadian telcos by the Harper government. The government has also limited the purchase of new spectrum at an upcoming auction by the Canadian incumbents while allowing favoured access and pricing to foreign purchasers such as Verizon should they indeed bid, which they have indicated that they have every intention of doing.
Mr. MacDonald comments that the aggressive stance taken by the big three Canadian telcos is “unfair”. What is unfair about asking that the same rules apply for everyone competing in the wireless sector? The Harper government is in effect asking Bell, Telus and Rogers (which owns Canadian Business) to play with one arm strapped behind their back, while allowing Verizon (and other foreign companies) to pick and choose their targets, entry point and timing.
Mr. MacDonald further equates the recent purchase of Saks by HBC as an example of free market economics – what is good for the goose is good for the gander. First of all, this is not an example of a Canadian company purchasing a U.S. company – HBC has been owned by U.S. private equity firm NRDC since 2008. And the competitive situation is not the same at all – the retail sector has many different players, is rife with competition and in no way compares to the wireless marketplace in Canada.
Scale is the name of the game in wireless and Verizon dominates in that its revenues eclipse the Canadian big three’s combined. Why should Verizon be allowed to play by different rules, rules that clearly provide them with an advantage over the Canadian players, when it is obvious that they would already be a formidable competitor in the existing Canadian marketplace?
There is nothing fair about the current Canadian government’s position. If the object is to increase competition in the wireless sector, one set of rules should prevail. That is fair and that is a competitive environment. And consumers will choose who has the best service and products available and at the best price.
Mr. MacDonald’s other argument is that it is unethical to limit competition. An ethical company should promote competition and win on the merits of its products and services. Agreed, but let’s examine a little more closely who is being unethical. Is it really Rogers, Bell and Telus who just want a level playing field? Or is it the regulators and the Harper government, through their contrived manipulation of existing competition policies?
The Harper government is moving the goalposts to create a playing field that puts the Canadian big three telcos at a distinct disadvantage after spending billions creating that same playing field in wireless infrastructure. In effect, they have built the stadium for another team to play in. Is that ethical?
It certainly isn’t fair.
Same rules, same conditions, same policies – what is indeed good for the ganders should be good for the geese. Canadian geese or foreign geese.
Richard C. Powers is a senior lecturer at the University of Toronto’s Rotman School of Management