Conservative Party leader Pierre Poilievre has signaled that if elected prime minister, he’d be inclined to pursue “real and complete competition” in Canada’s telecommunications sector. If so, it would represent a major policy development and a key departure not only from the Trudeau government but also from the last Conservative government under Stephen Harper.
The Harper government shared Poilievre’s insights about the benefits of greater competition in the marketplace. It instinctively understood that more competitive intensity would improve prices and services for consumers and boost innovation in the industry.
But its policy agenda—particularly from 2008 onwards—stopped short of “real and complete competition.” Instead, it took the form of artificial or government-induced competition based on an arbitrary and top-down goal of having four wireless players across the country. The results have been underwhelming at best and counterproductive at worst.
The federal government’s so-called “fourth-player policy” has been a rare case of policy continuity between the Harper and Trudeau governments. At its core, it presupposes that Ottawa knows precisely the optimal number of market participants in the telecommunications sector and how to go about engineering this particular outcome.
Successive governments have granted special preferences to new entrants in a series of spectrum auctions, mandated access to the incumbents’ wireless networks at subsidized rates, and legislated asymmetrical foreign investment rules for them. It’s amounted to an inherently contradictory policy of rising (and often heavy-handed) government intervention in the name of market competition.
The policy induced some new players into the market. But most of them were never capable of transitioning from their state-engineered origins into market-supported competitors. They’ve either sold out as soon as they were permitted to under the government’s rules, or only been sustained by the cascading effects of government intervention.
Today many of the companies that entered the market under the “fourth-player policy” have effectively disappeared. There may have been some benefits on the margins from this dedicated policy agenda, but the costs have been significant. It’s not only driven up the cost of spectrum for incumbent firms such that since 2020 they’ve spent more acquiring spectrum than they’ve spent on their networks, but it has also represented a transfer of billions of dollars in indirect subsidies from taxpayers to the new entrants.
Put bluntly: the whole policy has been a case study in opportunity costs. It has misdirected capital away from network investments on the one hand and created the conditions for a policy arbitrage by clever entrepreneurs on the other hand. It’s a good (or bad) example of government policy prioritizing a particular outcome even if it predictably comes with big and costly downsides.
This is why Poilievre’s comments about real competition are so interesting. They reflect a possible much-needed departure from the deficiencies of the policy status quo. They’re also consistent with recent observations made by the former head of the Competition Bureau that the government’s policy choices have been a barrier to “entry of real and effective foreign-based competitors.”
The emphasis on real competition (as opposed to artificial competition) is key. It is as much a shift in policymaking philosophy as it is a change in government policy itself.
Real competition would reflect the market’s sorting out of the proper number of companies in the sector rather than take for granted that there’s a market structure that’s self-evidently better. It would similarly accept that market forces are ultimately more efficient than government diktats in balancing competing objectives including investment conditions, consumer prices, and access to technology. It would in short represent a new telecommunications policy framework rooted in the overarching goal of enabling sustainable, market-based competition.
Shifting in this direction would require significant policy adjustments to the status quo. As a first step, the government would need to amend the Telecommunications Act to fully repeal its foreign investment restrictions.
In practice, this would mean that Canadian firms, irrespective of their size, are able to draw on greater shares of foreign capital to finance their operations and network investments. It may also mean that foreign carriers could possibly enter the market themselves. Whatever happened, it would be driven by market-based decisions rather than regulatory ones.
While liberalizing the foreign ownership rules is necessary, it alone is insufficient policy to boost greater market-based competition. A new policy framework would also require rolling back auxiliary fourth-player policies, including preferential treatment in spectrum auctions, the government’s MVNO regime, and the various other ways in which federal policy has sought to manufacture and sustain artificial competition. A greater deference to market forces would need to be shot through the entire telecommunications policy framework.
The potential outcomes of such a new policy approach are inherently speculative. It’s impossible to prejudge how the market would react over time. But the dynamic process of market-based competition would mostly self-regulate based on business and consumer choices. Companies would still need to compete on prices and services. And the threat of new players and new technologies would ostensibly have a disciplining effect.
There would of course still be a role for government in industry-wide regulation, targeted support for non-market investments, and foreign ownership reviews (including the national security test) under the Investment Canada Act. But otherwise a vision of “real and complete competition” would subordinate the assumptions of politicians and public servants to the preferences of businesses and consumers in a competitive marketplace.
We’ve had a more than decade and a half of artificial competition and the outcomes are disappointing. Poilievre’s right: it’s time to try the real thing.
This article was made possible by TELUS and the generosity of readers like you. Make a one-time contribution today.
Sean Speer is The Hub's Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well as a think-tank scholar and columnist. He previously served as a senior economic adviser to Prime Minister Stephen Harper....
