When Canadians need a cellular or home internet service provider, they’re mostly limited to a small number of choices. The “Big Three” as they’re often described—Bell, Rogers, and TELUS—are the only national options.
Even though the industry is more competitive than it’s often given credit for, Canadians still can’t shop around for packages from American providers Verizon, AT&T, or T-Mobile.
The big telecommunications brands that dominate the U.S. market don’t operate here for historical and regulatory reasons. Canada’s Telecommunications Act prevents foreign entities from having more than a 20 percent decision-making stake over a Canadian telecommunications firm.
Peter Menzies, senior fellow with the Macdonald-Laurier Institute and past vice chair of the CRTC, argued recently in The Hub that part of what’s keeping that restriction in place is a fear among policymakers that foreign cellular and broadband providers would storm into the country and take over the Canadian telco market were the law to be amended.
“When we think of foreign ownership, we think of United States ownership,” Menzies said in a podcast conversation with The Hub this month. “Canada has this long history—particularly…in the corridors of power—of being afraid of the United States.”
But is that fear justified? (That is, beyond the obvious fact that big telcos can hail from countries other than the United States. Why worry exclusively about Verizon and AT&T when there’s also Japan’s Softbank, Britain’s Vodafone, China Telecom, etc.?)
In recent conversations with The Hub, observers of the sector have challenged the idea that U.S. telcos would blitzkrieg the Canadian market if given the chance —and questioned whether it would even be a terrible thing if they did. Below are five reasons Canadians shouldn’t be afraid of dropping the barriers that keep U.S. telco firms out.
1. A U.S. telco might be preferable to one from a strategic rival
Given that “foreign” companies could come from anywhere, would a U.S.-based telco really be the worst option for Canadians? Not from a security standpoint, according to intelligence experts.
Consider Chinese telcos, for example. Intelligence professionals have repeatedly cautioned that Chinese firms’ involvement in Canada’s communications infrastructure could represent a security threat. In 2022, Ottawa heeded those warnings and banned Shenzhen-based Huawei from participating in building 5G networks here. (Nor would Ottawa likely welcome an India-based telco either, given recent events.)
Canadian lawyers Calvin Goldman and Thomas Mathews proposed a safeguard against such concerns. Writing in the Globe and Mail, they said, “There is an obvious need to protect our telecom networks, data, sensitive information, telecom supplier diversity, and trade and innovation secrets from hostile foreign interests.”
The authors argued that Canada’s close allies, including the U.S., would be more worthy of being trusted with handling our sensitive data. “The Five Eyes, led by the substantial security apparatus of the U.S. and Britain, would provide confidence to Canadians that their telecom sector is safe.”
(That being said, the major U.S. telcos are not impervious to data hacks, including security breaches allegedly sponsored by unfriendly governments.)
2. Do ordinary Canadians even care who owns their communications service providers?
As the first piece in this series discussed, technological nationalism—the notion that strategic sectors ought to be Canadian-owned to protect Canadian interests—was the de facto consensus in late-20th-century Canada.
Since then, Menzies suggested, the public has left behind that 20th-century mindset—arguably leaving policymakers far behind. That’s sensible, he argued, as corporate leaders are answerable to shareholders, not countries, meaning there’s no logical reason to expect Canadian-raised CEOs to act in the interests of their fellow citizens more than foreign executives would.
Vass Bednar, executive director of McMaster University’s master of public policy in digital society program and co-author of The Big Fix, agreed that domestic ownership probably isn’t at the top of Canadians’ list of concerns when it comes to telecommunications companies.
“I don’t think people are really that sold” on the notion that Canadian ownership better serves Canadian interests, she said in an interview with The Hub. Bednar believes Canadians are more concerned about considerations like choice. “Is there sufficient competition that you feel you can shop around? Are there good enough switching opportunities?”
Menzies also dismissed the notion that Canada’s “laws and regulations might be insufficient to control the conduct of a foreign-owned telecommunications firm” as “silly”. His argument is that the same rules that protect Canadian consumers would be in place whether the service’s owners are based in Toronto or New York. So what does it matter to consumers who the owners are?
3. Are foreign (including U.S.) telcos even eager to enter Canada in the first place?
Maybe not. Ted Woodhead, former chief regulatory officer and government affairs head at Rogers, explained in an interview that the maturity of Canada’s telecommunications market means any new entrant would have a difficult time ensuring future growth, which may in turn discourage foreign companies from trying to compete here.
“The way our telecom market has evolved, 85 percent of the market is controlled by three companies that are relatively even in size. We are highly penetrated. In other words, virtually everybody has a device or a connection. And for those reasons, it’s not terribly attractive to enter because there’s not a lot of growth,” he said.
This is on top of the oft-cited challenges of conquering the country of Canada that any new market entrant or upstart would face—namely, our vast geography, punishing climate, and the fact that we have one of the lowest population densities in the world. These are difficulties for any foreign firm looking to do business in Canada, whether in telecommunications or a number of other sectors.
So, is Canada a juicy prize of a market for foreign telecom interests—or a lemon? The fact that foreign grocers haven’t set up shop here is a sign that Canada isn’t such a sweet proposition, Bednar said. She noted that Industry Minister François-Philippe Champagne’s attempts to lure foreign grocers to Canada have not added to shoppers’ choices as of yet.
“Trader Joe’s could come to Canada” anytime, she said. And yet it hasn’t. Is there any reason to assume Verizon, AT&T, or other U.S. telcos would be any more keen?
Whatever the answer, opening up the telco market would enable Canadian-based firms to access a larger pool of capital which could lower investment costs. There’s also some evidence that even the threat of a foreign player entering the market could have some pro-competitive effects.
4. Any new market entrant would have to compete hard for Canadian customers
As a corollary to the previous point, a foreign telco coming into Canada would have to try to carve out its market share by making itself more appealing to consumers.
More choice could be a win-win proposition for consumers. New entrants to the market could entice Canadians to switch to a more appealing service package—but consumers who are happy with what their existing provider offers could just stick with that.
But it’s not just that. There’s evidence that greater competition can lead to innovation, new technologies, and better customer service. Consider Elon Musk’s satellite internet company Starlink entering the Canadian market in recent years. According to reports, it already has 400,000 customers and is growing rapidly.
5. Foreign investment in the telco sector could bring benefits to consumers
Perhaps the most compelling reason why Canadians shouldn’t fear an American invasion is that, as noted above, big American telcos could potentially bring capital investment with them—providing money for future network upgrades that would help ensure Canadians continue to enjoy reliable, high-quality cellphone and internet service.
Given the third major reason above, it’s possible (even likely) that foreign players might prefer to enter the Canadian market as investors rather than take on the onerous job of building their own cellular and/or broadband networks.
Meanwhile, Canada’s major telcos could be expected to continue building infrastructure to ensure signals and data can stretch across this enormous country—but they’ll need capital to do so. Foreign investment could play a role in ensuring Canadian telcos can make the investments necessary to keep up in a competitive world.
What’s ultimately at stake, said Ian Scott, former chair and CEO of the CRTC and visiting scholar at McGill University’s Max Bell School of Public Policy, “is the ability of Canadians individually and [Canadian] businesses to participate in a digital economy and digital society.”
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