March 19, 2020 – The C.D. Howe Institute Competition Policy Council addressed the issue of mandating access to telecommunications facilities, at a recent meeting. The Council considered whether mandated access to broadband and wireless facilities would enhance or impede market efficiency.
This issue is timely as the federal government targets a 25 percent reduction in cellular prices and has directed for possible expansion of mobile virtual network operators (MVNOs) in the market through mandated access to facilities-based providers’ networks.
Council members agreed that competition in telecommunications services involves fast-paced technological change, long lead-time investment in facilities, multiple and highly differentiated service offerings, consumer demand for high quality services, and rapidly evolving cost structures. The consensus of the Competition Policy Council is that with the high risk of getting rates wrong, mandated access to telecommunications facilities could impair Canada’s next generation of digital infrastructure. The Council discussed whether mandating access to other competitors’ facilities is economically efficient. Regulators face a long-standing tension between enabling new competitors by prescribing terms for access to facilities and potential disincentive to new and innovative infrastructure when new entrants can “free ride” on prior investments.
Members recognized that a fundamental challenge for mandated access is setting appropriate rates. Setting rates for access at too low a level below facilities providers’ required return on infrastructure investments would discourage future investments.
Finally, many members were surprised by this federal government’s express political direction regarding the CRTC’s approach to mandated access. If government pursues short-run political objectives at the expense of returns on long-lived infrastructure investments, certain Council members believe confidence in Canada’s regulatory regime for telecommunications will be difficult to win back.
The Competition Policy Council comprises top-ranked academics and practitioners active in the field of competition policy. The Council provides analysis of emerging competition policy issues. Elisa Kearney, Partner, Competition and Foreign Investment Review and Litigation at Davies Ward Phillips & Vineberg LLP, acts as interim co-chair, along with Grant Bishop, Associate Director, Research, at the C.D. Howe Institute. Professor Edward Iacobucci, Dean at the University of Toronto Faculty of Law and Competition Policy Scholar at the Institute, advises the program. The Council, whose members participate in their personal capacities, convenes a neutral forum to test competing visions and to share views on competition policy with practitioners, policymakers and the public.
For more information contact: Grant Bishop, Associate Director, Research; or Nancy Schlömer, Communications Officer, C.D. Howe Institute, phone 416-865-1904 ext. 0247, email: firstname.lastname@example.org.
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.