Foreign Investment is No Panacea

Blog, Disruption, Les Routledge

Terrence Corcoran take the government to task today in an article at the Financial Post.  He asserts that the government has muddled their priorities when it comes to promoting competition before liberalizing rules governing foreign investment.

The future promises at least another decade of tangled policy, court battles and regulatory chaos — and delayed innovation. No other outcome is possible so long as the government intends to set the policy agenda exactly backward. The plan, as frequently outlined by Industry Minister Tony Clement, is to first get all the spectrum allocated and settle all the competition issues, including installing a range of competing companies. Only then will the government look at changing foreign-ownership regulations.

I agree that liberalizing rules restricting foreign investment is a key element of promoting more vigorous competition in the broadband and mobile communications sectors.  However, simply opening up foreign investment rules is not a solution on its own.   Indeed, liberalizing foreign investment rules without taking steps to strengthen the competitive dynamic within the industry could lead to even more concentration of ownership and control and even less competition and choice for consumers.  Foreign investment is not a pancacea.

In previous posts, I have outlined additional steps that need to be taken to alter the rules that govern how market forces work in Canada.  Yes, let’s increase reliance on market forces and competition to satisfy the demands of customers, but let’s make sure that the rules encourage sustained and vigorous competition in the market.

Micheal Geist has also written articles and posts about how to promote more vigorous and sustained competition in the telecom market in Canada.  One suggestion that merits more investigation is the following:

impose open access requirements in new spectrum allocation and build open access requirements into new residential developments, municipal construction, and other initiatives

Under the Investment Canada Act, the federal government is equipped with powerful tools to advance towards its policy objectives of establishing a more vigorous and dynamic competitive environment in the communications sector.  The federal government should employ those tools to correct the competitive market distortions that are legacy of past monopoly models of operation.