Still out of the service area

“As a former minister responsible for Canada’s telecommunications policy,” chamber president Perrin Beatty had warned, “I can say that it’s infinitely more important to be right than to be fast. With so much at stake for Canada, it’s important to take whatever time is needed to get the decision right.”

Had the government heeded those words, it would have avoided the dilemma it fell into when Verizon decided it was not interested in joining the Canadian market. Not only do Harper and his industry minister look like idiots, but they have told the public and financial markets they were willing to bend the rules and cut corners for a quick fix that had never been confirmed.

It is hard to justify the current ownership restrictions that keep foreign capital out of Canada’s wireless sector. Even such beneficiaries as George Cope, head of Bell Canada, think the policy should be changed.

The bureaucrats at Industry Canada persuaded the federal cabinet that it would be easy in 2008 when Ottawa set aside wireless spectra for three new entrants to take on the Big Three Canadian wireless carriers – Bell, Rogers Wireless Communications Inc. and Telus Communications Inc. – and give consumers better prices and service through the resulting competition.

Unfortunately, government doesn’t decide which companies meet their sales targets. Markets do.

Now, the three new wireless entrants – Wind Mobile, Mobilicity and Public Mobile – are struggling, prices have not changed significantly and a key government promise is looking like hot air.

Ottawa’s latest campaign to deliver its promise of cheaper mobile phone service began to spin out of control almost as quickly as it started. The Big Three, quite rightly, accused Ottawa of giving Verizon special treatment in order to salvage the feds’ initiative. The special treatment involved relaxing foreign ownership rules by allowing Verizon to take up the small Canadian entrants while keeping those entrants’ already designated spectra. That spectrum ownership would have been permanent.

James Moore, the new industry minister, responded by attacking the Big Three’s integrity rather than their argument. Basically, he called the Big Three liars without saying what they were lying about.

Moore’s performance so far has been a disappointment. When he replaced Christian Paradis, everybody’s idea of a lightweight minister, we all were looking for leadership and competence. Perhaps the Prime Minister’s Office should let the new industry minister do his job.

If the government thinks foreign ownership rules have outlived their usefulness, then it should change the rules through the democratic process.

Deciding to enforce the rules on a case-by-case basis will only promote something that is bad for financial markets and economic growth – regulatory uncertainty.

The Harperites say Canadians have put up with high wireless prices long enough, and that the government works for consumers, not big business. But that’s not the real reason Ottawa was in bulldozer mode on this issue.

The Harper government badly needs a deliverable, now that the Canada-Europe Trade Agreement is in purgatory and may stay there for years, while the Senate spending scandal continues to rage on like a brush fire.

This year is turning out to be one in which the Tories talked a good game but delivered little in tangibles to put in the display case before the 2015 election.

Arbitrarily changing the playing field to suit political strategy undermines investor confidence, delays projects that lead to economic growth and increases transaction costs.

It can also get you tossed out of office.

© 2013 Investment Executive. All rights reserved.