Can Canadian Telephone Bills Get Any Higher? If the Rogers and Shaw merger is successful, then yes.
Canadians notoriously face outrageous telephone bills. A study done in the UK in 2020 that analyzed mobile data costs in 228 countries found that Canada ranked 209th, with higher rankings indicating higher bills. It’s understandable why, then, if someone called to tell you that Canada was losing one of its only telephone providers, you would likely slam the phone down, hanging up on them.
Canada has four major national telephone providers: Shaw, Telus, Bell, and Rogers. In recent news, Rogers has begun the process of acquiring Shaw. If this merger were successful, Canadians would be left with only three options.
It is an understatement to say that this merger is going to bleed Canadians dry (if there’s anything even left). The telephone providers hold so much market power that they are able to push their phone plans to exorbitant rates. Canadians should be concerned about this monopolistic behaviour. The lack of competition faced by these companies is what sustains these prices. When one company decides to increase prices slightly, instead of maintaining or lowering prices to capture the other company’s demand, the other firms will match that company’s higher rates. These firms have realized that they all succeed when Canadians are the ones paying.
The reason behind the lack of competition in this market can be simplified to two main structural barriers. First, new companies are disincentivized from partaking in the Canadian market because of the regulations imposed by the Canadian Radio-Television Telecommunications Commission (CRTC). The CRTC requires telecom companies to be owned by Canadian citizens. As a result, all foreign investment is restricted. The lack of potential foreign investors protects these companies from fewer competitors, and thus never allows them to compete for national demand. Second, there are very few Canadian competitors because of the astronomical start-up fees. Canada is an extremely large country that is not densely populated. Therefore, new companies have to pay sizable sums in order to reach Canadians coast to coast. The result is that Canadians are left with few firms to choose from. To make matters worse, cell phone service and internet access are necessary goods and thus have an inelastic demand -- consumer demand does not change in response to price changes. It follows that consumers begrudgingly choose to pay despite the unreasonable sums.
The notion that increasing competition would aid consumers is not merely a hypothesis. Saskatchewan and Quebec both have the lowest telephone bills across the country. This is not a surprise since they each have a telephone company that works solely in their province. Saskatchewan is the home of SaskTel and Quebec has Videotron. Therefore, the citizens of these provinces don’t have four but rather five telephone companies to choose from. The lower prices seen in these provinces highlights the need for more competition in the telecommunications sector across Canada.
The good news is that the merger between Rogers and Shaw can still be stopped. It is currently under review by the Competition Bureau of Canada. Given its blatant anti-competitive nature and the harm that it would cause to consumers, the deal should not be allowed. In a broader sense, however, reversing this merger would only allow us to return to a status quo that itself is unsatisfactory. The CRTC needs to loosen regulations and find ways to increase competition.