Foreign Investment Restrictions as Industrial Policy: The Case of Canadian Telecommunications

We assess the economic harms that would accrue if Canada were to adopt asymmetric rules of foreign ownership for incumbent carriers and entrants. We explain the current Canadian regulatory climate surrounding foreign investment in Canadian telecommunications. Competition in the telecommunications industry is generally robust, which suggests that rules aimed at favouring entrants are not necessary. Moreover, Canadian entrants are equally capable of attracting foreign capital as Canadian incumbents, which suggests that foreign investment rules aimed at favouring entrants are especially unwise. Next, we review the U.S. attempt to stimulate competition in local telecommunications markets through an analogous form of asymmetrical regulation. Despite the best of intentions, United States regulators have not been able to stimulate meaningful local competition through such asymmetrical regulation. Moreover, the resultant easy access to capital created wasteful invest- ment by the entrants. Second, licensing restrictions on foreign carriers in the U.S. reflect another form of asym- metric regulation because they apply only to wireless licenses, not wireline operations. This licensing process confers substantial discretionary authority on the FCC, which has allowed the process to become highly politicized. Finally, asymmetric rules for broadband services have cemented the position of cable modem providers vis-à-vis DSL providers. The U.S. experience highlights several issues that may be relevant for Industry Canada as it assesses the effect of changes in foreign ownership rules on competition in telecommunications. In particular, the investment of more than $40 billion by entrants in the U.S. local telecommunications markets has been almost com- pletely squandered. This asymmetric regulation did not succeed in attracting entrants that would have a measur- able effect on the retail price of telecommunications services. Given the nature of demand for and supply of telecommunications services, competition is more likely to develop across different platforms — cable, wireline, and wireless — not among small niche players lured into the marketplace by regulators. With the lessons of the U.S. regulatory experience in mind, we review two specific Canadian proposals regarding foreign investment rules: tiering and licensing. We conclude that a tiering approach would harm com- petition and infrastructure investment because it would reduce the incentives of incumbent carriers to invest in network upgrades or new services, and potentially aggra- vate the problem of excess capacity that plagues the telecommunications industry. A licensing approach for foreign investment restrictions should also be rejected. Licensing would impose a further layer of regulation on the marketplace, reduce foreign investment, and expose foreign carriers to political pressures. The Canadian agencies should not follow their southern neighbours down the road to despair

Is America Exporting Misguided Telecommunications Policy? The U.S.-Japan Telecom Trade Negotiations and Beyond

Global telecommunications markets have traditionally been closed to foreign trade and investment. Recent World Trade Organization negotiations resulted in a Basic Telecommunications agreement that sought to construct a multilateral framework to reverse that trend and begin opening telecom markets worldwide. Regrettably, this new WTO framework is quite ambiguous and open to pro-regulatory interpretations by member states. In fact, during recent bilateral trade negotiations with Japan, U.S. government officials adopted the position that the new framework allowed them to demand that the Japanese government adopt very specific regulatory provisions regarding telecom network interconnection and pricing policies. The Office of the U.S. Trade Representative argued that Japanese officials should require their domestic telecom providers to share their networks with rivals at a generously discounted price to encourage greater resale competition. Those interconnection and line-sharing rules were borrowed directly from the U.S. Telecommunications Act of 1996, a piece of legislation that remains the subject of intense debate within the United States. Good evidence now exists that those rules generally retard net-work investment and innovation by encouraging infrastructure sharing over facilities-based investment. Consequently, the USTR has generated resentment on the part of Japan and other trading partners as it has attempted to force them to adopt heavy-handed telecommunications mandates that have very little to do with legitimate free-trade policy. The USTR must discontinue efforts to impose American telecommunications regulations on other countries as part of free-trade negotiations and should instead focus on reforming or eliminating the most serious barriers to foreign direct investment both here and abroad

An Antitrust Analysis of the Case for Wireless Network Neutrality

The ongoing debate about possible implementation of regulatory rules requiring “network neutrality” for wireless telecommunications services is inherently about whether to impose a prohibition on the ability of network operators to control their vertical relationships. Antitrust analysis is well suited to analyze whether a wireless network neutrality rule is socially beneficial. Implementing network neutrality rules would be akin to using a per se antitrust rule regarding vertical relationships instead of the rule of reason analysis typically applied to vertical relationships in antitrust. Per se rules are used to prevent actions that rarely, if ever, have any pro-competitive benefits, such as price-fixing agreements. Rule of reason analysis is used when there are potential efficiency gains from the actions under investigation. Some vertical practices of the wireless carriers, such as bandwidth restrictions, may appear to be anticompetitive, but may also have plausible efficiency justifications so should be judged under rule of reason analysis. Economic examination of the wireless industry shows significant competition between networks which reduces the concern about vertical relationships, but some areas that should be monitored by antitrust and regulatory authorities. We propose several regulatory changes that would likely increase wireless competition and lessen the perceived need for prophlactic network neutrality rules while at the same time allowing efficiency-enhancing vertical relationships.network neutrality, wireless internet, antitrust,

European Law and Regulation of Mobile Net Neutrality

Mobile is a rapidly growing and potentially major element of the future Internet, and its environment cannot be sensibly considered in isolation from fixed networks [2]. A note on terminology: Europe uses the term Mobile Network Operators (MNOs) while the United States uses 'wireless' Internet Service Providers (ISPs) [3]. 'Wireless' is somewhat more open in the United States. In Europe, mobile has always made special pleading for forms of self-regulation, as we will see. The article introduces mobile broadband, then considers net neutrality in the fixed environment including the new laws passed in November 2009 in the European Parliament, before considering the mobile net neutrality debate, the degree of price control regulation exerted on European mobiles and the MNOs' vigorous rear-guard anti-regulation defence. Finally, I look at the effects of this regulatory asymmetry and whether MNO calls for mobile to be treated differently from other ISPs can be justified. I conclude by examining what the effect of price and content control on mobile is likely to be for incentives for fixed ISPs and produce a result that I describe as the 'fixed' strategy

Telecommunications Policy Reform in the United States and Canada

The Telecommunications Act of 1996 marked a fundamental departure in U.S. regulation. Monopoly market structures were officially deemed inefficient, and extensive rules were authorized to jump-start competition. Canada opened long-distance markets to entrants in 1992, and did likewise with local telephone access five years later, but employed distinct tools from those utilized by U.S. regulators. In this paper we compare and contrast the two alternative approaches to deregulation. The conventional wisdom is that telephone competition in the U.S. has lagged under the Telecommunications Act. Rates are alleged to have risen for most customers, just the reverse of what was promised by policy makers. We examine broad trends within the sector, and conclude that the Act, while flawed, actually scores well in comparison to previous reform measures. We prefer the approach taken in Canada, however, which is less regulation-intensive in the transition to competition.

Wireless Local Number Portability: New Rules Will Have Broad Effects

After a delay of over seven years, wireless local number portability rules ( WLNP ) finally went into effect on November 24, 2003. These rules, promulgated by the Federal Communications Commission, allow wireless subscribers to change service providers within a given location while retaining the same phone number. The rules also allow consumers to transfer a land-based telephone number to a cellular provider. These new choices will likely have a significant impact on the wireless industry and increase competition in an already intense playing field. This iBrief provides a summary of the new rules, looks at the history and litigation, and predicts how increasing wireless options will benefit consumers and promote competition in local telephony

Spectrum Trading: An Abstracted Bibliography

This document contains a bibliographic list of major papers on spectrum trading and their abstracts. The aim of the list is to offer researchers entering this field a fast panorama of the current literature. The list is continually updated on the webpage \url{http://www.disp.uniroma2.it/users/naldi/Ricspt.html}. Omissions and papers suggested for inclusion may be pointed out to the authors through e-mail (\textit{[email protected]})

The End of Net Neutrality

In 2005, the FCC changed the competitive landscape of the high-speed Internet access industry by classifying both DSL and cable modem service as information services. While many hail this move as a victory for competition and free markets, others fear the ruling could jeopardize the future of the Internet. This iBrief examines the potential end of net neutrality and concludes that new federal regulations are unnecessary because antitrust laws and a competitive marketplace will provide consumers with sufficient protection

The Measure and Regulation of Competition in Telecommunications Markets

The development of the canadian telecommunications web is significantly influenced by the regulatory framework put in place to oversee the evolution of the web toward a competitive system. This paper has two specific objectives: first, to develop a methodological framework, which will allow a proper characterization of the level of competition in the telecommunications industry, more specifically in the residential local access market and second, to recommend some (significant) changes in the CRTC approach to the regulation of the Canadian Telecommunications industry. I argue that the current approach to the regulation of telecommunications in Canada is likely to generate significant harms to consumers and businesses as well as efficiency losses for the Canadian economy. I conclude that there is a urgent need for a telecommunications regulatory reform, with a stronger accent put on three crucial roles of the telecommunications regulator as the trusted generator of information for the consumers, as the manager of the level playing field conditions, and as the promoter of efficient investment programmes. Le développement du réseau canadien des télécommunications est influencé de façon significative par le cadre réglementaire adopté pour régir l’évolution de ce réseau vers la concurrence. Cet article a deux objectifs principaux : d’une part, développer un cadre méthodologique adéquat pour caractériser le niveau de concurrence dans l’industrie des télécommunications, plus particulièrement du marché des services résidentiels locaux, et, d’autre part, de proposer des changements (importants) au cadre réglementaire actuel. Je montre que le cadre réglementaire actuel peut engendrer des problèmes importants pour les consommateurs et l’industrie ainsi que des pertes d’efficacité pour l’économie canadienne. Il existe un besoin urgent de réformer le cadre réglementaire actuel, en mettant l’accent sur trois rôles essentiels de l’agence de régulation des télécommunications comme fournisseur d’informations aux consommateurs, comme gestionnaire des conditions de concurrence loyale pour toutes les entreprises et comme promoteur de programmes d’investissement efficaces.competition, regulatory reform, telecommunications , concurrence, réforme de la réglementation, télécommunication