Once in a rare while we get a glimpse into what is really happening to the economy. We see clearly some of the incorrect assumptions that have brought the world economy to its knees.
The Canadian Radio-Television and Telecommunications Commission (CRTC) have ruled that incumbent phone companies such as Telus and Bell-Aliant must give back money they overcharged customers between 2002 and 2006.
In 2002, the CRTC allowed phone companies to charge more than the regulated prices so that new competitors entering the home phone market could undercut them. At the time, the CRTC held the (mistaken) belief that the higher rates would increase business for local service competitors.
Let’s repeat for clarity. The reason, and it’s hard to believe, that telecommunications companies were allowed to overcharge customers was so that new companies entering the field could charge less. Somehow this was supposed to increase business.
Over the years, the companies collected $1.6 billion and used some of that money to further muddy the landscape by charging lower wholesale prices to companies providing long distance, such as Yak and Primus, for accessing their networks.
Let’s see if we can understand. The government thought Canada needed more competition in the communications field, even though it was already a price-regulated industry. So, instead of letting the free market take its course, the government’s regulating body, the CRTC, decided to manipulate the process. Customers were charged extra money so that they could have the option of switching providers. And, somehow, this was supposed to increase business.
“We are the lackeys of the United States. Canada does not have the same government structure, and we don’t have the population density.” -
Something is rotten in the State of Denmark. Why did competitors need enticements to enter the market, if the market were potentially lucrative? In a free unfettered market, businesses seek out opportunities. They don’t wait for government involvement and manipulation of the process.
Canada is dancing to the free market tune of the United States. But the small number of people in this vast country probably cannot support a free market, when it comes to basic services such as telecommunications. Canada has too few people for the vital communications industry to be free to operate purely for profit.
The CRTC knows telecommunications is a basic service, in spite of the fact that they seem befuddled over free markets and regulations. Maybe this is why they decided to help the free market, to nudge it in a certain direction. Still, it’s either a free market or it is not a free market.
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