Telecom Tweak

Antony — March 14, 2012

Canada’s federal government has taken a step in the right direction by allowing some more foreign ownership in the telecom sector. It is a small, incremental, timid, and underwhelming step, but a step nonetheless. Hopefully this can pave the way for more foreign competition in Canada’s telecom sector, which remains more expensive, and lower quality, than it should be thanks to excessive government meddling.

Unfortunately, the dialogue surrounding this issue is still imbued with statist mindsets and assumptions. It is taken for granted that government policy should interfere by “creating some competition”, and “breaking up the oligopoly”. Government regulators have a plan for how they want the industry to be structured, and are imposing regulations to force that outcome. Ownership restrictions remain on the existing companies. Mergers are restricted. The wireless spectrum auction is encumbered with rules and restrictions. Companies will be forced to offer high-speed service to rural customers.

As Murray Rothbard pointed out, it should not be government’s role to determine the structural organization of firms in the economy. Whether is is better to have many small competitors, a few larger companies, or even one large “monopoly”, cannot be known by a central authority. It is simply impossible to gather the required knowledge centrally. These are problems for entrepreneurs to solve, and should not be micro-managed by government economists and bureaucrats. Questions of optimal organization of industry cannot be determined in advance, and may end up in novel or innovative arrangements that government regulators never could have predicted. All we can predict is that in a free market, with predictable property rights and unhampered by government rules, profit-seeking firms will pursue actions that delight consumers, and achieve the most efficient and productive outcomes for society as a whole.

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