How to kill corporate investment
The flow of policy follies out of the Trudeau Liberal policy machine has been endless — carbon taxes, internet regulations, mass immigration, EV and battery plant investments, pharmacare, dental care and grocery conduct codes. In this column, we take a look at two other emerging policies: The CRTC telco folly that prompted BCE to call off $1 billion in capital spending; and Environment Minister Steven Guilbeault’s “the future is electric” plan for national electricity regulations. The interventions aim to expand federal control over the Canadian telco industry and oversee the provincially controlled electricity grid.
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We begin with the latest Canadian Radio-television and Telecommunications Commission (CRTC) meddling in the telecom market — a move this week that prompted BCE to cut $1 billion from planned capital investment in new high-speed fibre services. The CRTC plan came with the usual regulatory claims about the need to “promote competition.” But Canadians might well be wondering: How is competition promoted when the CRTC decision prompts companies to slash investment in new products and services?
The answer is simple: the CRTC is not promoting market competition. The commission’s economic model is bureaucratic regulation in which a government agency determines the corporate structure of the industry, sets regulations, and fixes prices.
Announced Monday by Vicky Eatrides, the CRTC’s new chief executive, the plan requires the major telcos — mainly Bell and Telus — to open up their networks to allow companies with no networks to sell their services to consumers.
According to Eatrides, the CRTC is “acting quickly to improve internet services competition across Canada.” That statement, however, requires accepting CRTC economic models that have no relation to any real definitions of market competition.
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First, the CRTC is directing the market. Under its new action plan for the industry, the major telcos have been ordered to provide, within six months, access to their high-speed fibre networks to small companies that have no networks. When a government comes at an industry with a shotgun and orders companies to behave in certain ways, that’s a government-run regime, not market competition.
How to kill corporate investment
The CRTC claims to be “providing competitors with a workable way to sell internet services using the fibre-to-the-home networks of large telephone companies in Ontario and Quebec.” But these “competitors” are not competitors; they are effectively clients of the major networks that the networks are being forced to deal with.
The second aspect of the fake competition regime is price regulation. Competition implies that market competition sets prices. Not in this case. The CRTC has established what it describes as “just and reasonable interim rates that wholesale-based competitors will pay those incumbent companies for access.” For example, the CRTC approved “on an interim basis” a rate of $68.94 for Bell Canada to provide up to 1,500 megabites per second (mps), rising to $78.03 for 1,501 to 8,000 mps. Service charges are also regulated, with $246.30 set for Bell to install, move or change a home fibre connection if it includes a site visit.
The CRTC claims the regulated rates “were chosen to allow Canada’s large Internet companies to continue investing in their networks to deliver high-quality services to Canadians.” The fact that Bell Canada instantly announced a $1-billion cut in investment suggests there are big problems with the CRTC anti-competitive regulatory model.
Another Liberal intervention under heavy criticism is Steven Guilbeault’s Clean Electricity Regulations (CER), a draft plan the environment minister says is designed to increase Canada’s economic competitiveness, transition the energy economy to renewables, and fight climate change.
When Environment Canada’s Nov. 2 deadline for comments on the CER passed, provinces and corporations had filed major objections to the green grid transition. The government of Alberta, in a highly critical response, called Guilbeault’s plan “unworkable.” Because Canada’s electricity system is provincial, and grids are provincial, “the challenges of crafting national legislation for electricity which, as a provincial jurisdiction, has different models of delivery across Canada … we do not believe ECCC (Environment Canada) is in any position to finalize these regulations. ECCC should, therefore, scrap these regulations.”
Electricity Canada, the national industry association whose members include most major corporations operating in the electricity sector, from Alberta’s ATCO to Ontario Power Generation, said it is unclear if compliance with these proposed regulations “is possible at any price.”
Other highlights of the Electricity Canada critique of Ottawa’s plan include:
• The expected costs of the regulations modelled are significantly underestimated and hide significant localized cost impacts within national averages. These could be severe in those provinces where the CER’s impacts will be concentrated.
• The modelling is too optimistic when measuring reliability impacts.
• The model underestimates full costs based on national optimization and is missing additional infrastructure costs.
• As drafted, the CER plan would impede companies’ abilities to respond to the needs of their grids and would make it far more difficult to reliably provide a critical service that keeps Canadians safe, at a price that they can afford.
• There is not a sufficient labour force to build the required infrastructure by 2035.
• Electricity companies will not spend billions of dollars on technology without certainty of bringing them into compliance with future regulatory requirements.
So there we have it. A major telco pulling $1 billion off the table due to CRTC interventions, and the electricity industry warning that billions in investments are at risk due to Ottawa’s electric grid regulatory plans.
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