OTTAWA, Aug. 24, 2016 – The mismanagement of broadband in Europe – where state-imposed mandates and top-down regulations have contributed to underinvestment and poor network quality – offers a cautionary tale for Canada as it seeks to develop its innovation agenda.
That’s the conclusion of a new Macdonald-Laurier Institute study that offers an in-depth look at European governments’ misguided attempts to artificially create competition in the marketplace.
Andrea Renda, an expert on digital innovation in Europe, finds that government intervention has led to less broadband investment and poorer penetration with limited upside. In exchange for slightly lower prices now, Europeans will be paying in future years with sub-par broadband infrastructure that can come to hinder innovation, digital adoption, and entrepreneurship.
To read the full study, titled “Winners and Losers in the Global Race for Ultra-Fast Broadband”, click here.
He warns Canada’s new government that doubling down on the Conservatives’ attempts to manipulate the market, such as by requiring incumbent firms to grant new competitors access to their networks, will lead to long-term problems in the form of less broadband investment and deployment.
“If the state is going to mandate network access, the incentives for companies to invest in their own networks or to upgrade networks are diminished”
A robust broadband strategy should be a key pillar of the Trudeau government’s innovation agenda. Broadband infrastructure has become a driver of innovation, digital adoption, and economic growth. Everything from consumer products to high-tech business processes to medical research rely upon a digital foundation.
Renda demonstrates that Europe’s policy of mandatory network sharing has discouraged investment in the continent’s networks and diminished the positive economic benefits that high-quality networks can enable.
For example, fibre to the premises coverage is approximately double in the US compared to Europe (23 percent versus 12 percent); and overall next generation access coverage reaches 82 percent in the United States versus 54 percent in Europe. Furthermore, telecommunications revenues are dramatically higher in Australia, the US, Switzerland, Japan, Canada, Iceland, and Norway than in EU nations, which all fall below the OECD average.
Canada could learn from this experience as it currently benefits from a vibrant facilities-based competition despite recent steps in Europe’s ineffective direction, and thus has no compelling reason to follow the EU approach.
Continuing down the European path could lead to a substantial price to pay in terms of growth and jobs.
“Nobody washes a rental car and so, if the state is going to mandate network access, the incentives for companies to invest in their own networks or to upgrade networks are diminished”, writes Renda. “Incentives matter”.
Andrea Renda is a Senior Research Fellow and Head of the Regulatory Policy Unit at the Centre for European Policy Studies. He is also a Senior Fellow at Duke University’s Rethinking Regulation Program, based at the Kenan Institute for Ethics.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank in Ottawa focusing on the full range of issues that fall under the jurisdiction of the federal government.
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