Canada’s newly competitive cellphone market at risk
This news article describes the competitiveness currently in the wireless industry. The niche was previously dominated by the Big Three – BCE Inc. , Telus Corp. and Rogers. The Harper government tried to benefit wireless users by introducing new companies like Mobilicity and Wind Mobile by auctioning wireless spectrum. The tactic did reach a short-term success. According to the demand and supply curve theory in economic, as more suppliers enter the market to fight for market shares, the equilibrium price will decrease. This effect is notable and it is supported by the fact that wireless providers are now increasing the amount of service in their price-reduced plans.
However, the change in price might only be a short-lived success. The high barrier of entry in the telecom industry suggests the danger for the revival of the Big Three monopoly. First of all, one wireless provider needs to raise a large amount of capital in purchasing wireless spectrum and retail stores while building towers. Secondly, the government’s regulation on the industry needs refinement. Anthony Lacarvera, the chairman of Globalive Wireless Management Corp. , noted that “The Government doesn’t have … teeth to enforce polices that are in place.” For example, the Canadian government failed in the policy in having the incumbents to share the spectrum tower with new entrants. Thirdly, the only point of difference between providers is the price because of the underestimation in the number of Canadian cell phone holders. New entrants struggle to gain market share by decreasing price amount to a level that may lead to deficit. Many players might withdraw under financial difficulty. Eventually, the market share will be redistributed to the Big Three and oligopoly will be resumed. To attain a permanent success, instead of concerning on how to attract new competitors, I believe the government should begin the reformation of the telecom industry by focusing in maintaining a sustainable competition.
To read the article, please click:
http://www.theglobeandmail.com/technology/tech-news/canadas-newly-competitive-cellphone-market-at-risk/article533723/?page=all
