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  • Ted Woodhead

Innovation over Regulation - A better idea!

Updated: Apr 9

In my post on March 25, 2024, I sought to highlight the comparative advantage that Canada enjoys in its advanced and robust digital infrastructure. In the post, I referred to the preliminary conclusions of the European Commission that found that Europe as a whole is falling behind other advanced economies in respect of digital infrastructure. The Commission referred primarily to the United States, Japan, South Korea and China and India, but comparing the European results to date with similar Canadian data it became readily apparent that Europe is falling behind Canada too.

There are a variety of plausible explanations for this, but one of the biggest drivers of poor performance is regulatory overreach or putting it another way, prioritizing regulation over investment and innovation. Europe has a complicated regulatory structure. Politicians and technocrats in Brussels establish overarching rules that are supposed to be followed and administered in the domestic markets of the members. That is the theory at least. In practice, domestic European regulators interpret directives in divergent ways. This can be seen with the relative performance or underperformance of the member states. Some perform well and others less so, but on the whole Europe underperforms. Politicians and regulators often refer to Europe as some form of paragon of success. It simply is not. Parties relentlessly seeking regulatory interventions frequently refer to examples from Europe as successful outcomes. They are simply not.

I was therefore intrigued to read an article dated March 28th, authored by Nick Wood in reporting on a speech given by Ericsson CEO Börje Ekholm. In the article Wood reports that Ekholm said, "Europe's lawmakers are prioritising regulation over innovation, to the detriment of telcos’ scale and the ability of the industry to invest in new technology relative to the US, China and India." Ekholm goes on to point out that average investment in digital infrastructure in Europe is currently less than half that in the USA, and that Europe needs to switch its priorities to focus on innovation more than regulation.

Ekholm is not alone in his view. He joins others who have been saying the same thing including ETNO, the GSMA and the CEOs of Deutsche Telecom, Vodafone and Orange and Telefónica.

Canada is not immune to global trends, but it can control whether it repeats the mistakes made in other jurisdictions and specifically the EU. In particular, Canadian politicians and regulators shouldn't lean in to regulation as the answer to all perceived problems. Europe has stubbornly refused consolidation despite the fact the financial circumstances of their digital sector being sub-optimal, clearly indicates the necessity of it, to put it mildly. The EU has used antitrust and other forms of regulatory overreach as a punishing bludgeon and the effects are crippling. If companies cannot grow their top lines, investment will decline and we are beginning to see signs of that here in Canada.

Squandering our comparative advantage relative to our global peers would be an own goal and a huge mistake. The CRTC is currently engaged in consultations in both telecom and broadcasting that could have serious implications for the health of these industries and our ability to invest. There is tremendous pressure on the CRTC from politicians and other government departments to do things that would emulate the frameworks from other jurisdictions whether those frameworks are well thought out or not. The results do not appear promising. We have been forewarned.

The last word comes best from Mr. Ekholm, "The ultimate outcome of this continued approach could see Europe relegated to a museum with great art but no leading industries, lacking in digital technology, innovation and industrial leadership on the global stage". Canada would be best not to follow that example.

@CRTCeng @ISED @telecoms @nickwood


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