Why we don’t need Internet price controls

The market should determine what Internet access is worth, not government regulators

CALGARY, Alta. Feb. 14, 2016/ Troy Media/ – Sign me up! I want $10-a-month high-speed Internet, too.

The Association of Community Organizations for Reform Now (ACORN) is telling us that Canadian prices are out of whack and too high. The group is asking the Canadian Radio-television and Telecommunications Commission (CRTC) to mandate that $10-per-month high-speed Internet be made available to low-income families.

Yes, the group is asking for Internet price controls.

In a January report titled [popup url=”https://www.acorncanada.org/internet-all-internet-use-and-accessibility-low-income-canadians” height=”1000″ width=”1000″ scrollbars=”0″]Internet for All[/popup], ACORN reported that 83.5 per cent of respondents to its survey considered high-speed Internet “extremely expensive” and that 59 per cent paid for Internet access by forgoing other household necessities. Some 64 per cent had to cut into their entertainment budget, while 13 per cent even dipped into their rent payment money for Internet service.

What does ACORN make of the data it collected? The report says, “ACORN Canada members feel strongly that access to home Internet is essential and a right.” And it says, “The United Nations now considers access to Internet to be a human right, comparable with freedom of speech.” In the Toronto Star on Feb. 2, ACORN spokeswoman Alejandra Ruiz Vargas said that a lack of affordable Internet service “excludes low-income Canadians from equal opportunities to education, employment, government services and modern civic participation.”

ACORN wants us to believe that, without Internet access, low-income Canadians cannot make satisfying social connections and will be unable to better themselves economically. How else could someone satisfy their basic human right to Facebook?

Now, these claims are terribly confused and chock-full of hyperbole. I certainly hope ACORN sees them as such, because it wasn’t that long ago that Canadians were perfectly capable of making meaningful friendships and finding employment outside of the virtual world. Many still do. Were the human rights of previous generations that lacked affordable high-speed Internet service being violated?

What this reveals is that ACORN’s respondents didn’t distinguish between their wants and needs.

But ACORN is correct about the price of Internet service. Netflix executive Ted Sarandos said in 2013 that Canadians have “Third World access to the Internet,” and that it is “grossly overpriced.” There’s little doubt that Canada suffers from poor Internet service and that access is expensive. This was confirmed by a Harvard University study in 2009 and by an Organization for Economic Co-operation and Development (OECD) study in 2013.

But are these quality and cost problems best solved by mandating $10-per-month high-speed Internet?

A 2011 report by the C.D. Howe Institute argued that the high price of Internet service is directly related to a lack of competition in the Canadian marketplace. And as Jesse Kline pointed out in a National Post article two years ago, removing the regulatory and bureaucratic impediments to competition — like our anachronistic foreign ownership rules and the barriers to new infrastructure investment — would go a long way toward helping to solve this problem.

ACORN has a history of diagnosing a real problem yet proposing precisely the wrong solution. In 2010, ACORN was part of a coalition of groups that sued the federal and Ontario governments alleging a failure to develop an effective housing strategy. The coalition’s legal documents were high on platitudes but low on concrete ideas. Yet they had no qualms about asking that more taxpayer money go to subsidize or purchase housing for low-income earners — effectively expanding the governments’ interference in the housing market. As it turned out, the Ontario Superior Court of Justice found little merit to their claim, so the case was tossed out in 2013.

Unlike Internet access, a lack of affordable housing is not a trivial matter. But what is the most effective solution in terms of costs and results? The Demographia International Housing Affordability Surveys have repeatedly confirmed that the affordability of housing is overwhelming linked to the amount of government interference in the housing market — the greater the interference, the less affordable housing becomes. And yet ACORN advocated for more government interference, which would only exacerbate the problem.

The same problem presents itself whether it’s Internet access or affordable housing. Government interference drives up prices while constraining the problem-solving power of a free market.

If ACORN wants to effectively advocate for those in poverty, it’s doing it wrong. It should be advocating for less interference, fewer regulations and a less powerful bureaucracy.

The solution is never more government. It’s less.

Derek James From is a lawyer with the [popup url=”http://www.theccf.ca/” height=”1000″ width=”1000″ scrollbars=”0″]Canadian Constitution Foundation[/popup]. 

Derek is a Troy Media [popup url=”http://marketplace.troymedia.com/our-contributors/” height=”1000″ width=”1000″ scrollbars=”0″]contributor[/popup]. [popup url=”https://www.troymedia.com/become-a-troy-media-contributor/” height=”600″ width=”600″ scrollbars=”0″] Why aren’t you?[/popup]

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One Response to "Why we don’t need Internet price controls"

  1. Avatar
    George Burger   February 14, 2016 at 6:22 pm

    Derek James is absolutely right, regulated retail price controls is not the answer. In fact, we had regulated retail price controls on telephone services prior to 1992, and the moment competition was allowed i.e. mandated access to phone infrastructure, landline phone costs fell through the floor, especially long distance.
    Similarly, the answer today is not regulated or subsidized retail internet prices, but a robust competitive environment where consumers have more than one or at best two sources of internet service to choose from. Loosening foreign investment restrictions on infrastructure(I assume that is the sort he means, not domestic investment, there are no restrictions on that) is not the answer either since no one, not Verizon, not AT&T not no one, is going to replicate the lines already laid by Bell and the cablecos after their decades of near monopoly privileges.
    There is only one answer and that is to ensure that VMedia and other independent internet service providers, like phone competitors which blossomed after 1992, are given fairly priced wholesale access to existing facilities. That is the central challenge, even more so as we see Bell trying to persuade the new government to end all such access, and effectively wrench the market back to the same monopoly conditions that existed with phone. If that succeeds, Bell’s shareholders win big, and everyone else loses – big.

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