Chapter 10 - Industrial Organization in Canada

http://www.metronews.ca/vancouver/canada/article/548951--ottawa-gets-canadians-advice-on-foreign-ownership-of-telecom-companies--page0

Summary:
A recent article talks about the possibility of the telecom industry opening up its doors to foreign investment. The government is aiming to create more competition in this industry which is dominated by the three major companies – Bell, Rogers, and Telus. The government provided three options for increased foreign investment. Firstly, increase the foreign voting shares limit from the current 20% to 49%. Secondly, fully lift ownership restrictions on small telecom companies with market share of 10% or less. Lastly, remove all foreign ownership restrictions. Foreign investment will encourage competition, which leads to lower prices for consumers. Grant, a telecom analyst, stated that Canadians paid the highest prices for wireless communication in the world!

Connection:
The connection between the article and our text is foreign ownership. The government wants to open up the telecom industry to foreign ownership, aiming to create more competition and attract more investment into Canada. In fact, foreign ownership will have several benefits, such as increased capital investment, advanced foreign technology, increased employment, and increased competition. Last of all, the most important one for consumers, are lower prices, because the telecom companies will have less market price control when another member is brought into play. They have “mutual interdependence” in an oligopolistic relationship, as stated in the book.

Reflection:
I believe that opening up our telecom industry to foreign ownership is a great idea. I agree with Mr. Grant because we Canadians are indeed paying the highest wireless communication prices in the world! We are being overcharged because the few telecom companies have too much market price control. Eliminating restrictions on foreign ownership for telecom companies will create more competition, therefore bringing down our telecommunication prices. Of the three options that the government provided, I personally prefer the first suggestion – increasing foreign ownership voting shares limits to 49%. This will have positive effects to competition, but does not remove all restrictions as if we were selling Canada.