The debate over the three Canadian telecommunications giants and the possibility of U.S.-based Verizon entering the Canadian market has once again brought consumer issues to the fore.
Regrettably, when it comes to government policy, the interests of consumers are often neglected.
Government policy is often set not with an eye to what is best for consumers but in response to pressure from existing interests. Thus, for example, federal policy on airline competition forbids 鈥渇oreign鈥� airlines from picking up and dropping off passengers within sa国际传媒. That protects domestic airlines from competition; it means airfares are higher in sa国际传媒 than they would be with full competition, such as in the European Union.
Or consider dairy and agricultural marketing boards. Existing dairy and poultry producers are protected behind a wall of high tariffs on imports that range from 202 per cent on skim milk to 298 per cent on butter, with cheese, yogurt, ice cream and regular milk within that range.
Then there is automobile insurance. There, contrary to myth, the rule is that private-sector provinces have cheaper premiums than do provinces with government monopolies. (The exception is Ontario, and the reason for the exception is important: higher claims costs per vehicle, which drives costs up, not because the private sector operates in that province.)
In each case, when governments restrict competition, or outlaw it entirely, they do so at the behest of existing interests or producers.
Thus, politicians protect 鈥渄omestic鈥� airlines at the expense of travellers; governments give 12,965 dairy farmers protection and pricing power over 35 million shoppers; where competition in basic automobile insurance is banned, provincial governments protect their own Crown corporations at a cost to drivers.
If governments were interested in what鈥檚 best for consumers, here鈥檚 a simple suggestion: Stop favouring existing producers and players, be they government-owned corporations or private-sector corporations.
For competition to flourish, it doesn鈥檛 take a reinvention of the competitive wheel.
Instead, some straightforward principles can be applied that open markets and allow consumers to purchase goods and services based on what鈥檚 important to them.
First, ensure there are no government-induced policy barriers to entry into a marketplace (this because no one can possibly know the 鈥渞ight鈥� number of firms that will compete for consumers). When the federal government prevents a foreign airline such as Lufthansa from picking up and dropping off passengers in sa国际传媒, that鈥檚 a barrier to entry; it should be scrapped.
Second, stop assuming a monopoly provider, including in the public sector, somehow leads to lower prices. In some cases, Crown corporations might charge less than a private provider in some other province. They can accomplish this only by neglecting investments in infrastructure or by allowing Crown debt to build up.
In other cases, such as in government-owned insurance companies, cross-subsidization of certain cohorts can take place at the expense of others and lead to the illusion of lower prices. In reality, there is no downward pressure on average prices because of tough competition, since such competition is, by law, absent. In general, if governments were so sure their Crowns were the most efficient providers, they鈥檇 open up the market to competition.
The benefit of favouring consumers over producers is not theoretical. One can observe how competition works every day. Grocery stores compete on many items and adjust their pricing daily to reflect what the 鈥渙ther guy鈥� is up to.
The European Commission-Mobility and Transport, the agency tasked with overseeing transportation, has long noted that wide-open airline competition has resulted in prices that 鈥渉ave fallen dramatically, in particular on the most popular routes.鈥�
The benefits have been widespread: 鈥淐onsumers, airlines, airports and employees have all benefited,鈥� notes the European Union, 鈥渁s this policy has led to more activity, new routes and airports, greater choice, low prices and an increased overall quality of service.鈥�
Back in sa国际传媒, if governments wish to actually favour the ordinary consumer, they must abandon their habit of protecting existing cartels, producers and vested status quo interests over the more invisible but most important interest: the consumer.
Mark Milke is a senior fellow at the Fraser Institute.
