Barrel Strength

When I find the National Post getting soft I turn to the Financial Post for the really conservative market-oriented view. Its castigations of the global warming con job have been a source of amusement and great comfort. By contrast, its views on telecommunications have been economically illiterate.

The Financial Post’s  (or its lead editorialist Terence Corcoran’s) view of telecommunications has been: we have enough competition now to deregulate. Two competitors in the general area, cable and telephone, are enough, and three is a sufficient cause to leave the market alone. No attention needs to be paid to the market conditions in a particular place; it is sufficient that competitors exist in the same urban area, regardless of whether your building is served by one or two carriers. Mandated sharing of facilities, where the big incumbents must share facilities with ISPs, is just “telecom trotskyism”, in the glorious invective of Terrence Corcoran.

Thus it was with interest I read “Abolish the Canadian rail monopoly” by François Tougas in today’s Financial Post. Tougas is a senior lawyer at Lang Michener and an adjunct professor of competition policy at the UBC Faculty of Law - not a likely candidate for Trotskyism.

Tougas says:
“The best way to regulate a natural monopoly is to introduce competition by allowing others (a “guest” railway, in this case) to access the track infrastructure of the incumbent (the “host” railway) to vie for the business. Modern economies already do this with other network industries like telecom, cable and electricity and gas distribution.”

But where barriers to entry are “tremendously high”, says Tougas, railways are able to carry on free from competition. Where you cannot build a rival rail-line, the existing regulatory remedies available to captive shippers are insufficient. There is no market. Tougas recommends “running rights” - the right to pass your traffic over the lines of another railroad, using someone else’s railcars, and paying them a regulated rate for the privilege. Otherwise there occurs an unjust transfer of wealth from industries to carriers.

There is no difference in principle between “running rights” in the railway case and “access to underlying facilities” in telecommunications. Why then does the Financial Post rail at Professor Michael Geist (and by extension, all the companies which benefit from sharing of underlying facilities, such as MTS-Allstream) as Trotskyites, and Professor Tougas gets a free pass?

Are ideas made acceptable by their content, or by their provenance? Is what is good for natural resource producers in Flin Flon bad for businesses in Markham and Pierrefonds? Should the telephone companies and other carriers take a part of the profits of all electronic transactions, because they can? But railroads should not? One is tempted to think that the reason why different positions are taken by the Financial Post on the identical issue is that we can visualize railroads; we do not really have a precise mental image of networks.

For a further treatment of Terence Corcoran’s sadly mistaken views on intellectual property, see the comment by the economist Joseph Potvin on digital rights management.