Telus is an interesting company. Whereas BCE and Rogers have used their dominance in telecommunications to get into professional sports and entertainment, the third member of Canada’s telco oligopoly is building adjacent businesses in health and agriculture. Telus’s side hustles are based on Maslow’s hierarchy of needs, while the other two are inspired by Nirvana: Here we are now, entertain us. There’s a qualitative difference. 

Maybe one day Telus will be known as a healthcare provider or an agtech company. For now, it’s still primarily in the business of providing internet services and mobile communications, a heavily regulated industry that inspires innovation in unproductive activities such as lobbying and regulatory arbitrage. 

Vancouver-based Telus’s base of power is British Columbia and Alberta. Chief executive Darren Entwistle is trying to expand in Ontario and Quebec, but not by building expensive new infrastructure—at least not right away. Instead, Telus is taking advantage of a 2023 CRTC ruling that said internet providers must share their fibre lines at regulated wholesale rates. Its Eastern rivals aren’t keen. 

“What if you let airlines fly each other’s planes?” said Frédéric Perron, chief executive of Montreal-based Cogeco. “What would happen? Well, they would be weakened.” 

The CRTC’s idea was to promote competition in a concentrated industry where barriers to entry are high and the incentives for the big three companies to expand aggressively are low. Forcing telecommunications companies to share their networks might let upstarts get a toehold and provide consumers with more choices. But the ruling has had the perverse effect of requiring regional telcos to share their networks with the big three, harming the smaller companies that have managed to build decent businesses in the shadow of BCE’s Bell, Rogers and Telus. 

“We’ve done financial modeling that says that if this continues, we suffer,” said Perron, whose company provides cable and internet to 1.6 million customers, primarily in Ontario, Quebec and about a dozen U.S. states. “We suffer significantly. We’ve even called it an existential threat.” 

The wolf was unfairly cast as the villain of The Three Little Pigs. It was just being a wolf. Same with Telus. The telecommunications industry’s rigid regulations create a powerful incentive to exploit the rules. The economy suffers because companies spend money on lobbyists and lawyers that could instead be invested in technology and workers. They spend time waiting for regulators and judges to make decisions, creating uncertainty that impedes investment. The oligopolistic structure of Canada’s economy probably is one of the key factors behind the productivity crisis. 

But that’s not Entwistle’s concern. His job is to exploit his environment for the benefit of his stakeholders. Same goes for the leaders of BCE and Rogers. Given the uncompetitive structure of the telecommunications industry, politicians have little choice but to try to create incentives that replicate what you might get from a competitive market. 

That appears to be what the federal cabinet was trying to do on Nov. 5, when it issued an order in council that asked the CRTC to “reconsider” the decision that allowed Bell, Rogers and Telus to use others’ fibre lines in Quebec and Ontario, noting that the three companies “are of a disproportionate size relative to other internet service providers” and that it had “concerns about the viability of small and regional Internet service providers.” 

Cabinet said it wanted a response within 90 days. Ministers could be distracted by their political futures around that time, but the outcome of this dispute will send a signal about the extent to which Ottawa’s thinking about competition has changed. 

For years, politicians and regulators were seduced by arguments that scale would lead to greater efficiency and that more efficient companies would charge lower prices. But powerful companies tend to bully suppliers and remove new entrants from the field. That’s bad for innovation and it makes it hard for smaller companies to grow. Prime Minister Justin Trudeau’s government, often backed by the opposition, has been rewriting competition rules to recognize that bigger isn’t always better. 

Telus appears to want to play by the old rules. At the end of November, it started a petition to counter cabinet’s order asking the CRTC to “reconsider allowing Telus to offer fibre internet services to consumers in Ontario and Quebec.” Calling itself a “new entrant,” Telus called on consumers to “join the movement to protect competition and choice,” boasting that it had brought “not just affordable internet, but innovative bundles that integrate mobility, entertainment, home automation, security, health services and much more.” 

More than 92,000 people signed, according to Telus’s page at Change.org. Along with exerting political pressure, the company put its lawyers to work and asked the Federal Court to block the cabinet order. “The best form of competition can be brought forward by those who have the means to bring it,” said Zainul Mawji, president of Telus consumer solutions. “If we’ve invested in national home automation platforms, and national healthcare platforms, why should Ontario and Quebec citizens not have access to those bundles that we could provide, and Alberta and B.C. customers should?”

There’s little doubt Telus is winning fans in Eastern Canada. The cost of internet services in Ontario plunged 15 per cent in November from a year earlier, while in every other province costs increased over the same period. Telus has the wherewithal to go toe-to-toe with Bell and Rogers and it can offer services and prices that smaller companies can’t match. 

But the question is whether the sugar rush of price competition and bigger bundles is worth the risk of cementing the oligopoly’s power. 

“Could it bring some competition in the short term? Yes,” said Perron. “But what’s going to happen is, it’s going to weaken the mid-sized players who operate those networks, which will then invest less in their network, who will struggle—and then in the end, the consumer would suffer.” 

Telus disagrees, of course, and puts up its track record of innovation as proof. Mawji also said that Telus is committed to building infrastructure in underserved parts of the country where it currently dominates, no matter what Ottawa decides. 

And that’s the problem with oligopoly: The incentive to secure your share of the pie is greater than the incentive to stake out new ground. Eastern Canada would benefit from Telus’s entry, but not at the expense of further shrinking the industry.  

Kevin Carmichael is The Logic’s economics columnist and editor-at-large. He has spent more than two decades covering economics, business and finance for outlets including Bloomberg News, The Globe and Mail and the Financial Post, where he also served as editor-in-chief.