Economics

Why Canadian Cable Companies and Telecoms Are in Trouble?

Term Paper

Name: Humza Saleem

Course: ECON 1P91 (Microeconomics)

Student #: 5208582

Tutorial #4: Thursday, 11:00-12:00

Tutorial Leader: Aruana Murzaliyeva

The article “Why Canadian Cable Companies and Telecoms Are in Trouble” by Sean Michael, assists readers to understand the business of cable companies and Telecoms and the reasons for why the Canadian firms are not in a decent position in the market. Presently, foreign ownership restrictions in Canada are protecting Canadian firms from real foreign competition. However, if the Conservative majority government has their way, the Canadian telecom and media companies such as Rogers, Bell, and Shaw, will face severe problems and threats to their businesses. Liberalization will further accelerate the destruction of the telecom business model in Canada, while new developments in internet video technology are adding on to their threats.

Currently, a major threat to the Canadian firms is web-based companies such as Netflix. Netflix has been able to provide customers a better television service for a cheaper price than most cable and DVD rental services. Also, many people are beginning to watch live events and shows such as sports from the internet, which decreases the number of customers for cable companies. Because of this, in order to protect their businesses, companies have increased prices and charge $2 to $5 per gigabyte used by consumers. This method has been increasing revenue growth for Rogers and Bell. Allowing foreign competition into the Canadian market will be extremely dangerous to the existence of these Canadian firms. Apple TV, Google TV, Amazon Prime, and Hulu have plans to aggressively expand their business into Canada, which interfere with Canadian broadcasters. Also, in the mobile communications market, Canadian firms have been able to gain large margins from overpriced wireless and data plans. After Canada allowed Globalive...