CH10: Industrial Organization in Canada

http://www.canada.com/Canada+cellphone+market+hyper+competitive/2260608/story.html

Canada's cellphone market is 'hyper-competitive'

|summary|
Roughly 22 million Canadians communicate everyday using mobile devices, most of whom are customers of “The Big Three” wireless carriers—Rogers, Telus and Bell. Cellular mobility is one of the biggest sources of consumer discontent in Canada and is said that the market for cell-phone is “hyper-competitive”. Dan McTeague said that there is a lack of competition in the cell-phone market, which is holding back wireless growth. However, change could be just around the corner: A handful of new carriers have pledged to launch low-cost cell-phone services in major cities across Canada by next year. The way he sees it, Canada is under the thumb of an established oligopoly of corporate giants who face little incentive to lower rates or introduce new choices.

|connection|
This article reflects on the concept of oligopoly, a competitive situation characterized by an industry that is comprised of only a few firms. Canada’s cell-phone market having only three major wireless providers, Rogers, Bell, and Telus. In this competitive market, price ranges for plans/contracts are expensive. A person introduced in this article felt that the service being provided to him wasn’t good enough, but since Canada only had three service providers, he was only given a limited choice of plans to choose from. With only so little firm, the providers can raise up the prices to a certain extent because other providers take away their market share when the plans are unreasonably priced.

|reflection|
In the wireless industry, customers such as Rob McLeod is not satisfied with the service being provided by the current providers. Wind, joining the wireless oligopoly puts pressure on Rogers, Bell, and Telus to be more considerate about their customers being that if they offered better deals, then the three dominate service providers will start to lose customers. The number of firms is small enough that each firm must consider the reaction of the others when it changes it’s price. Therefore, if newly wireless carriers are being introduced later on in this oligopoly competitive situation, the three major service providers will start to consider taking more actions for their price variations. I think the introduction of the wireless carrier Wind will strongly create a mutual interdependence to the three service carriers in which Canada has now causing them to take actions on their plans and prices considerately.