Harper Puts Focus on Phone Bills as Canada Economy Slows

Canadian Prime Minister Stephen Harper is turning his government’s focus to consumer issues such as the cost of telephone and cable TV as he prepares to outline his agenda for the last two years of his mandate amid a slowdown in economic growth.

Harper, who secured his first majority government in 2011 elections, will give a mid-term update of his government’s plans in a so-called Speech from the Throne tomorrow that marks the opening of a new legislative session in Ottawa.

While balancing the budget and sustaining the expansion will be a priority, the government will emphasize consumer issues in the country’s phone and cable industries -- which is dominated by companies such as BCE Inc. and Rogers (RCI/B) Communications Inc. -- Industry Minister James Moore said in a series of interviews since the weekend.

“When we put together a list of things that frustrate consumers on which the government can take action, the list gets long very quickly,” Moore told CTV Television in an interview Oct. 13.

Moore said the government’s initiatives will include changes to cable television rules that force consumers to pay for packages of channels rather than individual ones, as well as lowering domestic roaming fees for wireless phones.

The government has fought a public relations battle with the largest phone companies this year over its plans to limit the amount of new wireless spectrum on auction that the dominant firms can buy in an attempt to spur competition.

Shares of Montreal-based BCE (BCE) have fallen 7.8 percent since hitting a peak May 22, partly over concern that the government is trying to increase competition in the industry. Rogers of Toronto has seen its stock fall 12.9 percent from its high this year on April 10.

Lacking Momentum

Harper’s focus on consumer issues comes as the world’s 11th largest economy struggles to build momentum. Canada has averaged annualized quarterly growth rates of 1.3 percent since the start of 2012, down from 3 percent in 2010 and 2011, according to Statistics Canada data. The economy has added 113,100 jobs so far this year, on pace for its second worst annual result in the past decade.

The nation’s currency has fallen about 8 percent against the U.S. dollar since Harper won the 2011 elections. Over that time, Canada’s benchmark stock index has lost 7.5 percent, versus a 26 percent gain in the Standard & Poor’s 500 Index.

In addition to consumer issues, Harper’s speech tomorrow will probably focus on many of the same themes as his 2011 election platform, when he pledged to eliminate the country’s deficit, diversify trade away from the U.S., develop resource infrastructure, make the labor market more flexible, and attract more foreign capital to fuel business investment.

Slow Payoff

Many of the government’s initiatives to promote growth aren’t likely to pay off until well after he leaves power, said Eric Lascelles, chief economist at Royal Bank of Canada’s RBC Global Asset Management.

“I think this government has done several quite constructive things towards maximizing long-term growth,” Lascelles said in an Oct. 10 interview in Washington. “But these things play out over the span of five or 10 years. They are not going to materially alter the trajectory over the next few years.”

At stake for Harper is his reputation as a competent manager of the economy, an advantage he holds over his rivals. Even as his Conservatives have suffered in the polls amid an expenses scandal implicating some of his lawmakers, Harper continues to have an edge on economic issues, those surveys show.

Keystone’s Fate

His efforts to encourage resource infrastructure projects, in part by expediting environmental reviews, has faced opposition from environmentalists and aboriginal leaders, as well as some provinces. The fate of the Keystone XL pipeline -- one of the most significant projects -- remains in the hands of President Barack Obama, years after the pipeline’s plans were first submitted for approval.

Free trade negotiations with the European Union -- Harper’s signature trade initiative -- have dragged into a fifth year.

At the same time, the nation’s businesses haven’t ramped up investments and found new export markets to take over as lead drivers of growth from indebted consumers and governments.

Capital spending by businesses outside of residential investments has been little changed since the second quarter of last year. Exports are down 1.2 percent since the end of 2011 and 6.5 percent below pre-recession levels.

Export Share

The nation’s share of world exports has fallen to about 2.5 percent, from about 4.5 percent since 2000, according to Bank of Canada estimates.

Slowing growth is being exacerbated by the government’s efforts to eliminate the nation’s deficit before the 2015 election. Finance Minister Jim Flaherty’s last budget plan, delivered March 21, seeks to limit spending growth over the next five years to the rate of inflation, which if successful, would be the slowest pace since the country last eliminated the deficit in the 1990s.

“We will balance the budget in 2015,” Flaherty told reporters in Washington on Oct. 11, where he was attending meetings of the International Monetary Fund. “Our plan was always to get back to balanced budgets.”

With longer-term reforms moving slowly, Harper’s plan will stress consumer issues in the short term. Other areas where the government may act include credit card fees and the practice of airlines overbooking flights, Moore told CTV.

Harper should be careful not to veer too much of his attention off core economic issues, said Nik Nanos, an Ottawa-based pollster.

“The Conservatives have to remember that their brand and success was built on fiscal and economic stewardship and they have to make sure that has to remain the key marquee theme out of the throne speech,” Nanos, chairman of Nanos Research, said in a telephone interview.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net

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