Industry Minister Jim Prentice has just announced that the government will put in place measures as part of the forthcoming spectrum auction to encourage greater competition within the Canadian wireless market. Prentice acknowledged that Canadian wireless pricing is too high, particularly for data. Accordingly, they will set aside a significant chunk of spectrum – nearly 40 percent of the auction – solely for new entrants and mandate tower sharing. This is a welcome development. The lack of competitiveness within the Canadian market has been readily apparent to all – consumers, market experts, and the three major wireless providers who have left Canadians paying too much for too little for too long. Given the need for greater openness in the marketplace, there is more to be done, but today's announcement is certainly a good start.
Canada to Create Spectrum Set Aside in Wireless Auction
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I certainly hope that this will make the major cellular carriers sweat because so far, nothing has. We continue to keep paying for the profit grab of $6.95 per month plus taxes, outrageous data prices (I finally canned data on mine) and being served up 3 year contracts of subpar plans. Hopefully Virgin mobile’s push into the post paid next year will make things competitive again. Remember Fido when it forced everyone into per second billing and we could have 1 year contracts, or better yet, no contracts? Seemed so distant now.
I am hopeful but it’s likely I’m switching over to 7-Eleven’s SpeakOut wireless since even paygo is cheaper than what I’ve got.
This is certainly a welcome move. Hopefully in the future they’ll prevent the big mergers that caused us to loose the competition we used to have with Fido & Clearnet.
Various people quoted in the article seem to imply that only one new national provider will emerge as a result of this auction: “Prentice said the amount of spectrum reserved for new entrants, or 40 megahertz, is enough to facilitate a new national carrier.” If we only get one new carrier, then that isn’t really a great increase in competition.
I’m also pleased to see that the government is creating an “open carrier” model, at least temporarily. It’s interesting that the FCC did the same, yet is balking at the open carrier model for broadband providers.
As I sit here in Manitoba and look at the current lineup of cellular phone plans from the big, bad national carriers, I wonder what the fuss is about. $10/month for unlimited evenings and weekends from both national carriers available in Manitoba, plus they thrown in 250 peak time to boot? Doesn’t sound like we’re paying too much to me. On top of that, the data rates for all three national carriers seemed to be in a virtual free fall recently.
Not that competition is a bad thing, but I wonder if maybe it isn’t the case that the tail is wagging the dog here. Are we in need of another national carrier because we are paying too much, or are we being told we’re paying too much because a regional carrier is in need of being a national carrier?
But heck… if additional competition legitimately does drive down pricing I’m all for it, of course. Who wouldn’t want to lighten the load of that cell bill each month? But how will we know if it worked? Prices on voice and data are considerably lower than I ever remember them being (I currently get 1000 daytime minutes and unlimited evenings and weekend for $40 plus $6.95). My monthly cell bill dropped by 30% from what it was just 3 months ago. It’s hard to imagine that the addition of Allstream (presumably, the next national carrier) will drive prices down further, but I’m game to see.
I’m not familiar with the details of the auction process, so I’m hoping someone can shed some light on some questions in my mind:
38% of the spectrum is set aside for new companies, which means that the big 3 can bid on the other 62%. Is the auction resolved by highest bid only, or do the companies have to present a plan of how they intend to use the new spectrum, and is that weighed into the bid?
Do any of these companies _need_ more spectrum? Can they just buy it and sit on it to freeze additional potential competitors out of the market, or is there some ‘use it or lose it’ clause?
Josh N. One of the plans that you are referring to, is it from Rogers, the $10 Mega Time plan? If yes, it is offered in Manitoba and Saskatchewan only. If you move to another province where it is not offered, there is a good chance that you would lose it.
Setting aside some spectrum is a good idea, but the big one is tower sharing. Personally, however, I suspect that the better plan would be to have a single entity own and operate all of the towers and the carriers buy time from them. This would require that the tower owner either be public or be regulated, however.
Josh N,
Now are you sure the price is not dropping in anticipation of competition i.e. the incumbants lower prices so they lose as little customers as possible?
I suppose the question is, “Lose to who?” If new competition entered the marketplace and THEN the incumbents lowered prices, we could see a clear connection to increased competition and lower pricing. However, to say that the price drop is to prevent losing customers to a carrier that, on a national level, could not currently take them doesn’t make any sense to me.
I maintain, it seems like the tail is wagging the dog. The problem seems to me to be that “consumers are paying too much” is a popular position to take, and taking the opposite position is like swimming upstream. If one regional carrier, set on making its big break to national, proclaims that pricing is too high nationally, it’s easy to jump on that bandwaggon. However, let’s look more closely on what their pricing is like as a regional carrier. Should they not already be the cheapest game in town if their position is that their entrance to the national stage will lower prices? Smells like politicking to me. I just don’t think that “additional national competition” will have an ounce of impact on general pricing. Pricing in cellular has been dropping quite consistently for some time, and I see no reason why that wouldn’t continue with or without government intervention to increase competition. Bell, Telus, and Rogers have all presented data plans that are very aggressively priced (unlimited mobile data at $70/mth?).
Who legitimately thinks that pricing will decrease (more so than it would have otherwise) because there is a new player in town? Or – far more likely – will there simply be another national company that charges what everyone else charges now anyway? Take a look. There’s almost no discernible variation in pricing amongst carriers now. Why will this change just because there’s a new player? Is Allstream expected to be our saviour, permanently lowering the cost of cellular for all Canadians? We’ll see. I think not.
Josh N,
I wrote the above, Guess I should have expanded.
What I was getting at is by lowering their prices now; they make it harder for the new competitor to get a foot hold in. Same thing with the 1, 2, or 3 year contracts. Lets face it, people are lazy, they will stay with their existing provider unless it makes sense ($$, or shinny things like new phones) for them to move.
So by lowering the prices and making it harder, it may make the new competitor think twice about actually entering the market. Essentially killing the new competitor before it becomes a competitor.
Then once the threat is over, back to business as usual and prices rise.
BTW I think $70/month is way too much. Unlimited email (text) should be included in every talk plan for what we’re being charged.
I do have to agree with your last paragraph, I think it will just be bussiness as usuall, but with the profits being divided between 4 instead of 3.
Palonek
I wonder how come they didn’t come in and stop the acquisition of Fido by Rogers? But it still a welcoming news if it works. Paying over 150$ a month for a cell phone plan is a bit too much
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So Quebecor and MTS successfully campaigned for some government handouts on the platform that they will bring new competition to the market and that will lead to lower prices for consumers. What I don’t understand is why they haven’t done this already – they both offer cell phone services and looking at their websites it appears that their pricing and product selection looks to be generally in line with everybody elses. It seems to me they could lower their prices anytime they want – but they haven’t. Did our government miss this detail or did we just witness some slick political maneuvering?
@Rhonda: Precisely what I’m saying. If they had any ability or intention of lowering the cost of cellular to Canadians, you’d think they’d already be doing so in their own hometown. And yet, MTS rarely leads the market on price in Manitoba. I think it’s a lot of politicking and a little oversight.
@db: You say that for what we’re being charged, unlimited email should be included. But on what do you base this on? How do you go about calculating what cellular *should* cost? Right now (at least in my region) you can get (virtually) unlimited email and web for $15/month in some cases. That’s pretty aggressive data pricing as far as I’m concerned. Those who need more data capabilities (such as myself) will pay more. I pay about $60 / mth for my data services. Would I like to it be lower? Sure! But I’d also like my gas bill to be lower, my grocery bill to be lower, etc, etc etc…
hey Josh N,
The amount of the network resources used to send a text only email are tiny compared to those used if a call was placed and the words spoken. Therefore by sending text only email through a phone, you are using less network resources.
So from a network usage stance alone it would be in the carriers interest to get people to usse it more, since that’s were they claim all the costs are. So yes I think text only email should be included. But then again new must cost and if they’ll pay, someone will charge.
As for what it should cost, maybe have a look at costs other places. Not the states.
Presumably the above was written by “db” again?
What other place should I look at, exactly, to determine what it should cost? Show me another example of a country with a population 30 million that is *geographically similar*. Sure, you could look at a number of European countries and state that, based on their cost of cellular service, we are overpaying. However look at the physical size of those countries and tell me if your argument still holds any water. With the need to provide service across a geographically wide area to a relatively small number of (even potential) customers, I’d have to say that I think our country’s national carriers are doing a pretty decent job with rates. That’s my take on it anyway.
As for network usage, perhaps a short email or text message is a lower “load” on the system, but I think that the current pricing mostly reflects that. What is the average price of a voice minute with any of the national carriers? Something like 6 cents? (Remember all those unlimited evening and weekend minutes before you jump on the 25 cent argument). What does a single email cost? If I sent 25 per day (a reasonable estimate in my world) I would have sent 750 emails in a month at a cost of $15, or an average of 2 cents per email – about the equivalent of 20 seconds of voice. Although one could argue that the email is less “load” than is 20 seconds of voice, there is a capital cost of infrastructure that needs to be considered, and data is still fairly new in the world of cellular. In time, as those capital costs are recovered, the price naturally falls – as we are already seeing in the dropping cost of data. All makes sense to me. Any questions?
Palonek
Google Inc has announced that they will bid on a wireless spectrum band in the United States. I for one would like to see Google bid on the Canadian wireless band. I think such a move would be great for the Canadian market. Such a move by Google would only help to level the high prices and better improve the service.
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Forget pricing, I carry a mobile computer wherever I go. I just wish I could use its full capabilities. Phone locks are evil.