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How Telus Once Supported a Spectrum Set-Aside To Create Competition and Attract Strong Players

Telus is currently engaged in a full-court lobbying press aimed at killing the government’s plans for a spectrum set-aside for new entrants in the forthcoming spectrum auction with Telus CEO Darren Entwistle warning ominously of a “bloodbath” should the government move ahead with its strategy. Entwistle notes that the company has invested more than $100 billion in the Canada and that the industry as a whole has invested $420 billion. Yet only a fraction of those figures are actually linked to wireless investment in the way that most would conceive of it. A Telus spokesperson said yesterday that spending on technology and infrastructure was actually $30 billion, leaving $70 billion for operational expenses, such as paying salaries, office supplies, and rent. Last year the CWTA said the entire Canadian wireless industry has invested $25 billion on spectrum and wireless infrastructure. That is a far cry from Entwistle’s $420 billion figure, which is apparently based on such a broad notion of investment that my lunch at Subways and coffee at the Second Cup is also an investment. More on the Telus numbers in a must-read post from Peter Nowak.

Beyond exaggerated investment claims, the dire warnings about the future are nothing new for the incumbents. Before the government’s 2007 spectrum decision, Rogers called potential new entrants the “all-time corporate welfare bums in Canadian history.” When the government announced a spectrum set-aside in 2007, Bell warned that “basically you’ve sold an asset of Canada at well under market price.” When the auction actually generated far more than expected, Bell, Rogers, and Telus argued in 2009 that the auction format drove up prices that resulted in billions in overpayment. As a result, Telus warned that “this will push the industry back into a cumulative cash flow negative for a number of years.” By 2010, well before Verizon’s entry emerged as a possibility, Telus was already warning about the dangers of another spectrum set-aside.

Although Telus then expressed support for the government’s announced spectrum policy in 2012, Entwistle now claims that a spectrum set-aside was designed for smaller players (“fledgling new competitors”) and never envisioned participants such as Verizon. The National Post reports:

If Verizon comes to Canada, Mr. Entwistle said, the government should consider three possible changes to the auction rules, which he said were intended to protect fledgling new competitors not foreign players more than ten times the size of Telus.

Yet Entwistle said the opposite in 2007 when he was proposing to merge Telus and Bell. The Telus merger proposal raised obvious competition concerns, which Entwistle sought to address by arguing for a spectrum set-aside, which he promised would attract deep-pocketed competitors that were not start-ups. The Toronto Star reported on the competition concerns and the Telus proposal:

Among Telus’ proposals would be setting aside a block of spectrum licensing in each region only for new entrants. Telus would also make available transmission towers and building rooftops for the new player. Where there is not enough room on that equipment, Telus would allow roaming by the new entrant for three years. “We believe this policy will facilitate an active competition,” he said. The new third competitor would likely come from among the ranks of cable providers, who have been itching to get into the growing wireless business. Entwistle said these organizations are not startups and could quickly transform their significant customer base and established distribution networks. “They are positioned to capitalize on the securing of spectrum in a very expeditious fashion.”

In other words, when Telus wanted to address competition concerns, the company argued that a spectrum set-aside was an effective policy measure that would attract serious, financially strong competitors. Now that it wants to stop competition, it warns that a set-aside would create a bloodbath for the industry.

16 Comments

  1. If the ‘Big Three’ truly wanted to avoid competition from a large and cable new entrant…. they could have concentrated more on the customer than the stock holder.

  2. @Crockett

    I’ve been following this saga in the Post and Globe over the past few weeks and haven’t yet seen any of the big three state that they want to avoid or block competition. That notion is just something Mr. Geist created. In fact, all three have stated that they just want a fair and level playing field against Verizon. Verizon is plenty big enough and can easily afford to pay their own way, heck, Verizon is 3 times bigger than all the Canadian cell companies combined. Verizon doesn’t need or deserve Canadian taxpayer subsidies or protection in the way of a spectrum set-aside. As a Canadian citizen and taxpayer I would consider it an absolute travesty if our government gave an American firm like Verizon a cost or competitive advantage over Canadian companies.

  3. Cynic,

    Then why did it take legislative intervention to kill something as ridiculous as 5-digit roaming charges?

    True competition, rather than collusion, would have solved that long ago.

    I stand by my premise. More attention to customer service could have prevented the necessity of foreign competition.

    We sleep in beds of our own making.

  4. If Telus doesn’t like competition or fair pricing for us consumers they can get the fuck out of Canada. I wish the small ISP’s would get together and start putting up towers for wireless internet

  5. I don’t trust Verizon any more than I would any of Canada’s existing big three. Behind all this there is a government that seems incapable of generating any broadly supported Canadian vision on anything.

  6. @Crockett

    Your comment that legislation was required to kill 5 digit roaming charges is incorrect. I know that at least one of the big 3 had a cap on roaming charges long before the CRTC code of conduct was implemented.

    If, as you say, there is collusion in the industry why would one carrier offer a roaming cap when others chose not to? Doesn’t collusion imply they are all offering the same products at similar prices on similar terms?

    We have had deep pocketed foreign competition in Canada since Wind (backed by Orascom and now Vimpelcom) launched in 2008. As you will recall, they enjoyed some lucrative taxpayer incentives to start up in Canada and now Vimpelcom is trying to dump them. If you look at the CCTS register you will also see that foreign owned Wind has the highest number of service complaints per customer. It’s a myth that foreign owned competition will improve customer service or prices.

    As others in this forum have already stated, Verizon charges more in the US than some Canadian carriers typically charge for similar service packages. I don’t believe for a millisecond that an American company is going to come to Canada to offer cheaper prices than they do in their home territory just because Canadians are nice people.

  7. Cynic said: >It’s a myth that foreign owned competition will improve customer service or prices.

    I like WIND but I’m not one of those retards that complains about everything.

    I went from $200-300 phone bill between three phones to $170 when I switched to WIND from Rogers. Now the only reason my phone bill is still high is because I roam a lot for work. If I didn’t I’d be paying $35×3 per month from WIND instead of $75+ x 3 from Rogers.

  8. Incorrect summary
    No one says they want to stop competition, this is a made up notion. They want it on fair grounds. Why should the gov’t give Verizon a free pass at our telco market? They are not a white knight in shining armour. Telus is changing their stance because they are not proposing to merge with Bell. What’s wrong with that?

  9. Specific Blocks
    What specific blocks of 700MHz are being set aside? Do they align with Verizon’s LTE bands?

  10. @Cynic “I know that at least one of the big 3 had a cap on roaming charges long before the CRTC code of conduct was implemented.”

    Could you please specify which telco you are referring to? How long before the code of conduct was this policy implemented?

    @Cynic “It’s a myth that foreign owned competition will improve customer service or prices.”

    Then why were people (like Greg above) able to reduce their phone bills by switching to the new competition? Why were Big-3 sub contractors such as Koodo started to directly compete with said new entrants? Why did Koodo then get top prize for customer service?

    Seems you need more faith in your myths sir.

  11. I did some more research on caps and Telus…
    @Cynic “I know that at least one of the big 3 had a cap on roaming charges long before the CRTC code of conduct was implemented.”

    Here is a report from less than 2 years ago on Telus charging high roaming fees: http://mobilesyrup.com/2011/07/29/customer-racks-up-13000-in-extreme-roaming-charges-telus-kindly-reduces-it-to-500/

    I was not able to determine when Telus introduced the $200 cap but comments on their board seem to indicate it was not until sometime in 2012, this does not to me seem “long before the code of conduct was implemented”. Seems to me they saw the writing on the wall, and jumped, kudos for that at least. Oh by the way, they still oppose the cap as proposed by the CRTC.

    Further, Telus only operates in western Canada, which left the majority of Canadians in the collusion column.

  12. @Crockett

    You are correct, it was Telus that implemented roaming caps, I don’t recall the exact date but it was more than a year ago – they didn’t need legislation to force them to offer caps. They also scrapped activation fees and a couple of years ago they got rid of contract cancellation fees. You still need to pay off the balance on your phone but that’s fair.

    Not sure where you get the impression that they only operate in the west. They offer service across the whole country, my two sisters (one in Montreal and one in Halifax) are both with Telus.

    I’m not sure where you are located but I’m sure they offer service in your part of the country as well. You should try them out, they actually have some excellent plans and I have always found their customer service to be very good. I have tried Rogers and Wind but found both to be quite poor.

  13. Well I learned something new today :)
    @Cynic

    You are correct, Telus does offer cell service across the country. I was not aware of that. It’s their TV, land line and internet services only available to the West. Of all the telcos I like Telus the best, so I am glad you can at least use their cell service.

    I still consider one of three telcos finally offering a cap after years of gouging to be too little too late.

    But … I learned something new today. So thanks, I will have to reconsider some of the points I made.

  14. stupidity
    I left telus some year ago when they asked me a connection fee when I moved. I said to them that competition was waving connection fees and asked them if they could do the same to keep me as a customer. They said no even if I was their customer for years and so I changed provider. Now they are phoning me at least every month asking me to go back with them and offering me all kind of gadgets (laptops, ipads, etc.) way more expansive than that little connection fee.
    I’m sorry but I do not trust stupidity.

  15. @ENO

    It’s not clear from your comment but it sounds like the connection fee might have been related to a landline telephone. If that is the case, Telus would have been required by the CRTC to charge the tariffed connection fee – they wouldn’t have had the option of waiving it for a long-time loyal customer such as yourself because landline telephones were regulated by the CRTC. The phone services offered by cable companies were never price regulated by the CRTC so they weren’t required by the CRTC to charge a connection fee.

    Unfortunately the mish-mash of partial and inconsistent application of regulations across Canada’s telecom market makes it extremely difficult for Canadians to figure out why things work the way they do.

  16. Telus can get stuffed
    “you should try them out, they actually have some excellent plans and I have always found their customer service to be very good.”

    Are you joking?!?! Telus has the worst customer service of all the big players I deal with. Maybe it’s their lousy call center in Manila or the fact that they don’t have much competition where I live but they’re horrible. I just got rid of them and their scam charges at home and it’s a shame I can’t dump them at work. They suck! Whoever said collusion is right on the money. They wouldn’t want Verizon to come in and inject some competition.