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Getting Signals Straight in the Great Wireless War of 2013

The great wireless battle of 2013 continues to unfold with Bell, Rogers, and Telus – the big three incumbents that dominate the Canadian market – calling for “fairness” in Canadian telecom policy. Ben Klass posted an exceptional response to Bell over the weekend that provided some perspective on Canadian spectrum allocation, while Peter Nowak once again took on Telus’ speaking points on the issue.  My weekly technology law column (Toronto Star version, homepage version) notes that the incumbents concerns with the policy represent a notable shift, since they described it as “thoughtful and balanced” when it was unveiled by then-Industry Minister Christian Paradis in 2012. The same companies now say the rules will create a “bloodbath” since they fear the potential entry of Verizon Communications, a U.S. telecom giant with the power to shake up the Canadian market.

While the incumbents have framed the issue around fairness and a “level playing field”, the reality is that Canadian policies are strikingly similar to those found in many other countries that have sought to encourage greater competition. Moreover, the arguments around level playing fields conveniently omit the myriad of advantages enjoyed by the incumbents.

The Canadian policy boils down to the two issues: opening the door to telecom foreign investment after years of restrictions and creating limits on spectrum available to the incumbents in order to ensure that new entrants (whether domestic or foreign) have a reasonable shot at launching competitive wireless services in Canada.  The fear is that in the absence of these policies, the incentives for the incumbents would be to pay far above market price for the spectrum in order to keep competitors out of the market.

Despite the longstanding objections of some incumbents to the removal of foreign investment restrictions (Bell has long been opposed or sought to delay reforms), Canada finds itself in a tiny minority of developed economy countries that still restrict foreign investment. In fact, in a 2010 consultation on the issue, the government noted that the OECD found that “there are 30 OECD member countries, and only three countries have investment and ownership restrictions that apply to all public telecommunication operators. These countries are Canada, Mexico, and Korea. Of the three countries, Canada has the most severe restrictions.” In response, Canada opened the market to those with smaller market shares, but retained restrictions on the larger players.

Not only is opening the market to foreign operators uncontroversial by global standards, so too is the use of spectrum caps or set-asides for new entrants to encourage greater competition. The OECD recently released a survey of all member countries on their spectrum allocation policies and found that the majority has implemented policies to encourage new entrants that could be seen to “disadvantage” the incumbents.

For example, Belgium, the Czech Republic, Germany, Hungary, Italy, Netherlands, Portugal, Spain, and the United Kingdom have all established set-asides that limit some spectrum exclusively to new entrants. Moreover, spectrum caps have been used recently in Denmark, Estonia, Finland, France, Norway, Slovak Republic, Sweden, Switzerland, and Turkey.

In the UK, the regulator Ofcom reached a conclusion much like the Canadian policy position:

Ofcom has concluded that UK consumers are likely to benefit from better services at lower prices if there are at least four credible national wholesalers of 4G mobile services. Therefore, in the interests of competition, Ofcom has decided to reserve a minimum amount of spectrum in the auction for a fourth operator.

Suggestions that Canadian policy is out-of-touch are inaccurate, as are claims regarding a level playing field. The current policy will create a framework that opens the door to foreign competition, yet the incumbents still enjoy enormous marketplace advantages.

These include restrictions on foreign ownership for broadcast distribution, extensive broadcast assets that Verizon could not touch, millions of subscribers locked into long term contracts, far more spectrum than Verizon would own, and shared networks that saves the incumbents millions of dollars.

Industry Minister James Moore has confirmed that the government remains committed to greater competition through its policy of foreign investment plus spectrum auction rules designed to facilitate new entrants. In doing so, he is following a well-worth policy path used around the world to encourage wireless competition.

8 Comments

  1. If the government further liberalized foreign ownership of telecoms, what would they have left to play with? Our current government wants and needs something they can play with to manufacture consumer populist issues they can manipulate to boost their popularity. While some voters are more concerned about healthcare and education, there is a young group of voters who care more about the internet and their smartphones. If the government gives up control over those companies, they give up their ability to manipulate the things young voters care most about.

    The whole issue about foreign ownership is not about what is best for Canadians, it’s about what is best for government.

  2. On the fence
    At a surface level, I don’t think Verizon’s coming to Canada is a good thing but I want to see the curbstomp that they’d bring.

  3. Don’t you think if the the ‘Big 3′ are overly concerned about the competition meaning lower profit margins, that it can only be better for consumers?

    So …

    Will consumers see lower prices? Likely.
    Will the ‘Big 3′ see reduced profits? Probably.
    Will stock owners see less profits? Probably again.
    Will there be net job losses? Perhaps.

    So if the needs of the many (consumers not working for Canadian telcos or owning their stock) outweigh the few then Verizon coming seems to be a win to me.

  4. Director Mobikyo
    Hi Michael..

    Great stuff, as always, thought you might enjoy this:

    Spectrum Auction Strategy – Canada vs. Japan. Editors Note, some fresh perspective Without Fear or Favour: http://bit.ly/192m40S

    Cheers,

    Lars

  5. Robbers Hell Tales says:

    Fair for Canada Parody
    In response to the recent propaganda by Robelus, check out this Fair for Canada Parody:

  6. as long as…
    As long as there is a rule that Verizon creates jobs in canada by keeping high level/admin jobs separated from the US entity, then I’ll be satisfied. Jobs will be lost but if Verizon can balance it out, it’ll work well.

  7. The Big 3 Telecommunications Companies are NOT fair for Canadians!
    You know what I am sick of this crap on the radio and TV by the big three telecommunication companies whining
    about a US company coming to Canada. The big three telecommunications companies are bombing the media
    with their misleading campaign to have this US company Verizon not come to Canada.

    The big three companies just want to keep a monopoly on the telephone business and it is time that it stops!
    Bell, TELUS and Rogers just want to continue to control the market and the pricing.

    We need more competition here in Canada so let other companies come to Canada it is time that the monopoly
    be broken.

    Everything that these companies are saying in these ads are a bunch of garbage anyways about
    rural and remote communities. It is clear that the big 3 telecom companies just don’t want another
    company to come in and ruin what they currently have.

    Ignore these messages from http://www.fairforcanada.ca what they are saying is nothing more than a bunch
    Of garbage and are just trying to prevent any new competition here in Canada so they can continue to control
    the market.

    We need more competition here in Canada let the US companies come to Canada and then maybe there
    Will be more competitive rates and plans and then Rogers, TELUS and Bell will actually have to FIGHT for
    the consumer’s business.

    The big three companies for years gouged customers with system access fees and made a lot of money off
    Consumers. Rogers, TELUS and Bell are nothing more than crooks! They charge you cancelation fees and signup
    Fees. Really this is fair for Canada?

    It won’t cost any Canadian jobs here at all the big three telecom companies have already shipped a lot of the
    Calls over to India and other call centers anyways. And yes I know this because I used to work for Rogers Communications

    None of the existing companies Rogers, Bell or TELUS really provides any kind of a fair for the consumers and gouge
    The consumer and they know that if they all stick together they will be able to continue to do for many more years.

    It is time that this vicious cycle stops and that the monopoly be broken. Let the other companies in and have a fair
    and open market for the consumers to choose from, right now I don’t think that Canadians have that.

    I think that this ad campaign by the big three telecommunications companies is nothing but a fraud and they should
    Just get it off the airwaves. Canadians are not stupid and are not buying this fraud and can see right through what
    these companies are trying to do.

    The Canadian people are already seeing though this and have setup other websites like these speaking out about what
    Rogers, Bell and TELUS are trying to do.

    http://www.realfairforcanada.ca/

    Let the US companies come to Canada if they can provide better customer service and better plans for Canadians then
    Maybe Telus, Rogers and Bell will finally have to straighten up and be fair to Canadians they have had it too easy for too long.

  8. Rimes Lenna says:

    Is it in the public interest?
    I think it may offer the lowest pricing but stock owners may get inappropriate points. So somewhere compromise has to be done otherwise it will be just a floating issue. hotel safes