With Verizon CEO Lowell McAdam stating yesterday that “Verizon is not going to Canada”, the government’s best hope for “more choice, lower prices, better service” may have been lost. The mere possibility of a Verizon entry into Canada sparked a massive lobbying campaign by the incumbent carriers, who used every tool at their disposal – huge advertising spend, direct lobbying, lawsuits, union protests, and favourable media on their own networks – to try to sway public opinion and pressure the government to change its approach. The government did not come close to doing so, recognizing that Canadian wireless pricing is high and that its proposed policies were consistent with many other developed countries. The companies claim the concern is merely about spectrum (not competition), yet companies like Telus applauded the government when the spectrum rules were first released in 2012 and it was only after Verizon indicated its potential interest in entering the market that the rules were characterized as loopholes and unfair.
So what comes next?
After the share price of the incumbents jumps up to reflect the premium the market gives to the lack of Canadian competition and the arguments that the government should delay the auction disappear, the government will be left with the same reality that existed before Verizon. As I noted in an earlier post, there are primarily two things that will drive corporate behavior in any market – competition and government regulation. On the competition side, the government must consider whether further steps are needed to entice significant new players into the market. These may include complete removal of foreign investment restrictions from both telecommunications and broadcast.
In the absence of robust competition, however, regulation is needed. The Canadian government should be doing all it can create more competition, but it must also commit to regulation – even if temporary – until that competitive environment develops. The CRTC signalled a willingness to regulate roaming pricing last week, but that may only be the start of far more dramatic steps that are needed to bring Canadians more choice, lower prices, and better service.