Industry Minister James Moore yesterday took another step toward improving the state of wireless competition in Canada by announcing plans to cap wholesale domestic roaming fees at the same rates the companies charge their own customers. The cost of domestic roaming has been a persistent concern for new entrants and regional wireless carriers, who argue that the national carriers increase wholesale prices for roaming that render the smaller players less competitive. The new government reforms will put an end to those concerns. Moreover, it plans to create tough new penalties for companies that violate the wireless code or other regulatory requirements, a move that may increase compliance rates.
While the usual critics will moan that the latest changes are indicative of a wireless policy with ever-changing rules, the reality is that the government has made a clear commitment toward addressing the state of wireless competition in Canada. Some of its hopes may have been thwarted – the entry of Verizon tops that list – but identifying and addressing competitive barriers should be a continuing process with regular reforms as needs arise.
The lingering question is therefore what other steps the government may take in order to address ongoing competition concerns in a market that seems unlikely to attract significant new facilities-based competitors in the short term. The CRTC has focused on consumer-oriented competition concerns in its wireless code. For example, the Competition Bureau identified switching costs that inhibit competition in its submission to the CRTC’s wireless code consultation, which led to limits on the term of contracts, rules on unlocking devices, and the minimization of termination fees.
Given that the government remains concerned with the state of wireless competition (Moore acknowledged yesterday that “it is not at its maximum potential”), once it is satisfied there is little else that can be done to assist existing players, it may go back to the drawing board in an effort to attract new entrants. Potential policies include a complete removal of foreign investment restrictions, pro-competitive policies on future spectrum auctions, or the creation of a regulated wholesale wireless market that would facilitate the entry of MVNOs – mobile virtual network operators. Critics suggest that MVNOs offer limited potential for serious competition, but a steady stream of new entrants aided by regulated wholesale pricing could shake up the Canadian market. In fact, given the government’s new found willingness to intervene in the wholesale pricing arrangements on domestic roaming, the introduction of policies to facilitate MVNOs may not be far behind.