Yesterday, I was contacted by a Toronto radio station wanting to discuss wireless pricing increases that have occurred over the past few months (including increases over the weekend at both Rogers and Bell). Their key question was what lay behind the increased prices? While some might point to reduced roaming revenues or costs associated with the spectrum auction, I believe the answer is far simpler.
The carriers increased prices because they can.
Indeed, this is precisely what the Competition Bureau of Canada concluded could and would happen in its analysis of the wireless environment in Canada. In its January 29, 2014 submission to the CRTC, it stated:
In the Bureau’s view, mobile wireless markets in Canada are characterized by high concentration and very high barriers to entry and expansion. Furthermore, Canadian mobile wireless markets are characterized by other factors that, when combined with high concentration and very high barriers to entry and expansion, create a risk of coordinated interaction in these markets. Given these factors, the Bureau’s view is that incumbent service providers have market power in Canadian retail mobile wireless markets.
And what is market power? As the Bureau notes, “market power is the ability of a firm or firms to profitably maintain prices above competitive levels (or similarly restrict non-price dimensions of competition) for a significant period of time.”
The risk of coordinated action and the ability to profitability maintain prices above competitive levels? Sounds familiar.