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Competition Bureau Recommends New Regulations To Address Wireless Competition Concerns

The Canadian Competition Bureau has filed a submission to the CRTC’s wholesale mobile wireless services review in which it reaffirmed its view that the Canadian wireless market is uncompetitive and would benefit from regulation.  The Bureau finds that a more competitive market would deliver $1 billion annually in benefits to the Canadian economy:

incumbents appear to have the ability and incentive to profitably raise the rates they charge their retail competitors for wholesale roaming services, and potentially other wholesale arrangements, above competitive levels. The incumbents’ wholesale customers may be passing these price increases on to retail customers. These retail price increases may be harming competition in retail mobile wireless services markets in Canada. In particular, more competitive markets could deliver approximately $1 billion in benefits to the Canadian economy.

The submission, which includes a commissioned study on the Canadian market, also concludes that:

  • more customers are either leaving Canadian retail mobile wireless services markets or not entering these markets at all, than would have in a fully competitive marketplace.
  • Rogers and TELUS are generally earning above-normal returns on their mobile wireless investments
  • the CRTC has an opportunity to significantly increase the economic efficiency of the Canadian economy. Specifically, by taking steps to increase competition in wholesale mobile wireless services markets, the CRTC can improve consumer welfare by enhancing the affordability and variety of retail mobile wireless services in Canada.

In light of these findings, the Bureau recommends:

To achieve these significant gains, the CRTC should adopt measures to address the incentives for the incumbents to raise their retail competitors’ wholesale prices. Appropriate measures may include the introduction of competitive safeguards or mandated wholesale access, or targeted spectrum allocations towards non-incumbent carriers in upcoming auctions, which the Bureau may address further as additional evidence develops in this proceeding.

Last year, some commentators suggested that the Competition Bureau consider whether there is a wireless competition concern in Canada. The views of Canada’s independent agency responsible for ensuring “that Canadian businesses and consumers prosper in a competitive and innovative marketplace” are now on the record and are unequivocal.  There is a wireless competition problem in Canada and regulation is needed to address it.

12 Comments

  1. Competition is good but too much can be bad
    We need intense competition to encourage innovation/investment but also to keep prices down. But too much competition can have have a negative effect on innovation/investment as they have seen in France. Their networks are crumbling and they are years behind on 4G because none of the carriers is making enough money to invest in the new technology.

    In a strange twist, the government of France is trying to reduce the number of carriers from 4 down to 3 because competition is too intense and everybody is losing, including consumers. Check out yesterday’s story in the WSJ http://ow.ly/wVipX

  2. Not true
    As the article you reference clearly points out the consolidation is being pursued by the industry, for its own benefit, and is being suggested by the minister of economy who is likely tied to them.

    This does not mean that the “government of France” is doing anything, nor that the benefit which the Industry stands to gain will do anything for consumers. Competition helps, consolidation does not.

    In Canada we also have a surveillance problem, and as long as Rogers is invested in stopping piracy and/or competition on its networks, what we need is a provider whose business proposition is that it will keep its nose out of our private activity.

    Could we commission Teksavvy, CIGI, ISOC, Blackberry, Diebert, McOrmand, Bernier etc… to create a NGO-run mobile provider?
    I nominate Professor Geist to oversee it all!

  3. The problem in France extends to the rest of the EU
    Last summer the EU issued a news release bemoaning the lack of 4G wireless networks (less than 25% of had access to 4G). The EU recognized their telecom industry was struggling and networks were falling behind the rest of the world and that would create term negative implications for their entire economy.

    http://europa.eu/rapid/press-release_MEMO-13-779_en.htm

    http://www.v3.co.uk/v3-uk/news/2284824/eu-rages-at-lack-of-4g-across-europe-as-neelie-kroes-lets-rip

    Sadly, there are still some people who don’t understand some basic accounting principles and that the capital investments for new network new network technology are paid out of the profits of a company. If a company doesn’t have sufficient profits, there will be no investment in network upgrades. This is exactly what they are seeing in the EU and France right now, and we are even seeing that in Canada.

    Public Mobile has already gone bankrupt, Mobilicity is in creditor protection, and Wind is just about finished – they didn’t have the money to even bid for 700 MHz spectrum. It’s not rocket science, just basic math.

  4. AND, who do you think forced them out of business??

  5. @MGeist
    One thing I don’t understand is why the Competition Bureau doesn’t point out the obvious that having the medium providers having monopolies on media (copyrights, distribution agreements, TV stations, etc.) is completely unacceptable. Do you have any theories as to why there isn’t a greater push to force Bell, Rogers, et al. to divest their media assets as this is clearly a case of unfair vertical integration competitive advantage?

  6. Devil's Advocate says:

    Monopolies indeed!
    The question of why service providers are also allow to be content providers AND have controlling stakes in the infrastructure that provides all that has been one I’ve been asking for years.

    I know others are very interested in the answer to that as well, but alas, I’m sure it involves the same reason everything else that is supposed to involve our input, doesn’t.

  7. @ Eric Two of the best cell companies in Canada, SaskTel and Telus, do not have “content” businesses. In fact Rogers has been losing market cell phone share badly over the past few years so I’m not sure your suggestion that vertical integration gives them an undue competitive advantage is valid.

  8. RE: Donna
    It absolutely is valid and extends back to net neutrality. By no means, by the way, do I mean that the current oligopoly situation is *only* caused by the vertical integration, but it most definitely is a key factor. The two main oligopolies, Bell and Rogers, not only control much of the mediums in this country, but also much of the media assets. Shaw is another company that is in this position, although they don’t have a wireless division (although this doesn’t matter as any company wishing to gain access to Shaw Media will be dealing with a company that has interests in other mediums).

    As to your last point, the fact that Rogers is losing cell phone market share is irrelevant on two points. One, are you counting Rogers divisions like Fido in those statistics? Sorry, but people going from Rogers to Fido doesn’t count as lost market share. 2) Rogers still has a monopoly on media assets such as sports games. They can up and decide to restrict the usage to Rogers networks. That IS an unfair competitive advantage not only on wireless, but any related medium service (ISP, etc.)

  9. I’m not sure where you are getting your information but several of your comments are factually incorrect. Shaw is absolutely in the wireless business in a very significant way – they have built a massive wifi underlay network consisting of tens of thousands of public wifi sites across western Canada. Since every smartphone supports wifi they are a very significant wireless player. It not yet clear how they intend to recover their investment but consumers can certainly take advantage of the network if they choose.

    Rogers just announced their Q1 earnings a couple of weeks ago where they posted yet another quarter of very disappointing wireless results. Rogers reports their results on a consolidated basis which means they include the Fido numbers but they don’t break them out. Rogers reported a net increase of 2,000 postpaid customers and a net loss of 73,000 prepaid customers in the first quarter.

    Telus, which isn’t vertically integrated like Rogers, reported net postpaid additions of 48,000 and net postpaid losses of 36,000.

    Even Wind Mobile, with it’s crapping network quality and non-existent network coverage did much better in Q1 than vertically integrated Rogers.

    Sorry, but the facts just don’t support your theory that vertical integration gives a company a competitive advantage in the wireless space.

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  11. Donna said:
    “Sorry, but the facts just don’t support your theory that vertical integration gives a company a competitive advantage in the wireless space.”

    It sure does when said companies charge next to nothing for gigs of cell data for their own content, yet charge insane amounts for content from outside sources.

    In addition to this, some websites are now locking up their content unless you sign in with your Bell or Rogers account. Thus access to what was readily available yesterday on the web is now no longer available unless you prove you have a rogers/bell account, or if your tv provider has a broadcasting contract with Bell or rogers.

    Donna, I think you are missing a few situations and points here when it comes to vertical integration.

  12. @Tinkerer

    Our friend Eric proposed a hypothesis that suggested vertically integrated companies enjoy a competitive advantage in the wireless space. I simply pointed out that the less vertically integrated companies are actually enjoying superior financial results as indicated by superior subscription growth and lower subscriber losses. Perhaps you would care to enlighten us on how you measure the results of a competitive advantage.

    As you know, the concept of subscription content, pay walls and walled gardens has been around since the internet was invented. Your suggestion that no one should be allowed to make any money from content on the internet would wipe out virtually every online organization on the planet. That would include Google (YouTube), Netflix, Amazon, newspapers, magazines, porn sites, gaming, etc. Yup, all gone – nobody works for free.

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