WIND SIM by mroach (CC BY-SA 2.0) https://flic.kr/p/8w7m7Y

WIND SIM by mroach (CC BY-SA 2.0) https://flic.kr/p/8w7m7Y

News

Why the Latest Canadian Wireless Policy Move is More Shakeup Than Shakedown

Industry Minister James Moore announced new spectrum policy measures yesterday designed to help foster the creation of a viable fourth national wireless competitor. The policy features an accelerated timeline for another spectrum auction (AWS-3) and a significant set-aside of spectrum for new entrants such as Wind Mobile. When combined with the government’s policies on domestic roaming, tower sharing, and foreign investment, it is clear that it intends to continue to use the policy levers at its disposal to encourage greater wireless competition. For this, the government deserves kudos, as its emphasis on fostering greater competition is the right thing to do.

While the announcement generated criticism from the usual suspects who want Canadians to believe that the market is already competitive (or incredibly might somehow become more competitive if it shrunk down further to two competitors), it is worth revisiting the Competition Bureau’s analysis of the wireless market. Earlier this year, Canada’s independent agency responsible for competition in the marketplace concluded that the Big 3 enjoy “market power”, which it defines as “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.” In fact, the Bureau commissioned its own study of the market on domestic roaming and found that a more competitive market would deliver approximately $1 billion in benefits to the Canadian economy.

As if on cue, the Big 3′s most recent quarterly investor calls confirmed that they face little pricing pressure.

Rogers started the confirmation in its April investor call, noting that “we have reduced the amount of promotional activity” in response to a question about “price discipline.” Bell followed in its May call, noting that increased wireless service revenue came in part from the expiry of promotional pricing. Further, CEO George Cope emphasized “the discipline in our pricing in the marketplace.” Not to be outdone, Telus also indicated on its call  that even when “there are all kinds of aggressive promotions in the market, it allows us to stand back from the frame a little bit and be a little more sanguine.”

Those messages are invariably well received by the analyst community for whom “pricing discipline” means increased revenues. For consumers, however, they send the signal that the already high Canadian wireless prices are not coming down anytime soon. Canadians judging the government’s policy reforms on wireless therefore face an actual choice: they can either believe pundits who now claim that less competition will result in better pricing or they can listen to the Competition Bureau and the Big 3 themselves, who insist that they plan to maintain “pricing discipline” for wireless services. If you take them at their word, it is wireless consumers who are often left feeling that they have been the target of shakedown and hoping that government policies might provide a much-needed shake-up of the Canadian wireless market.

4 Comments

  1. Michael Heroux says:

    I think it’s good like you said but it is probably for all the wrong reasons. This government works on perks and back room deals. I wouldn’t doubt that spectrum range was promised to whoever toed the line the most. After all the disclosers from ISPs and Telcos it could actually be punishment to the BIG 3 for opening there mouths. We shall see what comes out of the BIG 3 now that they lost their perk. Follow the money.

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  3. There are a few things that I find curious with this announcement:

    “In January, I unveiled the details of our upcoming 2500 MHz auction, which included specific rules to benefit rural Canadians.”

    I hadn’t paid close enough attention to this but there is a huge problem here. How will rural Canadians make use of spectrum that Europe (and one Canadian operator) can only use for small/dense cell deployment? From my recollection, Germany used digital dividend spectrum (lower frequency/better propagation) for rural. So no rural Canadians except the ones near the small cells can use it and the operators will never loose it. Because of physics, this spectrum is very challenging and expensive to monetize.

    “AWS-3 spectrum is ideal for delivering fast, reliable service on the latest smartphones, tablets and mobile devices.”

    I agree that AWS-3 is good spectrum but again there are a few problems: it’s not standardized at the 3GPP (also my understanding is that the band pair is not exactly the same bandwidth) and it’s not auctioned off in the US (and not for a while it seems). It’s unlikely that smartphone vendors will rush to support this band in the near term without a strong push from US operators.

    The other thing I find difficult to understand is why are we following the ITU recommendation of band paring for this? Why can’t we go on our own, forget about FDD bands and move towards a cleaner TDD approach? TDD is way better suited for future spectrum allocation and North America can easily “run with it” without impacting the rest of the world too much.

    I have a feeling that this news will only allow the incumbents to further solidify their stronghold. AWS-3 gives very little incentive for new comers (domestic or foreign) to play any role in Canada (mostly because of the time it will take for the industry to support it).

  4. IMO Netflix should be directly subsidizing Canadian content, just as all other Canadian broadcasters must do.

    This would largely resolve the territorial viewing related loss of revenue.