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.