MTS by Steve (CC BY-NC 2.0) https://flic.kr/p/dWPScb

MTS by Steve (CC BY-NC 2.0) https://flic.kr/p/dWPScb

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Bains Gives Bell-MTS Merger a Pass Despite Competition Bureau Finding Serious Wireless Market Problems

The Canadian government has prioritized innovation as a marquee policy issue. There are  signals that Innovation, Science and Economic Development Minister Navdeep Bains will use the upcoming budget to overhaul the myriad of innovation funding and support programs that have cost billions of dollars with only a limited return on investment. There is no reason to doubt the commitment to innovation, but a national strategy must involve more than changes to how the government doles out cash incentives.

Yet when presented with the opportunity to address a core component of any serious innovation strategy – the communications sector that provides the foundation for the digital economy – Mr. Bains last week took a look at a market that the Competition Bureau found suffers from coordinated behaviour among the three dominant providers and simply whiffed. My Globe and Mail column notes that the decision to approve the merger of BCE and Manitoba Telecom Services (MTS) with only minor tinkering seems certain to increase wireless pricing for Manitoba residents and eliminate one of the few competitive bright spots in Canada.

The government’s news release on the merger approval attempted to shift attention toward the expansion of Xplornet into the Manitoba market as the satellite Internet provider picked up some wireless spectrum, six retail locations, and 24,700 MTS customers that were otherwise headed to Bell. Xplornet plans to use the assets to launch its own wireless service in the province.

Canadian consumers can be forgiven, however, for sensing that they have seen this movie before and knowing that it does not end well. The inability of smaller, wireless only entrants such as Public Mobile and Wind Mobile to create viable fourth competitors leaves little hope that Xplornet will do any better. Indeed, with the same challenges – the lack of bundled services, weak purchasing power for new devices, and threats from discount flanker brands deployed by the Big Three – a small new entrant will be no match for Bell, Telus and Rogers.

The Xplornet news distracted from the far more important findings of the Competition Bureau. Its analysis of the merger confirmed what critics of the wireless sector have long maintained, namely that markets with a strong fourth competitor feature better pricing than markets dominated by the big three. The Bureau, which had access to confidential internal company data, issued the following unambiguous conclusion:

“as a result of coordinated behaviour among Bell, TELUS and Rogers, mobile wireless prices in Canada are higher in regions where Bell, TELUS and Rogers do not face competition from a strong regional competitor. Conversely, the Bureau concluded that where Bell, TELUS and Rogers face competition from a strong regional competitor, prices are substantially lower. The Bureau concluded that the lower prices are caused by the presence of a strong regional competitor who can disrupt the effects of coordination among Bell, TELUS and Rogers.”

The Bureau’s findings represent a near-complete indictment of the current wireless competitive landscape in Canada. While the Big Three insist that they actively compete against each other, it found that they actually coordinate with each other in markets without a strong fourth competitor. It is the presence of a strong fourth player that disrupts that coordination and which helps explain why the companies engaged in a lobbying blitz against the potential entry of U.S. giant Verizon several years ago.

The Bureau gave the merger a pass by concluding that beefing up Telus’s presence in Manitoba and adding Xplornet would help offset the loss of MTS. But those assurances are difficult to square with the evidence on the competitive effects of a strong regional competitor.

The Conservative government was criticized for failing to fix Canada’s uncompetitive wireless market, but at least it recognized the problem and did not shy away from challenging the Big Three. By contrast, Mr. Bains was faced with a sure thing – higher wireless prices for consumers and a less competitive, innovative marketplace – and blinked. Unless there are some new pro-competitive policies on wireless yet to come, the approval of the BCE-MTS merger guarantees that the government’s innovation strategy will start with a weak foundation.

5 Comments

  1. I am reminded of the condo sat-cases in van;
    oddly enough, there were explosions in supply -rooms for people giving away connections to tenants.

    or Northern indian TV providers getting locked up.

    the phased-array of receivers?
    how they doing with fake, junk and censored news?
    still slanted, sterilized and stupid?

    (That is what’ll kill them, they will NOT be able to resist the temptation and viewership will decline.

    usership will move to Lifi from reg wifi, or sats.

    you can’t say they weren’t warned.

    packrat

  2. Coordination? Is that the new name for collusion except that companies can’t be prosecuted for “coordination”?

    Tell me, in the end, how is one different from the other? The corporations still win by screwing over the consumers.

    Mr. Bains: Thank-you so much for eliminating one of the few places in Canada where real competition exists. It is exactly what the big 3 want. They need to eliminate all strong 4th player providers so that there is no evidence of any of this “coordination”.

    How is it that the average Joe can see what is going on in the mobile space and people who are supposedly “educated” and “professional” in their space cannot see what is going on?

  3. corporations screwing over the consumers Should be penalized

  4. Consumers don’t have well paid lobbyists, with close connections to the minister, looking after their best interests.

    Oh wait … we do. I believe they are called “Members of Parliament”.

  5. Pingback: How Navdeep Bains Can Get His #Innovation Groove Back - Michael Geist

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