Spectrum Transfer Policy To Test Government's Resolve on Wireless Competition
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Wednesday April 17, 2013
The issue of spectrum transfers has generated considerable attention
over the past few weeks as Industry Canada prepares to unveil a transfer policy in response to the proposed sale of spectrum by Shaw to Rogers. Industry Minister Christian Paradis has made it clear
that he is uncomfortable with the proposed sale, acknowledging that the
intent of the 2008 spectrum auction set aside was not to have the
spectrum end up in the hands of incumbents. While the incumbents and
their supporters are raising the concerns about market uncertainty and potential lawsuits,
the reality is that the government's policy on the Canadian wireless
market has been clear since 2007. Despite the efforts of the CWTA and
the incumbents to convince politicians and the public that Canada is a
competitive market, the government believes more competition is needed.
The Conservatives' policy on wireless competition solidified in 2007, when Prime Minister Harper shuffled then-Industry Minister Maxime Bernier (who most believed was opposed to government intervention in the form of a set-aside or other measures) with Jim Prentice. Within months, Prentice unveiled the government's policy with the headline "Government Opts for More Competition in the Wireless Sector." In case there was any lingering doubt about where the government stood, the release noted:
Recent studies comparing international pricing of wireless services show Canadian consumers and businesses pay more for many of these services than people in other countries. These services are key to strengthening the competitiveness of Canadian business.
Despite these measures, the policies have had only limited success. Prices have declined only modestly and the vision of robust competition from a strong fourth carrier remains a distant hope (though the situation may be better in Quebec with a stronger fourth carrier and more aggressive provincial regulation). Moreover, there is a sense that the new entrants may throw in the towel, cashing out to the incumbents and leaving Canada with higher prices and further reduced competition.
The responses to the recent consultation on spectrum transfer makes it clear that half-measures will no longer work. Past efforts have included set-asides without fully addressing roaming and tower sharing; foreign investment without fully opening the market, or new spectrum with caps that do not allow for a robust competitor. The response to spectrum transfer issue suggests that the government should either go all-in or it should be prepared to declare that its policies have failed.
The incumbents are unsurprisingly opposed to further government policy measures. For example, Bell is most vociferous in its opposition as it is reluctant to even respond to Industry Canada's questions. It is opposed to a policy aimed at creating four competitors and believes that the government should encourage spectrum transfers for their most optimal use (never mind the hoarding and non-use of spectrum by the incumbents). Further, Bell is against any caps or other measures designed to foster greater competition. Rogers is also opposed to a competitive assessment and spectrum concentration analysis. However, should the government implement such measures, it argues that it should only apply to future spectrum (thereby grandfathering its deal with Shaw).
On the new entrant side, the message is plain: either fix the competitive environment or we want out. The most obvious call for spectrum transfers comes from Mobilicity, which says the government must help to find ways to raise capital for future spectrum auctions or it should refrain from implementing any new rules on spectrum transfers. Wind Mobile and Public Mobile are more nuanced, focusing on the need for stronger policy measures to facilitate competition but making it plain that failure to do could lead to future spectrum transfers. Wind Mobile essentially says there should be no new restrictions on transfers until the government has addressed the competitive conditions in the Canadian marketplace. It points to four:
So where does that leave the Canadian government?
Following the incumbents' advice is a non-starter. For the past 5 1/2 years, the government has made it clear that it believes the Canadian wireless market is uncompetitive, resulting in high prices for consumers and businesses. Given the ongoing competition concerns, doing nothing is not an option. That said, neither is maintaining the current approach of half-measures. It is time for the government to go all-in with all the policy levers aimed at fostering increased competition. That will require:
Wednesday April 17, 2013