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Telus Attacks: The Battle To Keep Verizon Out of Canada

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Friday July 19, 2013
Telecom giant Telus has had an eventful week as it moves from claiming that Canada "really should be the most expensive country for wireless service in the OECD" to increasing its prices in the shift toward two-year contracts to now declaring war on the government's commitment to injecting greater competition into the Canadian marketplace. While the comments that something less than the highest prices in the developed world are a "great success story we should be celebrating" generated considerable media attention (here, here and here), the bigger long-term issue is the full-court lobbying press to stop the entrance of new competition.

Yesterday, Telus CEO Darren Entwistle was campaigning at the Globe and Mail and National Post, warning of a "bloodbath" if the government sticks with its commitment to allow for a set-aside of spectrum for new entrants such as Verizon. Telus is concerned that a set-aside would allow Verizon to purchase two of the four available blocks, leaving the big three to fight it out over the remaining two blocks. Telus emphasized its prior investments in arguing for a "level playing field" in the auction.

Yet to borrow Telus' phrase - "scratch the surface of their arguments and get to the facts" - and it becomes clear the fight is not about level playing fields since new entrants have been at a huge disadvantage for years in Canada. Indeed, even with a spectrum set-aside, there would not be a level playing field as companies such as Telus would have big advantages that include restrictions on foreign ownership for broadcast distribution (thereby blocking Verizon from offering similar bundled services), millions of subscribers locked into long term contracts, far more spectrum than Verizon would own, and its shared network with Bell that has saved both companies millions of dollars.

While the companies frame their arguments around level playing fields, the real goal is simply to keep competition out of the country.  For Verizon (or any major new entrants), a spectrum set-aside will be crucial since it is the only way to obtain sufficient spectrum (when combined with the existing spectrum from Wind Mobile and Mobilicity) to establish a viable fourth wireless network that could compete directly with the big three incumbents. If Telus gets their way, the removal of the set-aside would kill the government's stated goal of a viable fourth carrier since there would be little reason for Verizon to enter the country only to face many of the same disadvantages that has hamstrung the smaller new entrants. 

Moreover, if there is a sense of deja vu about the Telus arguments, it is because it made the same "level playing field" and big investment arguments back in 2007 to argue against a set-aside in that spectrum auction. For example, in June 2007 it stated (though notably on the same day it argued for a set-aside to address competition concerns arising from a proposed Bell - Telus merger):

We strongly believe that the competitive playing field should be free from government intervention so that companies can compete fairly for customers. Over the span of a few years, Telus evolved from a regional provider of wireless services in Alberta and B.C. to a leading national carrier. We accomplished this not by seeking regulatory benefits, but by investing more than $7 billion in a national wireless network that delivers advanced wireless services like mobile TV and satellite radio across the country.

In the early days of spectrum allocation, these same companies argued for a regulated approach to assist with their entry into the market. In 1984, the government allocated its first block of spectrum for wireless services, specifically reserving spectrum for Cantel (later Rogers), who benefited from no upfront payments and regulations that mandated that the incumbent providers could not provide service in a given region before Cantel established service there.  In 1995, the government again adopted a regulated approach to the allocation of spectrum for PCS services, setting aside spectrum for the two new entrants - Microcell and Clearnet - that are today owned by Rogers and Telus.

Make no mistake: the Telus lobbying campaign will be joined by Bell and Rogers as the three companies spend millions of dollars in advertising and lobbying to keep the Canadian market free from much needed competition (the Wire Report reports that ten board members each from Telus and BCE have registered to lobby the government on spectrum). The government has insisted that it will do whatever is necessary to ensure greater competition and consumer choice in the wireless sector.  The potential Verizon entry into Canada - undoubtedly conditioned on a spectrum set-aside - is precisely what is needed. In this case, sticking with its policy by siding with consumers and greater competition has the dual advantage of being both good policy and good politics.
Comments (22)add comment

TelcoCartel said:

Simple Formula
More Telcos = more competition = lower costs

That's how the free markets work for Conservative voters and politicians except when Failurety jumps in to stop the banks from competing and lowering their loansharking rates even further! Harpercrites!
July 19, 2013

Cynic said:

...
Keep digging beneath the surface and you will see that the government's real motivation is votes, it's not about wireless competition at all. Even former Industry Minister Paradis admitted Canadian wireless prices were "middle average" a few weeks ago, yet the PMOs office is still trying to make this into a consumer populist issue. But it's a very risky strategy, putting Canadian businesses at a competitive disadvantage to foreign companies could backfire and put the Liberals back in power. If Verizon thinks the Canadian regulatory environment is too unpredictable (i.e. can you say banana republic) they may conclude that the risk outweighs the benefits of coming to Canada. It will be interesting to see if the PMO really wants to risk alienating Canadian business over this issue.
July 19, 2013

Cynic said:

...
@Telco Cartel

As we from the Wind and Public Mobile debacle there are other additions to your equation:

More Telcos = more competition = lower costs = more failed telcos = more subscribers left without service = more taxpayer funded incentives to foreign firms

Let's not forget that Vimpelcom, which owns Wind, has twice the number of wireless subscribers as Verizon. Vimpelcom has put Wind up for sale - perhaps they just want out of Canada's crazy telecom business or maybe they are just flipping their spectrum holdings for a quick buck. They already got a big discount on the cost of spectrum in the 2008 auction so Canadian taxpayers have already helped them out enough.
July 19, 2013

Joe said:

...
Well I think as we saw with Target's entry into Canada, just because a US company moves North, does not mean they will raise the level of competition. More likely they will settle down into a nice non competitive balance with the other three after removing Wind and Mobilicity, with the added benefit of passing all of our data directly to the NSA.

July 19, 2013

James said:

Now American Wireless Companies wants our money
I guess US Gov and our Gov wants Total Canada to declare Bankruptcy like Detroit, we are already been monopolized by Bell, Telus, Rogers and Wind. And now American Companies wants to get in our pockets. It will hurt us cause precises wont come down it will go up...

Just like Law just passed for 3 year contracts, what happened right now? price of the phones went up... but here is the smart part from the telco companies, no more contracts its called Win-Tab yes your still paying same amount for phone. Still 36 months ** put it this way we will never win ** another legal Thief in town just suck it!...

July 20, 2013

Steph said:

...
Verizon's price for a 6GB plan in the US will set you back $80 per month and Telus' price is $70 per month. It's hard to imagine Verizon would offer lower prices in Canada just because we are nice people.
July 20, 2013

sh00tr said:

Verizon has some of the hughest ARPU
So why does anyone think that more competition will drive a reduced average revenue per user. Increased choice does not always reduce prices. Perhaps it is the choice that fractionalizes the customer base such that smaller redundant overheads actually produce more compartmentalized and therefore wasted capacity. Simplistic equations like increased choice are fundamentally ignoring the carrying costs of redundant infrastructures which establish a sunk cost. The Bell-TELUS network sharing arrangement is a proof that building out another parallel network isn't necessarily a recipe for success unless a corporation is looking past Q3 (2023). The return on investment is likely a lot further away than @TelcoCartel would have you believe. And whose to say 4 big players is enough. It think we have 5 big banks... And the country is happy with the banking fees, right? This is a cheap vote-getting tactic. Like mandating reduced insurance rates, or other direct control measures. How much does it cost to use Interac? Yeah that's what I thought...
July 20, 2013

James Van Leeuwen said:

Don't throw rural Canada under the bus.
Politically, the Conservatives have no choice but to follow through on their goal of establishing a fourth serious competitor in the Canadian wireless marketplace. There is far too much political capital to be gained if they succeed, or to be lost if they fail. Verizon is the competitor of choice, and barriers to market entry *will* need to be lowered to entice them to come north.

However...

As favourable as this outcome would be for the Conservatives and for most wireless consumers in Canada (the bloodbath would be over market share), Entwistle's warning that investment in rural networks would suffer is not idle fear mongering. This is already proving out in the U.S., where competition between networks is stronger than here in Canada:

http://www.bizjournals.com/prnewswire/press_releases/2013/06/12/NY30156

"... because of competitive pressures, it is no longer possible for companies to cross-support high-cost areas based on high rates in other more economic regions. The cross-support was once significant, but is no longer a policy goal or economic possibility in a competitive telecommunications market."

In other words, the Conservatives would have to throw weaker markets under the bus to achieve their policy objective. The only way smaller communities across Canada could then remain competitive in broadband telecommunication would be to take matters into their own hands, like the community of Olds, Alberta:

http://www.cbc.ca/news/technology/story/2013/07/17/technology-gigabit-internet-olds.html?cmp=rss

Olds is one of a tiny handful of smaller communities in Canada to take such initiative. Hundreds across the U.S. have already done the same:

http://communitynets.org/communitymap

At the very least, the Conservatives should be making it possible for Canada's smaller communities to take such initiative without the risk of anti-competitive practices like those of incumbent telecom and cable operators south of the border. So far, U.S. incumbents have successfully lobbied nineteen State governments to hinder or outright prevent development of community broadband networks. This is unconscionable, given that the incumbent operators will *never* build competitive networks in weaker markets. Almost all of their capital is committed to building and protecting market share in stronger markets that offer higher profits. Their strategy for protecting weaker markets is to crap in the sandbox, and our own incumbents must not be allowed to do this.

Lest anyone thinks the issue of rural competitiveness isn't important, think again. The average age of farm operators in Canada is approaching sixty, and there are nowhere near enough young farmers in the pipeline ready to take up the slack when they retire. Economic pastures remain greener in the cities; out-migration of rural youth is accelerating; most rural communities are aging rapidly.

For now, Canada has NO strategy for addressing the accelerating economic and demographic decline of smaller communities from coast to coast. Competitive broadband isn't just a 'nice to have' for these smaller communities. It is essential to reversing declining economic and demographic fortunes, and the entire country including large metropolitan areas needs to be supporting this ambition.

Rural communities are to society as roots are to trees. The roots of Canadian society are brittle and withering, leaving our entire society vulnerable to freshening winds of change.
July 20, 2013

Verizon is good news.. said:

Say goodbye to the "National Carrier" Finally.
Spectrum auction cost aside, with the Verizon coming in looking only to scoop up the cream in the Toronto/Montreal corridor the incumbents too will narrow their focus, and will finally stop charging me, a Vancouver resident, the "subsidy" it does now to provide rural service.

As Verizon knows, business is business and wireless service is a privilege, not a right. It is a good thing the CRTC is maintaining pay phones stay in service.

I doubt they will ever say it publicly, but I imagine the Big Three are already looking at revising network builds and the cost savings not having to add capacity to Red Deer, Dawson Creek, or Thunder Bay and the thousands of miles in between.

I would like to thank openmedia and Mr. Geist for helping to facilitate this change in philosophy by our Big Three - finally I will pay for what I need, and not what Canada needs.
July 20, 2013

Gregg said:

...
Mr Geist's ongoing misrepresentation of the facts is appalling. Telus' CEO has consistently said that he has no problem with Verizon coming to Canada, he just wants equal access to spectrum on equal terms. Is that unreasonable? Yet Mr Geist has distorted the truth to try to convince people that he wants to block their entry - which is not true at all. .

As a proud Canadian and a taxpayer I don't want to be subsidizing any foreign companies whether it's Wind or Verizon. Our Canadian companies that hire Canadian workers and invest in Canadian communities should never be intentionally disadvantaged relative to foreign firms by our own government. Would the governments in the US, France or UK grant special favors to Canadian companies over their own domestic companies? Not in a million years!
July 20, 2013

Misguided Sheep said:

On competition
From the Financial Post - July 2 2013

"Mr. Ghose’s Canaccord colleague, New York-based analyst Greg Miller, noted Verizon’s foray into Canada won’t be as a scrappy low-price competitor.

If the wireless giant does acquire start-up assets in Canada, he would view this as the beginning of an attempt to more deeply penetrate the Canadian enterprise market. This segment is responsible for most of the cross-border roaming.

Mr. Miller noted Verizon is unlikely to be interested in becoming “yet another consumer-focused nationwide competitor that destabilizes the competitive environment regardless of the leverage the company may have with handset manufacturers.”

I just wonder to what end you and Openmedia push your agenda. Do you think you are doing the consumers any good by not giving them facts and making them think? You are promising them lower prices and improved status in the wireless world but the fact is, you are basing it on ideals, not economics nor facts.

I know being the "advocate" keeps you relevant in the industry but at some point, even the most well intentioned lies cause damage.

July 20, 2013

Gregg said:

It seems suspicious that my namesake takes opposite views to me...
Seriously, are you trying to hijack my identity on this blog? I've been here for years under this name....

This is what makes Canada unique. But we already were unique in that the incumbents, so entrenched, make it impossible for anyone new to get a foot hold.

Unique situations call for unique measures. I hope Verizon takes up the set-aside auction space.
July 21, 2013

Gregg M said:

...
@Gregg

No intention of taking your "identity" from now on I'll add my initial to avoid confusion.
July 21, 2013

should i be excited about this? said:

@Gregg
the spin is typical. For the prices, we cant compare canada to europe or asia where users typically buy their handsets outright, and arent locked to a carrier to recover the hardware subsidy. Sure youre going to get your iphone 5 for 100 in canada but nobody can really believe that the remaining 700 is a gift? If CONSUMERS (yes thats you) stop insisting on having subsidized hardware, we could change things very easily, but people seem to get weak in the knees every time a new phone hits the street. We went along with this pricing scheme so we are as much to blame as the companies for the "high cost" (which really all things considered isnt so bad) I feel for the folks in rural communities but only because they are likely promised service that they never get, but if you live in a rural community you kind of have to expect that no?
July 22, 2013

should i be excited about this? said:

kind of have to expect "that"
the "that" is that services are very limited, not that companies may show on their coverage maps that an area is covered when they really mean that with a signal booster you "might" get service..but if thats the case, theyll give you your money back..you have a valid reason

(and no..im not excited at all about farming out our biggest industries to american companies)
July 22, 2013

end user said:

...
James said:
its called Win-Tab yes your still paying same amount for phone. Still 36 months ** put it this way we will never win ** another legal Thief in town just suck it!...

So not sure what you are trying to say here? If you can't afford a phone why buy it or get a cheap phone. IF you get the phone on TAB and then for some reason you cancel your account common sense would dictate that you still owe the outstanding amount on the phone. So pay up or shut the fuck up.


You do realize that with WIND if you haven't paid off the TAB after 3 years while keeping your account active they forgive the outstanding amount.
July 22, 2013

Mike The Ghost said:

Sod them all
Sod the telecos. Sod the energy companies. Sod 'em all.

Services that are integral to citizen's every day lives, services that citizens rely on, should be nationalized. Nationalize Petroleum companies- like Petro Can. Nationalize the phone companies. Nationalize energy companies. Actually, better than that: provincialize the companies.

And give them a mandate to produce a reasonable profit. The key word being "reasonable". They should make enough to spur future investment, provide payments toward old debt, and to make this country the True North STRONG and Free.

But of course, with the lot we have in charge today, it'll never happen.

Sod them, too. Vote Pirate.
July 22, 2013

Consumer Lady said:

Cause & Effect
Lol - placing 2 page ads .....looks to me as though the big 3 are scared of having their monopoly stunted. I looked at a advertisement I got in a product I purchased for cell phone coverage only applicable in USA. LOL it was so cheap. President from Bell on Lang and O'leary saying we are a few dollars more maybe than USA. My goodness what a liar. Once again spinning going on like any other big companies in this world. Would be nice for once to see these guys trumped.
As consumers we'll only buy from someone else when we see the deal they have for switching. I think Verizon is smart enough to realize that. Since Wind seems to get the picture well enough to offer no contracts and many extras without the high cost .... I think again Verizon will follow their suit. Verizon is coming in to pick up disgruntle consumers. Which I am sure is pretty much all of Canada. Never heard of any big 3 customers being comfortable/pleased with the price or what the package includes for that price.
Here is another situation that is kinda of connected with Rogers. We have Shaw cable in Ontario and were sold to Rogers. They obviously made a deal years ago to buy out mountain cable to monopolize this area also, in exchange for Shaw to retain total control of the West and obtain some other media outlets(something like that). Now get this I did my calculations and with having Shaw ( NO CONTRACT by the way ). Rogers was $50 dollars more expensive in the 2nd year of the contract (bundled phone/net/cable). Yes get this Rogers offers 6 month discount, then ups it to 1yr and then the next 2yrs for 3yr old contract. So in other words contracts force consumers to get stuck into higher prices. Funny remember the days when there were no contracts for home phones and cable. The necessity is for the Big 3 to implement the higher prices. The consumer therefore can't band together and basically boycott one of the big 3. Think these guys sat at a table and put that one together lol. Well that piece of news should make all Bell and Rogers customers a little ticked. I priced Bell ( again all those fees wow )yes more than Shaw was. So think about it that's $600 more a year to be with Rogers or Bell basically. I still have to figure out what I wasn't going to get with Bell and Rogers ( long distance to USA for instance over long term what savings that has).
When you see a difference as $600 more you'll pay in a year to have less than you already have, realizing that there are millions that already paying that a year .... you just want these greedy companies pulled back a notch or two ( lol being a lady with my comments ). These big 3 have paid off CRTC over the years, now we'll see if they will once again do it if Verizon doesn't come in or unable to use their towers.
P.S. I had Bell Mobility and they double my monthly rate without notice that my contract was up.... Oh they could correct my bill if I signed up for another contract. I switched to Wind the following day. One price and long distance throughout Canada and USA for the about the same price also unlimited talk/text time and phone messages,caller ID and reasonable data. With Bell I had 200 minutes day and unlimited local after hours and 100 minutes long distance, unlimited texting and caller ID ( I called Bell and put this package together with my price at the time - they don't do that now). Well this might be one example of where cause and effect came into place. Sure the Big 3 know of multitudes of causes that will shift their customers to a new carrier. Wouldn't it be wild if this would bring back real customer service again!
July 26, 2013

sharperCon said:

Welcome to Canada
Here is how Verizon treats its US customers

http://www.villagevoice.com/2013-07-24/news/verizon-hurricane-sandy/full/

Verizon (as any corporation) is looking to maximize profits. Be careful what you wish for - you may get it.
August 02, 2013

Bruce said:

Shut the F# up Cdn Mobile Phone companies
You've been ripping us off for years - individually and collectively. True competition is drastically overdue in Canada. Eat my shorts Bell, Telus, Rogers and your laughable discount arms Koodoo, Fido, etc. Myself and countless other Canadians are eagerly awaiting to join up with a US mobile phone company. These companies have driven us to it. So long 3 year ripoff contracts.
August 06, 2013

... said:

...
you want a us phone company in canada? Did we not just see that edward snowden was correct when he said the us government was spying on its citizens though their iphones or smart phones or whatever????? Yes our phone companies are shit but come on people, this is just like the target thing, i worked at zellers and everyone thought target would be great and be bertter priced... guess what, ITS NOT! like fuck people, open your eyes. this world is going to shit will all the "little" movements like this.. and there are only a small amount of people in the world who realize that. doesnt take a genius to realize we have some bad climate change on our hands so why is it so hard to see that if we keep letting u.s shit into our country we will soon enough be "part" of america. People are so greedy and stuck up their own asses you cant see anything they are doin.... OPEN YOUR EYES, its not good.
August 16, 2013

fuck cells phones and fuck the u.s too said:

...
what the fuck did you idiots do with outs cell phones? I am 19 never bought one and never will. They are pieces of shit that ruin your lives. Im sure we all know a few ppl who always have their noses stuck in their phone, when i see someone like that, I want to take their phone and smash it. Fuck. Ridiculous.
August 16, 2013

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