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Time for a New Plan: With Government's Wireless Strategy in Tatters, Regulation May Be Only Option

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Tuesday January 14, 2014
The federal government's spectrum auction starts today with its wireless strategy in tatters. Late yesterday, Wind Mobile announced that it was withdrawing from the auction, creating a new entrant vacuum that seems likely to leave some of the prime spectrum in major markets such as Ontario, Alberta, and British Columbia unlicensed and the hope for a renewed competitive wireless environment all but dead. Indeed, the marginal competitive gains of the past few years are now at risk and the government's vision of four strong competitors in every market looks like a pipe dream. The big three managed to scare off Verizon, while the federal government's mixed messages on foreign investment appears to have kept everyone else out.

Having made wireless competition a key policy priority - supported by a national advertising campaign and commitments in the Speech from the Throne - Industry Minister James Moore has little choice but to pursue a different strategy. The government had placed its bets on improving the competitive environment organically through foreign investment and new entrants. With that strategy a failure (a government spokesperson claimed the auction will still be positive for consumers but made no reference to improved competition), it is time to focus instead on regulatory solutions. The move toward regulated domestic roaming represents a starting point (and presumably Wind Mobile's best hope given its lack of spectrum), but more will be needed. Removing all foreign investment restrictions, establishing a regulated mobile virtual network operator market, and even considering structural separation are some of the regulatory choices still available.

If the government still believes that a competitive wireless environment remains a crucial economic concern, it cannot simply sit back as the big three carriers solidify their dominance in the upcoming spectrum auction and the prospect of viable competitors steadily disappears. The government should complete the spectrum auction and then move quickly to address the wireless mess with a strategy supported by targeted regulatory reform.
Comments (13)add comment

Joah Moat said:

...
I want to say something intelligent, but all I gots is "disgusting".

Cheers,
January 14, 2014

pat donovan said:

way off topic rambling...
ownership and control of the means of 'production, services and cannibalization'

lemme see, steel, chemicals, electronics... ah, here we go... (barter, manufact, trade, etc first)

from mil-indust to entertainment economies

from hyper-velocity moniarizism inflation in mega-project hot-spots (justin beiger?)

to (lynch-mobs as an economic culture. (reg+dereg monpolies)

So... like porn driving internet evolution (socio-genetics)

the cyber-wars between various Big-bros, hacker mafias and the corps squeezing life out of monopolies ( any troll patient war)

it'll be a race as to who wins, electronic pollution, admin pollution, (various types) and rational development.

(ie: a corp-only electronics world. tin-foil hats are illegal, remember. Interference with nat reg bodies))

will the e-world race succumb to lynch-mobs, raiders or malfeasance? (priest, cop or judge)

[I NEVER know where this stuff will take me.] fruit flies in a bottle, crushing monoliths, or field effects?
(ah, chenical warfare, electronic war-fare and a new (?) field war-fare. gravity, etc)

I'm looking to see the corps restrict the e-world to themselves.. for the very best of reasons... even if they have to do the bombing themselves.

gosh, the coffee is good today.

yours in a festering delusion

packrat






January 14, 2014

Don't get me started said:

...
Do we still need more proof that regulation is driving investment out of Canada? The government's ad-hoc regulatory meddling in the sector is precisely the reason foreign firms won't invest in Canada's telecom sector. Nuff said!
January 14, 2014

Interested reader said:

Just a common citizen
Given the disappointing result expected of the 700Mhz spectrum auction, it seems to me the federal government has another option, which would be to reserve, say, 25% of the 700Mhz spectrum to itself and start a national telecommunication company --call it Canada Telecom-- which would be charted to provide broadband Internet access across the country and wireless services for cell phones. This company would be structured as other state companies were in the past, like Canadian National Railway or Petro Canada. Setting up a national Network will take years, but after some time the government could issue shares to the public and sell a portion of this company to recoup its investment. Canada Telecom would price its services to cover its costs but its main goals would be to introduce competition in the market and provide broadband services where the current service providers will not.

Sounds like nation building again. No concerns about foreign companies coming in, but still delivering what people need: Service availability where it is lacking,competitive pricing, and decent customer service.

Cheers!
January 14, 2014

@interested reader said:

...
Our telecoms used to be controlled by crown corporations. The problem with those were that they were incredibly expensive. Think pensions, pay etc..so they were dismantled and made private. We have always had only a couple of big players. Bringing in new entrants who cant compete is pointless and they ultimately just get swallowed up by one of the three, so good idea but history shows it doesn't work in practice. Why do we need all the competition anyways? Most countries only have a couple wireless cariers anyways. why do we feel like we need more in canada. Depending on what you need, theres something out there for you already. We could always use lower prices but that would mean we would all need to bite the bullet and say goodbye to hardware subsidies. Thats the big difference between Canada and these other "cheaper" foreign carriers. Instead of that, we decided it was more important to line the pocketbooks of the "BIG 3 handset manufacturers" just so we can have a new iphone for less than cost. It only makes sense the Carriers are going to try to recover that 400 bux they covered for the cost of the device. Its pretty simple economics. It seems like all this "new entrant" stuff is just pandering to folks. I dont think our infrastructure will change anytime soon. If we give the best spectrum to a new entrant, how would that benefit the majority of the population? especially if theyre just going to fold in a year or so..its just prolonging the inevitable.
January 14, 2014

David M said:

Simple solution
Seems the simplest solution is what I heard from Elliot Noss and it is the cancelling of the auction altogether and open the spectrum for all. It will bring all sorts of innovation and competition to Canada. Of course the downside is for the shareholders of the big three and the loss of ~$4B government revenue.
January 14, 2014

Jim R said:

...
Perhaps the Big 3 should be treated like utilities and required to justify their prices to a regulatory body?

At a minimum, they should be required to do away with the notion of device subsidy and thus clearly separate the ongoing cost of service from the cost of the device. Devices could still be financed over the duration of a contract, but this financing would be explicit and different from the cost of service.
January 14, 2014

What problem needs to be solved? said:

...
I was glancing at the directory at West Edmonton Mall a couple of weeks ago and couldn't help but notice there were 47 stores in the mall selling cell phones. In sure looks to me like there is plenty of choice in the market to satisfy even the most demanding consumer. Not sure why anybody thinks we need more cell phone companies to choose from.
January 14, 2014

It was you. said:

...
It seems that as government policy and regulation have led major foreign telcos to be avoiding Canada like the plague one should be looking at what information the government is basing its policy and regulations on.

Dr. Geist? Mr. Anderson? Mr. Nowak? You folks are the advisors the government rely on, as you are the consumers champions.

What is the next step? More regulation as proposed in this blog? How has that worked out so far? At some point consumer champions have to stop ignoring the fact that economics are what determine a market and regulations only shape the way the economics are applied.

And the most important fact is at the end of the day it is profit or loss that determine competition - a fact that you may have fooled the government and even some of the people into forgetting, you have not fooled the accountants running the businesses.
January 14, 2014

Kerlo said:

Forget More Regulation!
Instead, There needs to be complete ownership separation between creating infrastructure and provision of the services. Once this is done, it will be easier for new entrants to compete.
January 14, 2014

Regulation just increases costs for everyone said:

...
@Kerlo

Electric utilities separated the infrastructure from the retailing of electricity several years ago and the prices have gone through the roof while services have declined and brownouts have become more frequent. The economics of this type of model just don't work because their is no incentive for the infrastructure owners to invest or upgrade the physical networks. I don't see how this would be any different for telecom.
January 14, 2014

Jason K said:

Government will only make cosmetic changes
Actually what the government will do is increase the mandate of CCTS, however changes are cosmetic. Government doesn't have what it takes to fix our telecom market. I've linked to a leaked still on the changes proposed to the CCTS from CTV news, keeping in mind that the "public interest" maybe to also be to ensure that both BCE and Rogers are not hurt significantly. I further explain in here:

http://jkoblovsky.wordpress.com/2014/01/15/why-the-government-will-only-make-cosmetic-changes-to-telecom/
January 15, 2014

Michael Kedar said:

Mobilexchange's CEO

Yes it is definitively time to look at other options, the CRTC in 2005/6/8 has looked at regulation open access/equal access and unbandeling of the wireless industry and missed the opportunity to create a base foe a sustainable competitive industry . It is time to revisit:

http://www.crtc.gc.ca/eng/archive/1996/PT96-18.HTM - Telecom Public Notice CRTC-96-18

http://www.crtc.gc.ca/eng/archive/1998/O98-1092.HTM - Telecom Order CRTC 98-1092
this process is starting this January 29 when comments are filed on http://crtc.gc.ca/eng/archive/2013/2013-685.htm
Mike
January 18, 2014

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