Canada's Wireless Crisis

Wednesday May 07, 2008

This week I delivered the opening speech at the annual Spectrum 20/20 conference that focused on the state of Canadian wireless marketplace.  As the title of this blog posts suggest, I believe that Canadian wireless is in a state of crisis, with limited competition and high data prices.  The talk and slides have been posted to Blip.tv and are embedded below.


Note that I also covered the issue this week in my technology law column (Toronto Star version, Ottawa Citizen version, Vancouver Sun version, homepage version).  I begin by noting that last week's announcement that the Apple iPhone will make its long awaited Canadian debut later this year generated considerable excitement.  While analysts focused on the bottom line impact for Rogers Wireless, it may be that the most important effects have already been felt in Canada since more than any industry statistics or speeches, the iPhone's slow entry into Canada has crystallized the view that the Canadian wireless market is hopelessly behind the rest of the world with limited competition, higher prices, and less choice.

The year-long delay of the iPhone - Apple first launched the device last June in the United States followed by France, the United Kingdom, Germany, Ireland, and Austria - provided tangible evidence that the Canadian market desperately needs an injection of competition (as the sole GSM provider, Rogers was the only carrier capable of supporting the iPhone) and more competitive pricing (Canadian data prices are far above the U.S. offer of unlimited data for US$20 per month).

In many ways, the iPhone saga merely confirmed what many Canadian consumers and businesses have known for some time.  Mobile data pricing in Canada is among the highest in the world, creating a significant barrier to the introduction of new mobile services and causing many consumers to carefully ration their mobile use for fear of being hit with a hefty bill at the end of the month.

The impact of uncompetitive pricing is felt beyond the consumer market.  Last month, the World Economic Forum pointed to problems in the wireless market as a key reason for Canada's slipping global ranking for "network readiness" (Canada has moved from 6th worldwide in 2005 to 13th today).  Canada ranked 75th in the number of mobile subscribers, trailing countries such as El Salvador, Kazahkstan, and Libya.  It also lagged behind countries such as the United Kingdom, Singapore, Italy, Sweden, and Norway on mobile pricing.

As the country falls further behind the competition, it is time to acknowledge that market forces alone will not solve the issue.  It therefore falls to policy makers to focus on the developing a marketplace framework that encourages greater competition and innovation.

The first step in that direction came last fall when Industry Minister Jim Prentice announced a set aside for new entrants in the forthcoming spectrum auction.  The auction, which runs over the next few weeks, is expected to pave the way for several new wireless competitors, who may join forces to create a fourth national carrier.

While the spectrum set-aside was a good first step, more is needed.  Prentice's goal should be to create the world's most flexible regulatory environment that encourages openness and interoperability.  The next round of spectrum auctions, which involves the coveted 700 MHz band, could include mandatory open access requirements that allow carriers, device manufacturers, and service providers to use Canada as the sandbox for mobile innovation.

Many companies are also beginning to focus on the potential of "white spaces," small bits of spectrum that exist between television frequencies.  The U.S. Federal Communications Commission is currently considering a proposal to make the white space home to unlicensed uses, thereby encouraging further experimentation.  Assuming that potential frequency conflicts can be resolved, Canada should follow suit.

The emphasis on openness could also extend to telecommunications ownership where the current foreign ownership restrictions may artificially limit Canadian competition.  There remains concern about completely opening up the Canadian market to foreign ownership, however, that may be a price worth paying to address the current malaise.

Prentice could also encourage competition by removing the barriers that consumers face in moving between providers.  The introduction last year of wireless number portability, which allows consumers to retain their phone number when they change carriers, helps in this regard.  However, restrictive long-term contracts and government plans to introduce legislation that could prohibit consumers from unlocking their cell phones would represent a case of one step forward, two steps back.

Finally, the Canadian Radio-television and Telecommunications Commission may want to take a closer look at the mobile marketplace.  The CRTC is committed to a de-regulatory approach and has for years largely left the mobile marketplace alone (with the exception of undue preferences and unjust discrimination), yet the regulatory hole has not served Canadians well.  Canadian iPhone fans may finally get their coveted device, but it is going to take more than a great phone to fix what ails the Canadian mobile marketplace.