Reports in the Globe yesterday that U.S. telecom giant Verizon has offered $700 million for Wind Mobile as part of an entry into the Canadian wireless market (which could also include buying Mobilicity and bidding in the upcoming spectrum auction) caused significant reverberations throughout the industry. The news sent the stock price of the Canadian incumbents plummeting and analysts – who only days ago were assuring clients such a move would not happen (“highly unlikely” said Scotiabank’s Jeff Fan; “what a joke” a telecom executive told Cartt.ca) – scurrying to assess the potential impact of a Verizon entry. Some have argued Verizon would have little interest in a smaller market like Canada, yet the company has actively promoted the elimination of foreign investment restrictions including in a 2008 submission to the Competition Policy Review Panel that detailed how “it had a long-standing presence in the Canadian telecommunications market”.
There remain many questions about a Verizon entry into the market via Wind Mobile, particularly with respect to the use of different wireless technologies and spectrum, but there is little doubt that the company could use its buying power to offer better deals on devices and North America-wide plans that leverage its U.S. network to offer significantly better roaming services. Moreover, the U.S. footprint could appeal to the corporate sector, offering the chance to steal customers from the current incumbents.
Less discussed would be the potential impact on broadcast rights and distribution.
The broadcast distribution issue could have even bigger repercussions. Of all the challenges faced by a foreign entrant such as Verizon, the biggest may well be restrictions on foreign broadcast distribution. The inability to offer television services as part of a bundled offering is a clear disadvantage for a foreign competitor, who is left chasing the low-end wireless-only consumer market and the high-end corporate market, but without the big consumer mid-to-high end market that often purchases bundled services.
Verizon could use their potential entry to blow this open by seeking government support for changes to the restrictions on broadcast distribution. Recommendations for changes to the BDU restrictions date back many years (e.g., 2003 Industry Committee report) but this would be a particularly opportune time to raise it. The Canadian wireless market is a mess and a Verizon entry would be viewed by the government as the best chance to meet its goal of a fourth carrier and rescue the failing new entrants. With billions at stake and with the CRTC re-examining Canadian television later this year, opening up the BDU market would be in line with a pro-consumer approach and bring greater consistency to foreign investment rules in the communications sector. There are still many questions about a Verizon entry into Canada as a fourth national player, but those questions should not be limited to telecom as there is the potential to similarly shake up the Canadian broadcast world.