Competition Bureau Raises Concerns Over Canadian Wireless Market

The longstanding debate over the state of wireless services in Canada has veered across many issues – pricing, roaming fees, locked devices, new entrants, and foreign investment to name a few. At the heart of all of these questions is a single issue: is the current Canadian wireless market competitive?

My weekly technology law column (Toronto Star version, homepage version) notes the competitiveness of the Canadian market is a foundational question since the answer has huge implications for legislative and regulatory policy. If the market is competitive, regulators (namely the CRTC) can reasonably adopt a “hands-off” approach, confident that competitive forces will result in fair prices and consumer choice. If it is not competitive, standing on the sidelines is not option, thereby pressuring government and the CRTC to promote more competition and to implement measures to prevent the established players from abusing their advantageous position.

The importance of the question has not been lost on the incumbent wireless providers.  Responding to public and government concerns about the state of competition, Bell recently told the CRTC “the wireless market in Canada remains robustly competitive.” Similarly, Telus maintains the “claim that Canada’s wireless market is uncompetitive is, frankly, not just woefully misleading, it is an insult to Telus’ team members.” To support their position, the incumbent providers have relied on a University of Calgary study that concluded “there is no competition problem.”

Yet if there is a neutral arbiter on the state of wireless competition in Canada, it would be the Competition Bureau of Canada, an independent law enforcement agency responsible for ensuring a competitive marketplace. Indeed, in a recent submission to the CRTC, Bell cites to a 2005 Competition Bureau decision to support its contention that the market remains competitive.

Last month, the Competition Bureau offered its latest opinion on the wireless competitive environment and it wasn’t even close: it believes the Canadian market is not competitive and regulation is needed.

The Bureau’s opinion came in a submission to the CRTC on domestic roaming regulation. Both the Commission and the government have indicated they plan to pursue regulation to guard against abusive wholesale pricing of domestic roaming. The issue may be invisible to consumers, but it is a major concern for regional and smaller wireless providers, who rely on the national incumbents’ networks for access in markets they do not serve.  Those providers claim that the incumbents are charging unfair prices, thereby limiting their ability to compete.

While the national providers have been dismissive of the need for regulation (Bell has argued that entire process is “without legal foundation”), the Bureau examined the issue and concluded that companies like Bell can use roaming to shield themselves from competition, noting that “making it more costly for entrants to access incumbent networks through roaming agreements is one way for an incumbent service provider to relax competitive pressure.”

If the market was competitive, this would not be a concern. However, the Bureau concluded that the incumbents enjoy “market power”, which it defines as “the ability of a firm or firms to profitably maintain prices above competitive levels (or similarly restrict non-price dimensions of competition) for a significant period of time.”  Moreover, it rejected the University of Calgary study, concluding that it “does not provide adequate support for Bell’s claims that mobile wireless markets in Canada are competitive.”

Given its findings, the Bureau urged the CRTC to establish regulatory safeguards on domestic roaming pricing. New domestic roaming regulations may be the initial takeaway, but the Bureau’s finding could have far bigger implications.  Not only does it validate federal industry minister James Moore’s insistence on the need for more wireless competition, but it also opens the door to examining other potential competitive barriers, including exclusive content deals, international roaming arrangements, and access to new smartphones.

Comments are closed.