The competitiveness of Canadian wireless services has been the source of an ongoing and contentious debate for years. Last week, Canada’s telecom regulator concluded that there is a competitiveness problem, yet in a decision surprisingly applauded by many groups, declined to use much of its regulatory toolkit to address the problem. Instead, it placed a big bet on the prospect of a smaller wireless carrier somehow emerging as a fourth national player.
The Canadian Radio-television and Telecommunications Commission began investigating the wholesale wireless services market in 2013. The big three wireless companies – Bell, Rogers, and Telus – argued that the market was competitive and that no regulatory action was needed. By contrast, new entrants such as Wind Mobile called for regulated roaming rates so that they could offer viable national services with more affordable connectivity wherever their customers roam.
On the issue of competitiveness, the CRTC decision is damning: the big three maintain wholesale rates and the ability to impose terms and conditions that would not prevail if Canada had a competitive market. Given their market power, it concluded that regulation is needed and it will therefore establish a process for setting the wholesale roaming rate. That move should allow the new entrants to more affordably offer national service to their customers and turn them into more effective competitors.
While that was enough to generate supportive comments from Industry Minister James Moore, the new entrants, and some consumer groups, the reality is that the CRTC could have done far more to address the Canadian competitiveness problem. For example, smaller wireless companies had asked for “seamless roaming” to ensure that customers that move in and out of networks do not experience dropped calls. The Commission rejected the request, meaning that dropped calls will continue and will place the new entrants at a competitive disadvantage.
An even bigger disappointment was the CRTC’s decision to sidestep mandating access for mobile virtual network operators, or MVNOs. MVNOs typically do not own spectrum or network infrastructure. Instead, they purchase network access at wholesale rates from existing operators and offer it to consumers with their own retail pricing. MVNOs such as Canadian-owned Ting have become a hit in the United States but are not even available in Canada.
The CRTC acknowledged that MVNOs can help create a more competitive environment. Further, it determined that the big three possess market power for wholesale access for MVNOs. In other words, they have the ability to charge uncompetitive rates or simply avoid selling to MVNOs altogether.
Yet despite the opportunity to inject more competition into the marketplace, the CRTC decided against mandating MVNO access, arguing that it might “discourage continued investment by wireless carriers, because they could rely on this access rather than investing in their own mobile wireless network infrastructure.”
Given the success stories in other countries, it is hard to believe that the commission still believes claims that MVNO access would discourage ongoing investment by wireless carriers who emphasize each quarter the scope of their investments and breadth of their spectrum holdings. With the MVNO market in Canada stuck on the sidelines, business analysts were quick to raise their ratings for the big three, noting that the CRTC ruling would likely keep new competitors out of Canada.
The CRTC decision smacks of the regulator asserting that it knows best what competition should look like, namely a fourth wireless player that offers an economically viable if somewhat inferior national service. That vision falls well short of a vibrant, competitive market with as many players and as many different services as possible. Further, it makes it likely that Canadian consumers will have marginally more choice in wireless services, but will be left looking with envy at other countries that feature a wider variety of business models and pricing options.
Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can be reached at email@example.com or online at www.michaelgeist.ca.