Canada’s Big Three wireless players have market power, according to the federal competition watchdog. But even the Competition Bureau doesn’t want to open the floodgates for mobile service resellers to compete in Canada.
The question of whether to mandate mobile resellers — mobile virtual network operators (MVNOs) who don’t own physical networks but buy wholesale access to existing networks — took centre stage on Tuesday at the first day of a nine-day public hearing on the state of Canada’s wireless market.
The Canadian Radio-television and Telecommunications Commission, facing pressure after the Liberal government made a campaign promise to reduce cellphone bills by 25 per cent, must decide whether more regulation is needed to boost competition and lower prices in an industry dominated by three players: BCE Inc., Rogers Communications Inc. and Telus Corp.
Mobile resellers cost less to operate and typically offer cheaper services, so are viewed as one potential way to boost competition in a country in which mobile prices have historically been higher than elsewhere. The perception of high prices remains even though data prices have dropped significantly in the past couple of years.
Such resellers can technically negotiate access to networks under existing rules, but in practice the national network operators have not sold widespread access, as they prefer to directly make money from the networks they spent billions building. The Big Three are strongly opposed to mandated reseller access, arguing it would hurt their incentives to invest.
Newer regional players that offer relatively less expensive plans than the incumbents, including Shaw Communications Inc.’s Freedom Mobile and Quebecor Inc.’s Videotron, also oppose mandated resale access. They argue the new entrants would target their customers and harm their prospects after sinking billions into network expansion over the past five years.
The Competition Bureau argued the CRTC should not create broad rules that enable mobile virtual network operators, stating that such a move would hurt regional operators, which, it argues, have been effective in reducing prices. Instead, the bureau said the telecom regulator should make it easier to compete for new entrants that own their facilities.
“The data suggests facilities-based competition is working,” said Anthony Durocher, the deputy commissioner of competition for the Bureau.
Regional players have indeed lowered prices in the areas in which they operate by putting pressure on the national players, according to the Competition Bureau’s analysis by economic expert Tasneem Chipty.
Consumers benefit more in areas where regional providers have at least 20 per cent of the market share, Chipty said at the hearing, adding there are incremental gains in areas where smaller players have at least 5.5 per cent of the market share.
The data suggests facilities-based competition is working
Anthony Durocher, Competition Bureau
The bureau said that any new policies should enable such disruptors given they’ve proven effective, rather than usher in a flood of low-barrier MVNOs that have mixed results globally.
That could mean requiring the Big Three to sell network access to regional providers on a temporary basis as they launch their own networks. Other suggestions included rules around seamless roaming handoffs, improved roaming rates, tower and site sharing, and costs of switching service providers.
Shaw presented a laundry list of ways the CRTC could improve conditions for providers like Freedom, which has tried to negotiate access to the bigger networks so customers can roam without dropping calls. The conversations didn’t go anywhere.
Shaw wireless president Paul McAleese stated the No. 1 reason people leave Freedom is calls dropping when they leave Freedom’s service area, with millions of calls dropped per year. This could be remedied easily, he said, but the big networks have shown no interest.
McAleese also characterized some of the Big Three’s behaviour as “aggressive and predatory,” saying they’ve gone so far as to call customers with “winback” offers while they’re in Freedom stores in the midst of switching carriers. Rules to prevent that would be appropriate, he said.
The big players will get a chance to respond to questions over the next two weeks. So will consumer groups that argue MVNOs are critical to provide services at lower costs to people who require more affordable cell services.