Telcos warned ‘something coming’
Wireless fees could become election issue
Canadians pay some of the highest cellphone prices in the world, while powerful telco companies make billions in profit, according to a central pillar in the NDP’S 2019 election platform. “And yet PM Trudeau refuses to do anything about it.”
Jagmeet Singh should be careful what he wishes for. Industry sources suggest Canada’s premium carriers have been given fair warning that they will be Trudeau’s whipping boys when he unveils the Liberal party’s re-election plan. “We were told in fairly clear terms that something is coming,” said one executive.
Trudeau’s big challenge in the coming campaign is to mobilize the grassroots volunteer movement that elected him in the first place. Four years of largely uninspiring leadership has created an enthusiasm gap that requires a mix of sound and original ideas to reverse.
Further government intervention in the cellphone industry is neither sound nor original — the NDP is already proposing price and data caps — but no politician ever lost votes by clobbering the big cellphone cartel.
It’s not quite clear how the Liberals will target the carriers, who have cleverly moved to offer wireless data plans that don’t charge overage fees once the monthly cap has been exceeded. Bell, Rogers and Telus are now offering
$75 packages that offer much more data than the average customer is likely to use. Given many of the accusations of gouging centre on bill shock from customers going over their data limit, this pushes political pledges to impose data caps past their sell-by date.
The Liberals did negotiate a $10 internet package for families on social assistance with the telcos and some form of cellphone equivalent is a possibility. But whatever form a price cap takes, it is based on the assumption that competition in the wireless industry is insufficient and, more importantly, requires government to somehow, directly or indirectly, subsidize new entrants.
Yet it’s far from clear that the market power of the big three carriers is a problem. In fact, academic studies like the one undertaken by Jeffrey Church and Andrew Wilkins of the University of Calgary’s School of Public Policy suggest that government attempts to enhance competition is a “vacuous commitment.”
Canadians do spend more for their cellphone plans than Americans — around 25 per cent more for a 2GB data plan, says one recent study.
But that could be said for many other consumer goods: U.S. cars on average are 20 per cent cheaper than the same model in Canada.
While users pay more, they also enjoy better service than almost every other country on earth — the quality of the networks built at vast expense by the big three means you can watch a hockey game live on your cellphone.
Prices have fallen by more than 50 per cent in the past five years and bare bones plans are available for as little as $5 a month (albeit for 10 minutes of calls, with no texts and no data).
This is not an advertorial for the cell industry — it’s clear that the dominant market share of Bell, Rogers and Telus is not in consumers’ best interests. In provinces that have strong fourth carriers — Sasktel in Saskatchewan and Vidéotron in Quebec — rates are lower. Freedom Mobile, the fourth-largest carrier, has grown but has only limited coverage in parts of Ontario, B.C. and Alberta.
More competition leads to lower prices. But since none of the parties are likely to liberalize foreign investment rules to allow big international carriers into the market, the NDP and Liberals apparently see price controls as the answer.
Navdeep Bains, the minister responsible for telecommunications, signalled where the Liberals are heading when he said policy will now be made through a “consumer-first lens” going forward.
The federal telecom regulator, the CRTC, is reviewing the wireless market and has taken the “preliminary view” that there should be more opportunities for mobile virtual network operators, companies that essentially piggyback on the facilities of existing carriers.
Forcing companies that have invested about $58 billion in recent years on their networks to open them up to competitors could bring down prices. It could also freeze the flow of the anticipated $26 billion needed for 5G infrastructure, the fifth generation of cellular technology.
The previous Conservative government instructed the CRTC to interfere in the market “to the minimum extent necessary.”
The new guidance appears to be for policy-makers to bend the regulations to bring prices down at any cost — and help the governing party get re-elected.
It’s a typical case of the perils of government intervention in the marketplace warned about by classical liberal economist Ludwig von Mises. “It creates unintended consequences, which lead to calls for further government intervention.”
But hey, what’s the longterm good of the country when there’s an election in the offing?