National Post (National Edition)
Should the CRTC apply price controls on low-cost data plans?
Competition Bureau vs wireless carriers
TORONTO • Smaller wireless players Shaw Communications Inc. and Quebecor Inc. agree with their Big Three competitors that the federal telecom regulator should not impose price controls on low-cost data plans, but the Competition Bureau argues such measures are appropriate to “help combat market power.”
Their arguments, laid out in submissions filed this month to the Canadian Radio-television and Telecommunications Commission over its proposal to mandate low-cost data only plans, highlight diverging views on the competitiveness of Canada’s wireless market and how — or whether — the CRTC should intervene.
This spring, the CRTC ordered BCE Inc., Rogers Communications Inc. and Telus Corp. to submit proposals for low-cost data plans to address affordability concerns raised by the federal government. It launched the proceedings after declining to mandate wholesale access to wireless networks, a policy that could open up the market to smaller, lowercost competitors known as mobile virtual network operators.
Both Shaw and Quebecor, owners of wireless challengers Freedom Mobile and Videotron Inc., respectively, submitted it wouldn’t be appropriate for the CRTC to require price ceilings or data capacity floors for low-cost data plans. Such a move would be similar to the skinny television plans mandated in 2016, when the CRTC required TV providers to offer a certain number of channels for no more than $25 per month.
While both wireless contenders called for a more hands-off regulatory approach, they differed in their views of the market’s competitiveness.
Quebecor argued price controls aren’t necessary given an increase in competition. It noted that about 20 brands compete in Canada’s wireless market (the Big Three operate half ) and said it plans to compete in the low-cost segment. It also argued that any price or data threshold could quickly become obsolete given a decline in data prices.
Shaw, on the other hand, argued competition is nascent in the wireless market given a “vastly unequal playing field” in which the incumbents have advantages when it comes to spectrum and tower access. It pointed out the Big Three account for 89 per cent of subscribers and 91 per cent of revenue in Canada’s wireless market.
“Canadians do not get the value, choices, and affordable prices they increasingly need as their reliance on mobile data escalates,” Shaw stated.
“The reality is that, no matter how innovative Shaw is operationally or technologically, or how many billions of dollars we spend, our competitive efforts will always be hobbled by these fundamental barriers to competition."
But it argued against price controls, stating they amount to rate regulation that would be “ineffective” and “highly disruptive to competitive market forces.” Shaw argued the CRTC doesn’t have the authority to mandate a retail mobile service at a regulated rate. It also reiterated concerns that mandatory lowcost data plans could distort the retail market in a way that disproportionately affect Freedom, which already targets people who want cheaper plans.
The Competition Bureau, which rarely intervenes in CRTC proceedings, agreed the industry has competition problems. But it supported the imposition of low-cost data-only plans and price controls.
Even though the bureau generally does not favour price controls, it submitted that temporary measures could improve economic welfare and consumer choice. It supported low-cost, dataonly plans given “the presence of market power in this industry” and Sugar Mobile’s failed attempt to enter the market. It also noted that low-cost data plans have emerged in other jurisdictions without government intervention, pointing to Verizon and Sprint deals for 2 GB of data for US$35 and US$40, respectively.
It did, however, state that low-cost data-only plans “are not a substitute for true competition in this industry.”
It advocated for imposing the plans on a temporary basis “until such time that the CRTC can establish longer-term, more robust solutions to competition problems and other public policy issues that may exist in this marketplace.”
Industry analysts believe the CRTC proceedings will result in low-cost plans with small data buckets, but the Competition Bureau’s intervention adds weight.
“The stakes have now become a little higher with the Competition Bureau’s intervention,” Desjardins analyst Maher Yaghi said in a note to clients last week.
Ottawa has also ordered the CRTC to hold an inquiry into large telecom providers’ sales practices, Yaghi noted.
“We believe this further increases scrutiny on telecom players, which could eventually lead to a more restrictive telecom regulatory environment,” he said.
The national carriers have until this week to respond to comments on their initial proposals, which offered between 250 MB and 500 MB of data for between $20 and $30 a month.
THIS FURTHER INCREASES SCRUTINY ON TELECOM PLAYERS.