Bell’s pleas on Verizon ring hollow
Consumer would be well-served by more competition
For years, Canada was regarded by international experts as one of the most protected and most expensive wireless markets in the world.
Canadian consumers weren’t well served by mobile operators and that only began to change a few years ago when new entrants like Videotron and others came in and the market became more competitive.
Now, the federal government wants to continue the push toward greater competition and choice by auctioning off additional spectrum in September to attract a new player.
From the perspective of consumers, what could be wrong with that?
But for the incumbent firms in Canada, the possibility that U.S. giant Verizon might want to take advantage of the opportunity is being treated as a foreign invasion.
Verizon hasn’t even confirmed if it’s coming here. But Bell, Telus and Rogers all have raised nationalist alarms and trotted out the well-worn cliché that Canada needs “a level playing field” in the wireless business.
Bell Canada, in full-page ads in newspapers across the country, published an open letter to Canadians in which it wrapped itself in the flag and warned of “unintended advantages for American giants.”
It’s all a bit rich from a company founded in the 19th century by American capital, American management and American know-how, notes Montreal telecom analyst Iain Grant at Seabord Group.
Grant and others are openly skeptical of the motives of Bell, Telus and Rogers, which have all seen major drops in the price of their shares since the possibility of Verizon coming to Canada was first reported.
Analyst Maher Yagi of Desjardins
Our prices have come a long way to meeting global norms IAIN GRANT
Securities is forecasting a continued stock price decline if Verizon comes in, since shares of coddled Canadian telecom firms have traded in the past at a premium.
“We should welcome Verizon back to Canada with open arms,” Grant says. The company’s forerunner GTE was in fact a major shareholder in both BC Tel and Quebec Telephone before restrictions on foreign ownership were enacted in this country.
The crux of Bell’s complaint is that Verizon could take advantage of three “loopholes” in the rules.
It would be able to buy twice as much spectrum as existing Canadian companies in the September auction. It could get to piggyback on the networks of Canadians carriers wherever it didn’t want to build its own. And it could acquire smaller Canadian companies while Bell and other big players would be prevented from doing so. Well, let’s consider these points. The fact a new entrant could bid for two of the four blocks of spectrum up for sale is really intended as a brake on incumbents who have a stranglehold on the market already.
As for the second objection, sharing networks is something that’s common in the global wireless industry so that’s not much of an argument against Verizon’s entry.
Finally, the prohibition on new acquisitions looks like a reasonable limit on the market power and dominance of existing players that have a huge presence already.
The key point is that there’s nothing like competition to keep the big players in line. The arrival of new entrants like Videotron, Wind and Mobilicity has already had a big impact. More competition led to lower prices, improved plans and “more friendly and cuddly behaviour” to consumers, Grant says.
“Our prices have come a long way to meeting global norms. We are no longer an overpriced wireless marketplace. However, without the hot breath of competition we could certainly forecast that the good old days of high (profits) for wireless companies could return.”
He notes the incumbents, in the 1980s, were given frequencies similar in terms of operation to those Canada is now auctioning off.