Telecoms paint Verizon as their latest bogeyman

Canadians will be winners if triple alliance faces rivals

Six years ago, when the federal government was preparing to auction off spectrum for mobile service, Canada’s three major mobile carriers were vehement that reserving any portion of the available spectrum for new market entrants would amount to a substantial government subsidy for the new players and deprive Canadians of billions of dollars in revenues.

As it turned out, the government did set aside spectrum for newcomer market entrants and the auction raked in a total of $4.3 billion, almost three times the $1.5 billion experts had predicted. So much for the argument that the government would be subsidizing the new players. And yet, strangely enough, many commentators are still pushing that theory today.

In addition to the set-aside for new market entrants, the government also announced new rules at the time of the auction requiring the members of the oligopoly that controlled Canada’s mobile market to share their towers with newcomers and allow roaming on their networks. The idea was to give the new competitors a chance to become viable players.

The government was not acting on a whim or out of malice toward the three incumbent carriers. It was an evidencebased decision.

A report from a task force created by the previous Liberal government had come to some crystal clear conclusions: Canadians were paying more than the rest of the world for mobile services of lower quality. The reason was simple: lack of real competition. International organizations such as the OECD had arrived at the same conclusion.

Videotron, a subsidiary of Quebecor, had led the fight against the three majors. In the 2008 auction, Videotron spent $555 million to buy the spectrum it needed to enter the mobile market.

As one of the last survivors of the ensuing battle, we can attest to the fact that, despite the federal rules intended to create a more competitive marketplace, the three members of the oligopoly made every effort to stall the advent of competition. They succeeded in making it very costly for the new players to enter the market. As a result, the others (Wind, Mobilicity and Public Mobile) are all in a precarious financial position today.

Some will argue the government’s policy has been a failure. But the fact is that it has yielded concrete benefits for cellphone users, which is to say the vast majority of Canadians.

Since 2008, the price of mobile service in Canada has fallen 18 per cent because, as a report prepared for the CRTC by Wall Communications observed, “The new wireless entrants continue to offer mobile wireless prices that are significantly lower than those of the incumbents.”

Three months after the government decided to create a more competitive environment, Bell and Telus announced plans to build out a new network that would offer Canadians service comparable to what already existed elsewhere in the world. These were the same companies that had repeated ad nauseam that Canadians were being well served technologically. What a joke.

So competition has thus far had a very positive impact on Canadians’ pocketbooks and it has brought them the same technology as is available in other countries in today’s globalized economy.

It is also noteworthy that after the sale of large blocks of spectrum in the 2008 auction, the members of the “triple alliance” still held 85 per cent of the spectrum used by mobile carriers. It was clear to industry observers that if the government hadn’t stuck to its guns and set aside a block for new entrants, the oligopoly would have bought up all the auctioned spectrum at any price.

The corporations that benefited from market concentration were willing to go to any length to preserve the status quo. Only government had the power to break the straitjacket of oligopoly, which was depriving consumers of access to the best prices and the best technology. So we commend the government for its resolve in shouldering its responsibilities as the guardian of the public interest, when the incumbents seemed to recognize no responsibility except to their shareholders.

Six years later, the triple alliance has come up with a new bogeyman: the prospect that Verizon, one of the largest telecoms in the world, may enter the Canadian market. The trio has been playing defence with a shrill propaganda campaign designed to sow fear.

“The big bad Americans want to grab a slice of our heritage” is the general theme of their new attempt to pull the wool over people’s eyes. So far, it doesn’t seem to be working.

A makeshift coalition is being hobbled together to support the campaign. It includes major trade unions, libertarian groups and a former Liberal minister who sits on the Telus board and is also president of a big business lobby. It would appear, however, that the government is standing up to the latest bullying tactics.

The facts of the situation are not complicated and Canadians understand them: Canadians are paying the fourthhighest average monthly mobile rates among the 34 OECD member countries (according to the Wall Report commissioned by the CRTC) and the only way to change that is to promote competition. As the only new entrant that has succeeded in putting down roots in its market, we believe the government is right to turn a deaf ear to the oligopoly’s disinformation campaign.

At the same time, we believe that if the government is still committed to enabling the Canadian-controlled market entrants to establish themselves in the marketplace, it should give serious thought to changing the rules of the next auction and reserving a block of spectrum exclusively for them. Otherwise, regional players such as Videotron, EastLink, SaskTel and others, which do not have the incumbents’ deep pockets, will leave the auction empty-handed, hobbling their ability to remain technologically competitive.

At our end, we are watching developments with interest and we remain ready and willing to work with anyone who believes that the current oligopoly is an obstacle to Canada’s economic development. Mobile services are part of the lifeblood of a modern economy and a vital component of a country’s infrastructure in today’s world.