over the past few weeks as Industry Canada prepares to unveil a transfer policy in response to the proposed sale of spectrum by Shaw to Rogers. Industry Minister Christian Paradis has made it clear
that he is uncomfortable with the proposed sale, acknowledging that the
intent of the 2008 spectrum auction set aside was not to have the
spectrum end up in the hands of incumbents. While the incumbents and
their supporters are raising the concerns about market uncertainty and potential lawsuits,
the reality is that the government's policy on the Canadian wireless
market has been clear since 2007. Despite the efforts of the CWTA and
the incumbents to convince politicians and the public that Canada is a
competitive market, the government believes more competition is needed.
The Conservatives' policy on wireless competition solidified in 2007,
when Prime Minister Harper shuffled then-Industry Minister Maxime
Bernier (who most believed was opposed to government intervention in the
form of a set-aside or other measures) with Jim Prentice. Within
months, Prentice unveiled the government's policy with the headline "Government Opts for More Competition in the Wireless Sector." In case there was any lingering doubt about where the government stood, the release noted:
Recent studies comparing international pricing of wireless services
show Canadian consumers and businesses pay more for many of these
services than people in other countries. These services are key to
strengthening the competitiveness of Canadian business.
In the years that followed, the government continued to support
measures for greater competition - backing
the Wind Mobile entry despite concerns about foreign financing
("The policy of our government is to encourage choice and
competition in wireless and Internet markets. Ours was the
government that set aside spectrum during the 2008 auction to allow
new entrants to compete. New entrants mean more competition, lower
prices and better quality services for Canadians.") and later relaxing
foreign ownership restrictions for the smaller players in the
telecommunications market ("the goals remain steadfastly the same:
increased innovation, increased competition, better service and
better prices for consumers"). More recently, it announced the
next spectrum auction rules with caps on spectrum ownership designed
to limit the ability of the incumbents to control all the newly
issued spectrum.
Despite these measures, the policies have had only limited success.
Prices have declined only modestly and the vision of robust
competition from a strong fourth carrier remains a distant hope
(though the situation may be better
in Quebec with a stronger fourth carrier and more aggressive
provincial regulation). Moreover, there is a sense that the new
entrants may throw in the towel, cashing out to the incumbents and
leaving Canada with higher prices and further reduced competition.
The responses
to the recent consultation
on spectrum transfer makes it clear that half-measures will no
longer work. Past efforts have included set-asides without
fully addressing roaming and tower sharing; foreign investment
without fully opening the market, or new spectrum with caps that do
not allow for a robust competitor. The response to spectrum transfer
issue suggests that the government should either go all-in or it
should be prepared to declare that its policies have failed.
The incumbents are unsurprisingly opposed to further government
policy measures. For example, Bell is most vociferous
in its opposition as it is reluctant to even respond to
Industry Canada's questions. It is opposed to a policy aimed at
creating four competitors and believes that the government should
encourage spectrum transfers for their most optimal use (never mind
the hoarding and non-use of spectrum by the incumbents). Further,
Bell is against any caps or other measures designed to foster
greater competition. Rogers is also opposed
to a competitive assessment and spectrum concentration analysis.
However, should the government implement such measures, it argues
that it should only apply to future spectrum (thereby grandfathering
its deal with Shaw).
On the new entrant side, the message is plain: either fix the
competitive environment or we want out. The most obvious call for
spectrum transfers comes from Mobilicity,
which says the government must help to find ways to raise capital
for future spectrum auctions or it should refrain from implementing
any new rules on spectrum transfers. Wind
Mobile and Public
Mobile are more nuanced, focusing on the need for stronger
policy measures to facilitate competition but making it plain that
failure to do could lead to future spectrum transfers. Wind Mobile
essentially says there should be no new restrictions on transfers
until the government has addressed the competitive conditions in the
Canadian marketplace. It points to four:
- the forthcoming spectrum auction rules will not allow
non-incumbents to gain sufficient spectrum to support LTE - non-usage of spectrum, such as in the case of Shaw, should be
revoked and made available to the new entrants - active regulation is needed to address high domestic roaming
charges - increased regulation is needed to deal with tower co-location
problems with the forthcoming 700 MHz spectrum auction (insufficient
for a non-incumbent to develop an LTE network), the need for
retaining set-asides in the AWS spectrum, and ensuring that all
future spectrum auctions account for spectrum advantages held by the
incumbents.
So where does that leave the Canadian government?
Following the incumbents' advice is a non-starter. For the past 5
1/2 years, the government has made it clear that it believes the
Canadian wireless market is uncompetitive, resulting in high prices
for consumers and businesses. Given the ongoing competition
concerns, doing nothing is not an option. That said, neither is
maintaining the current approach of half-measures. It is time for
the government to go all-in with all the policy levers aimed at
fostering increased competition. That will require:
- complete removal of foreign investment restrictions
- stringent restrictions on transferring set-aside spectrum to
incumbents - future set-asides and limits in spectrum holdings by single
entities (as is being discussed
in the U.S.) - enforcing use-it-or-lose-it rules on spectrum so that unused
spectrum is reallocated - enforceable measures on domestic roaming and tower sharing so
that new entrants have a viable path to competitiveness - increased CRTC regulation of consumer wireless issues
- encouraging the Competition Bureau to play a more active role
in sector
strongly support the measures. Industry Minister Christian Paradis said in
March that the government "has worked hard to increase competition
in the Canadian wireless sector." Unless Paradis is prepared to take
further policy steps, the efforts of the past few years may soon be
wiped out.
