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    Consumers gain from Prentice's run at cozy wireless cartel  
    Montreal Gazette  
   

Jay Bryan

 
    December 01, 2007  
   

In so many everyday activities, Canadians are squeezed by industries that hide behind government regulation to stifle competition, offer substandard service and overcharge customers.
A particularly blatant example is the wireless industry, where inept regulation has left us with just three competitors, all offering similarly high rates and baffling collections of add-on charges, such as the meaningless "system access fee" that's widely held up as symbolic of this industry's blithe contempt for its customers.
Now Industry Minister Jim Prentice has exploded this cozy cartel, and that's great news for consumers.

The lack of competition had become a licence to gouge, leaving average cellular bills considerably higher than those in the U.S. or Europe. With service so expensive, usage is low, which means a key business productivity tool probably isn't being used as much as it could be, particularly by small entrepreneurs.
Penetration of the Canadian market is only about 58 per cent, notes analyst Iain Grant of Montreal's Seaboard Group. That, he points out, is "neck and neck with Gabon," By contrast, penetration in our key economic partner, the U.S., is about 78 per cent. In Britain, it's 95 per cent.
But thanks to Prentice, who - rather surprisingly, given Canada's track record - put the welfare of Canadians above the special interests of the companies he regulates, that will change in a big way.
Prentice guaranteed this week that a number of new cellular companies will be in business within two to three years, setting the scene for lower prices, better service packages and possibly both.
He did this by reserving for new competitors some of the radio bandwidth the federal government will auction to cellular companies next May.
After that, it will take a couple of years for the new guys to build networks.
If Prentice hadn't done that, the three existing, enormously profitable, companies would have been able to bid sky-high prices to keep this precious public resource out of the hands of new competitors.
Radio bandwidth is what you're travelling through when you punch the seek button on a car radio and listen to one station after another. The fact that there's a limited amount is what keeps you from having an infinity of stations to choose from.
Cellphones are tiny radio transmitters and receivers, so they operate the same way. A cellular company needs its own chunk of bandwidth in order to operate. But the supply is limited, and only occasionally does new bandwidth become available as we learn to use the existing spectrum more efficiently.
For this reason, next spring's auction of bandwidth represents a rare and supremely valuable opportunity to restructure Canada's wireless industry.
Globally, wireless is the most exciting part of telecommunications, an area where technology is moving very fast, bringing cost savings and new services at a breathless pace. Telephones that were the size of a brick 10 years ago are now the size of a deck of cards, yet can do much, much more.

And this potential is taking another quantum leap as text messaging and Internet browsing overtake ordinary yakking and voice mail.
Had Prentice allowed Canada's cellular cartel to continue its stranglehold on this market, Canada's whole economy would have suffered as individuals and businesses were offered these new services more slowly than in truly competitive markets, and only at high prices.
Instead, Grant believes, what we're likely to see is a "quilt" of cell competitors that will transform the industry. It will include the three national incumbents, at least one new national carrier, probably run by Manitoba Telecom Services, perhaps two or three regional ones and maybe a scattering of smaller operators.

Regional entrants will probably include Quebecor, anxious to add cellular phones to the home telephone service its Vidéotron cable subsidiary now offers in Quebec, while two other cable operators, Shaw Communications of Calgary and Eastlink of Halifax, are also believed to be interested in regional cellular operations.
Another interesting wrinkle is that bids will be accepted for local licences focused on particular cities, raising the prospect that smaller firms might be able to get into this business. This part of the market is wide open now, and a couple of feisty U.S. operators that focus on smaller cities - Leap Wireless and MetroPCS - have shown that it can be a successful business.
Since most users make the overwhelming majority of their calls locally, and the new rules laid out by Prentice require the big guys permit roaming on their national networks, such local outfits would also offer effective competition among a sizeable chunk of the population.

 


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