Competition in Canada's wireless industry is in danger of dying on the vine. How could this be happening? In 2007, with an eye on a moribund wireless services marketplace characterized by high prices and low consumer adoption, Canada's federal government took some bold measures to create an environment where competition could flourish. New competition was to be the instrument to shift the marketplace dynamic. There was early promise: New companies entered the marketplace. New choices were offered to consumers. Service improved. New technologies were deployed by incumbents and challengers. And, most importantly, prices came down. The Harper Government's fecund touch appeared to have the desired result.
However, as any gardener knows, new plants need time and the right conditions to take root and grow, and so do new companies. It is difficult enough for a new entrant to get established at the best of times, but breaking into the telecom market in Canada was even more challenging because the old, incumbent companies, with their decades-long head start, had already snapped up the best spectrum bands – for free, no less – leaving new entrants to purchase expensive-but-less-effective spectrum. Furthermore, the same incumbents were also sitting on vast infrastructures that had taken decades to build. Yes, the government took steps to compel these established carriers to share their infrastructures with the new entrants: the terms, conditions and prices for sharing were "to be agreed." Sadly, however, agreement was hard to reach, conditions were onerous and prices were high – the process, was not as as smooth as the government had hoped.
Yet in spite of these challenges, the new entrants were off to a promising start. They offered exciting new plans at attractive new prices, forcing the stodgy old incumbents to get with the program and compete.
But new companies need time to get a foothold and expand, and this can be an uphill battle when established companies also already had a hammerlock on most of the existing pool of customers through rigid business practices. In the case of the Canadian telecom industry, that means draconian three-year service terms. Many Canadians would like to try the new carriers, but the old ones have made it awfully hard for them to switch.
Today, we are at a crossroads. Thanks to the Harper Government, we now have a competitive marketplace, but the new entrants are wondering whether the struggle is worth it. One new entrant is now for sale, and another one is restructuring. 1 This is worrisome indeed, because if the competition withers and dies, the incumbents will just revert to their old ways. Canadians will pay the price.
The result? Higher consumer prices and poorer service for consumers. The solution? Reinvigorate the marketplace. How? One idea: Allocate the new 700 MHz spectrum that the Crown will offer at auction in November to the new entrants exclusively!
Yes, the government has done a great deal to foster competition in the Canadian telecom garden. New plants flowered and started to grow, but if we want them to bear fruit and multiply, we must ensure that they are not blocked by older, bigger plants. If we want competition to continue to thrive, Industry Canada must continue to tend its garden by tying back the big plants just a bit so that the new ones can catch some rays – of the 700 MHz variety.