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The Quest to Drive Consumer Benefit

The State of Competition in Canada's Wireless Marketplace

 
   

December 2013 - IGB Grant +1 514 849 3508, Amit Kaminer +1 416 413 1636 and Lindsay Shaddy

   
    OVERVIEW  
 

 

 

It has been an eventful year in the Canadian wireless marketplace. Rumours that U.S. telecom giant Verizon might re-enter the Canadian marketplace with a retail presence set off a storm of "save Canadian companies" protests as Canada's incumbent carriers sought shelter from the threatened U.S. juggernaut incursion by cowering behind the maple leaf. The Canadian government responded to the jingoism by reiterating its commitment to its aim of using its powers to design a marketplace framework that would bring consumers more of the benefits of a competitive marketplace — and that design included access to the Canadian marketplace for non-Canadian-owned companies.

In the end, the object of this sturm und drang, Verizon Communications, elected not to proceed with an investment in the Canadian wireless marketplace, but the debate continued.

The debate centred around the Canadian government's focus on broadening competition in the marketplace. The principle of competition is broadly supported — why, even the incumbent carriers were amongst the first to declare their support for a competitive marketplace framework. Yet many observers point to the travails of the AWS-band challengers (companies that were encouraged to enter the marketplace fray with blocks of frequencies that had been set-aside for "challengers" in the 2007 spectrum auction). One company, Public Mobile, sold to Telus; another, Mobilicity, is in the midst of a court-supervised auction-based breakup; and a third, Wind, is owned by a reluctant proprietor who isn't convinced that its Canadian business should be a priority. These are not the most auspicious of developments from Canada's "Wireless Spring."

Does this mean that the government's focus on the wireless marketplace was misplaced? Or does it mean that the mechanisms the government chose to use were flawed?
We argue "No" to the first, and "No" to the second.

Government's focus on the wireless marketplace is important. Canadians have adopted wireless/mobile services in smaller numbers than anywhere in the developed world. As a country, our wireless penetration lags behind the average penetration in the developing world, and our wireless adoption rate is ahead, only, of the African average.

Does that matter? Many economists would argue that it does. There is a direct correlation between mobile/wireless adoption and GDP/capita. Higher mobile adoption equates to higher national income. Canadians are paying a penalty for lower adoption. Indeed, our research suggests that the impact of our closed wireless marketplace structure costs every Canadian at least $8,500/year — a high price to pay to support an oligopoly.

Moreover, there are good news stories from the 2007 marketplace framework initiative. Prices have fallen. Service levels have improved. Network technologies have been upgraded. Artifacts of a constipated marketplace, like system access fees and lengthy contracts, have been removed. And two of the 2007 auction process winners, EastLink and Videotron, are strong and vibrant, offering choice to Canadians in their territories and keeping the incumbent operators from slipping back into their old revenue-maximizing ways.

We urge the Canadian government to stay the course. Don't let the nay-sayers, the vassals of the oligopolists, distract you from your purpose.

 

 
   


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Thursday, 13 December 2018

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