Wireless regulation in Canada? It’s about time

12 Oct

So the CRTC is looking to potentially regulate Canada’s wireless market? Well, it’s about bloody time.

When the Conservative government came to power in 2006, its attitude towards telecommunications was that regulation was entirely unnecessary. Under the near-fanatical market-forces zeal of then-Industry Minister Maxime Bernier, the CRTC was ordered to regulate telecom only as a last resort.

As Bernier gave way to his successor Jim Prentice, the focus in wireless remained on those market forces, but with a perverted twist. The government knew Canada’s cellphone market was wildly uncompetitive and it wanted to inject some new blood. The solution was to give potential new companies a leg up in an auction of wireless airwaves, so 40 per cent of the spectrum was reserved for such potential entrants. And come they did – Wind Mobile, Mobilicity and Public Mobile are all products of the scheme.

But the perversion of the government’s market-forces ideal came from its unwillingness to change Canada’s restrictive foreign ownership rules, which assured that only small, relatively poorly financed competitors to the likes of Bell, Rogers and Telus could spring up. The auction itself was a form of government intervention in markets, necessitated by its own cowardly refusal to remove the only real regulation that mattered (foreign ownership limits).

As such, prices came down somewhat over the past few years for people lucky enough to live in the big cities where the new cellphone companies launched. But prices remain high overall and are predicted to rise across the board. The big carriers have been largely unfazed by this low-level competition, with new entrants managing to acquire their unwanted scraps in the form of 4% market share.

After Prentice came Tony Clement, who seemed to shift the government’s attitude to the telecom industry away from idealistic deregulation to populist intervention. Most famously, he sent the CRTC back to the drawing board on the whole usage-based billing debacle, a move that ultimately preserved large home internet caps in Canada.

Clement’s successor, current Industry Minister Cristian Paradis – whom I’ve dubbed the Invisible Man for his virtual silence on all technological and telecommunications issues – has, in one of his rare pronouncements, promised that the foreign ownership restrictions will be removed in advance of another spectrum auction. He has also promised a comprehensive Digital Strategy for Canada. On that count, we’re still waiting while the Telecommunications Act was indeed amended at the end of June.

It’s into this conflicting storm of populism-versus-market-forces that the CRTC is wading by looking into regulating the wireless business. Given that new chairman Jean-Pierre Blais was appointed by Prime Minister Stephen Harper, the move certainly looks like a signal from the government that it has finally committed to taking a populist stance, at least on wireless.

While a truly competitive wireless market made up of well-financed players who are genuinely interested in taking business from each other is the ideal, the reality is that Canada is not much better off now than it was five years ago. More regulation looks to be the only way to reign in the worst of the wireless abuses.

And numerous they are. What should the CRTC focus on as it tries to come up with a set of rules for the industry? Canadian wireless subscribers are sure to flood the regulator with suggestions, but here’s a few to get things started:

Ban on three-year contracts: As I wrote recently, long-term contracts are not just bad for consumers, they’re also bad for the economy as they impede spending and upgrading to more advanced and productive devices. It’s about time Canada’s unique three-year phone mortgages – two years is the maximum norm elsewhere – got the boot. If the CRTC does limit contracts to two years, we can be sure carriers will charge more for their phones; that $179 iPhone 5, for example, may zoom up to $300. Ultimately, though, that’s a good thing because it’ll then be easier to show just how badly Canadians are getting hosed relative to people in other countries. That sort of pressure will inevitably result in lower prices – either that, or even more regulatory intervention.

Limits on early termination charges: Capping contract lengths would be useless without also limiting how much carriers can charge customers for ending their agreement early. A few provinces have moved toward these termination limits, which cap the amount carriers can demand to the actual cost of the phone, so there are precedents to look at.

Elimination of nation-wide long distance: Down in the U.S., you can call someone in Oregon for the same price as someone in Florida, regardless of where you live in the country. It seems ridiculous that, in a day and age where the price of transmitting a phone call is tiny, carriers are still engorging themselves on Canadians calling the city next right door.

Sacking incoming text charges: There should be no charge on incoming texts, mainly because cellphone users rarely have a choice as to whether they receive them or not. The worst is when roaming – you can set your phone so that it doesn’t use data and you can avoid answering any incoming calls, but you get dinged for those incoming texts regardless.

Simplified pricing: Just as airlines were recently required to switch to all-inclusive pricing that bundles in all taxes and fees, so too should wireless carriers. The market has moved away from the hated system access fee of years gone by, mostly thanks to new entrants, but hold-outs such as Rogers’ “regulatory recovery fee” still remain. Without rules specifically forbidding such blatant bill inflaters, they’ll inevitably make a resurgence.

Truth in advertising: I can’t count how many times people have said to me, “I hate carrier X, I can’t wait to switch to carrier Y,” whereupon I’ve had to sadly inform them that carrier Y is actually owned by carrier X. The creation of sub-brands by wireless carriers has served to create confusion in the marketplace. The likes of Fido, Chatr, Koodo and Virgin should be required to prominently state that they are sub-brands of their respective big carriers.

Mandatory call display: Canadian carriers often dispute notions that they have high prices by pointing toward their low per-minute rates. That’s true, but where they make their big money is in ancillary charges such as regulatory recovery fees and charges on things like voice mail and call display. That last one is a feature that is free many countries, largely because it’s an embedded function of wireless networks. It actually costs the carrier money to go in and block it from users’ phones, so that they can naturally make a mint by enabling it again.

Data charge cap: If the CRTC really wanted to go crazy and help consumers, it could try to enforce a pricing cap on wireless data. Wireless companies could be required to show exactly what their costs are when providing customers with their smartphone connections, at which point the CRTC would mandate an acceptable mark-up. So if, for example, the cost of providing a customer with 5 gigabytes of monthly data was $5 (that’s probably a high estimate) and the acceptable margin was 40%, the cost to the subscriber would be $7. That’s of course astronomically lower than what it currently is and it’s a radical suggestion that’s unlikely to ever fly, but it is food for thought.

UPDATE: The regulator is unlikely to touch most of those suggestions since its public consultation appears to be limited to actual contract terms. Nevertheless, if you want to share your opinions, the CRTC is accepting comments until Nov. 20 by mail and fax or through its website.


Posted by on October 12, 2012 in crtc, mobile, telecommunications


6 responses to “Wireless regulation in Canada? It’s about time

  1. mcfudge

    October 12, 2012 at 12:33 am

    Good god, I really hope Canadians hear this invitation loud and clear, and take off in droves to let the CRTC know how they really feel and what they want changed!

  2. James F

    October 12, 2012 at 7:25 am

    My submission:

    1) Carrier locking a device should be prohibited in all circumstances as punitive to the user and anti-competitive.

    2) Carriers should be prohibited from controlling what devices a customer accesses their wireless services from. (i.e. no extra fees for sharing your wireless account across multiple devices)

    3) Carriers should exercise network neutrality, and be prohibited from exercising undue inspection and manipulation of traffic

    4) Billing for wireless services should be distinct and separate from billing for device payments (i.e. subsidized phones on contracts)

    5) Fees for wireless services should be charged in a fashion which is representative of the cost to provide those services (i.e. data caps and overage fees would not be a fair way to charge for data, as networks don’t function that way)

  3. Seppo Sahrakorpi

    October 12, 2012 at 9:05 am

    My pet peeve/indicator of the idiosyncrasies is ‘$8 voicemail’. Still waiting for that gem of robbery to go away.

    On a more serious note, if allowed, would foreign competition necessarily even enter Canada? Has anyone seen financial analysis/numbers whether it even would make sense for e.g. Verizon to enter Canada?

  4. Serge

    October 12, 2012 at 11:51 am

    Yeah, so most of what you’re asking for is explicitly outside the scope of the hearing. They won’t regulating any prices.

    • petenowak2000

      October 12, 2012 at 12:20 pm

      Yup. One can dream, though.

  5. Marc Venot

    October 13, 2012 at 2:13 pm

    It’s like the very high rate on borrowed money for credit cards. It shouldn’t be that much but you are against economic interests so powerful that even a majority government can’t regulate it.

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