Government needs a bold Plan B for wireless

24 Sep

Industry Minister James Moore: has he lost the war against wireless companies?

Wireless D-Day has come and gone and… yawn… sorry, what was I saying? Oh yeah. Industry Canada on Monday announced the list of bidders in the uber-important spectrum auction, scheduled for January, and there’s nothing notable about it. The big incumbents will of course be there, as will Wind and a few private equity firms, but no major foreign players appear to have registered.

That’s bad news for Canadians because it likely means one thing: the status quo will continue. In the words of Bay Street analyst Dvai Ghose, “The summer war between the incumbents and the government has resulted in a victory for the incumbent carriers.” That’s a pretty creepy statement of affairs in what is supposedly a democratic country.

Contrary to what some industry boosters are saying, big foreign interests such as Verizon weren’t scared away by supposedly robust existing competition or the government’s actions – in particular, its announcement back in June that it would review all spectrum transfers and bar those that would lessen competition. That suggestion actually borders on absurd – nobody starts a business with the intention of failure, which is why no wireless company would expand into another country with an exit strategy at the top of mind.

It’s far more likely that foreign companies were frightened off by the incredibly long list of disadvantages they’d face if they indeed took the plunge into Canada. I wrote about those at length last month, but in a nutshell, Bell, Rogers and Telus would still have tons more quality spectrum, towers and infrastructure, nation-wide coverage, cash flow, service bundles, media offerings, customers tied into existing contracts, brand awareness and lobbying power. As I wrote in that post, anyone willing to take all this on might be considered certifiably insane.

So what now? Consumers’ best hope is for a happy ending to the Wind-Mobilicity drama. The best possible outcome is that the two somehow merge and end up with decently resourced ownership that is committed to growing and strengthening a combined company. It would still have all those disadvantages above to overcome, but with better-quality spectrum in hand it could still make things interesting, especially if such an entity were to explore further partnerships with the likes of business services provider Allstream (soon to be owned by one of Wind’s original backers) and independent internet provider Teksavvy.

There is also the outside hope that Verizon or another foreign player could swoop in after the January auction and acquire Wind and/or Mobilicity, if those companies are still up for sale, but that’s a remote possibility at this point.

Beyond that, the government – fresh from apparently losing the war – must surely be thinking about Plan B. I outlined several possible options last month and some of them are looking increasingly likely now. More regulation seems likeliest, perhaps with the government beginning a process that will force a wholesale scheme onto incumbents. Similar to what exists for home broadband, such a system would give indie providers access to the networks of Bell, Rogers and Telus at mandated prices. Those third parties could then sell their own services at prices that would likely be considerably below the incumbents’.

If Moore and company are particularly irate about their wireless setback – and there’s evidence that they are, as an Industry Canada website that debunks what it calls industry “fictions” attests to – they could go even further by looking at splitting the incumbents from their networks. This split, which is often referred to as operational, structural or functional separation, would be a step further than a simple wholesale regime and a very bold move for the government.

Whether or not these options are on the agenda is unknown, but the government has in fact already hinted that it is looking at Plan B. In a statement on Monday, Moore said that “in addition to this auction, our government will continue to aggressively pursue policies that ensure consumer interests are at the core of all government decisions.”

Will such policies be small and trivial, or will they be big and brash? If the summer experience taught the government anything, it’s that boldness will indeed be needed for the next phase of its war with this particular industry.


Posted by on September 24, 2013 in government, mobile


7 responses to “Government needs a bold Plan B for wireless

  1. Marc Venot

    September 24, 2013 at 12:46 am

    Nothing that you said on the grip of the actual telcos is special to Canada (which is its geography of vastness, few hubs and mainly one neighbour).
    Bouygues in France has drop simlockage. That something the CRTC could enforce if the market forces are not strong enough here.

  2. Frank

    September 24, 2013 at 1:03 am

    Fat chance… Stevie boy is going to be told to clip Jimmy’s wings… And that folks is all she wrote…

  3. jvanl

    September 24, 2013 at 1:40 am

    Structural separation is the only defensible solution, and industry and government both know it.

    The disgraceful rampage of public abuse we have just witnessed has made it clear to voters, consumers and investors alike that we, as a nation, cannot manage our own affairs.

    For the benefit of our economic future and our self-respect, we have to break our telecom industry.

    There can be no redemption, and bringing industry to heel is justification enough for structural separation.

    An even stronger rationale is that there is no regulatory solution that can overcome the crippling liabilities of facilities-based competition, which a nation like Canada can least afford.

    Our physical and demographic geography cannot accommodate multiple competing networks.

    Nor can our economy, if we hope to remain competitive in an increasingly knowledge and data-driven world.

    The cost of data carriage in Canada has to be driven through the floor, and it couldn’t happen too soon.

    Early this year I asked a Google VP why they aren’t building data centers in Canada to take advantage of our cooler climate.

    He answered that, while Canada has plenty of dark fibre, it costs too much to access… we aren’t even close to competitive with the U.S.

    He also said that even though it’s a colossal pain in the ass to deal with the regulatory environment in the U.S., it’s nothing compared to what they would have to deal with up here.

    Canada has almost everything going for it in relation to the global Digital Economy, but we’re being held to ransom by a rogue network operators.

    It remains to be seen whether Harper will find the resolve to take them out behind the woodshed and dispense the legislative violence they have earned.

    Industry’s incessant bellowing has merely stoked the fire for a new era in Canadian telecommunication.

    Time for Government to swing its hammer hard, and forge a brighter future for the nation.

    • Alexander Trauzzi (@Omega_)

      September 24, 2013 at 1:34 pm

      Well said and I totally agree. Canadians (both consumers, and businesses) are the ones suffering here.

      • jvanl

        September 24, 2013 at 3:24 pm

        The Conservatives have hung a lot of their political reputation on fostering greater competition in telecom, but our uber-savvy incumbents have outmaneuvered them at every step.

        The Conservatives now look and feel impotent, and you can be damn sure they aren’t happy about it.

        Their core voting base is still rural Canada, where the costs of industry abuse and neglect have been greatest (especially opportunity cost).

        I live in rural Alberta, and I can assure you the industry has no friends and a ton of enemies out here.

        It doesn’t cut it for Harper to try hard, but fail.

        He needs to succeed, for everyone’s sake.

        Structural separation has always been the only defensible solution for Canada, but also the least politically expedient.

        So far the Conservatives have had neither the ideological inclination nor the political capital to take a swing at it, but now there is no alternative other than to accept varying degrees of failure.

        If they do fail, it will be a serious liability to the future of Canada and to the Conservative party.

        The Conservatives will likely be relegated to Canada’s political badlands, where future political anthropologists will muse over their fossilized remains.

        “It appears this specimen died an acute lack of vision, compounded by intellectual atrophy and lack of intestinal fortitude.”

        The good news is that industry has just handed the Conservatives a boatload of political capital by embarrassing them at the entire nation’s expense.

        In the process, industry has set itself up as a case study in socially irresponsible corporate conduct.

        My hope is that a savvy grad student or postdoc at Ryerson or SFU will seize this opportunity to shine a very bright and unwelcome light on The Invisible Empire.

        There is only one cure for the hubris and contempt that now permeate our telecom and broadcast industries, which they are bringing on themselves faster than they might have liked.

        They have probably seen this coming for a long time, and have been fighting a very effective rear-guard action at the nation’s expense.

        I’ve certainly had more than enough of their self-serving bulls**t, so swing hard Mr. Harper.

        I might even vote for you if you do.

  4. russellmcormond

    September 24, 2013 at 1:04 pm

    A different thought: All of this was just political theatre, and the intention was to stick with the status-quo and have pro-competition activists be happy about the Conservatives. Seems to me that both the Conservatives and the incumbent telecom monopolists won this summer.

    Without clear and passed legislative changes (not ephemeral Orders in Council) on foreign ownership restrictions and related policies, was a big new competitor expected?

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