TORONTO – Any time members of the Canadian telecom industry gather together for a conference, the age-old debate about just how competitive the market actually is here inevitably emerges. The Canadian ISP Summit held this week in Toronto was no exception.
And in fact, opposing views on the subject, firmly expressed, provided most of the sparks during the conference’s final session on Wednesday, a panel discussion that tackled many of the regulatory issues currently faced by the telecom industry.
Moderated by telecom industry consultant Mark Goldberg (co-founder and organizer of the annual Canadian Telecom Summit), the regulatory panel featured: Dr. Michael Geist, law professor at the University of Ottawa and Canada Research Chair in Internet and e-commerce law; Jonathan Daniels, vice-president of regulatory law for Bell; and Christian Tacit, barrister, solicitor, and principal of Tacit Law, who has represented independent operators.
Earlier in the afternoon, conference delegates had heard Leonard Katz, former vice-chairman, telecom, of the CRTC, express his views on the current regulatory landscape during a fireside chat with Globe & Mail telecom reporter Christine Dobby.
Katz had suggested much of the CRTC’s recent moves towards a more consumer-focused approach to industry regulation — and what could be seen as the Harper government’s attempts to influence policy decisions along those lines — may simply be the result of a federal government wanting to appear populist as it enters the final year of its current mandate. Katz (who also served as acting CRTC chair until Jean-Pierre Blais was appointed in June of 2012) pointed out the current CRTC commission has been fully appointed by the Harper government, and as such may be expected to “carry the tone of that government as they go forward,” he said.
“I think this government is taking a particular interest in trying to become more populist in order to get re-elected next year.” – Len Katz
“What’s unique right now is we’re into the last year of this government’s mandate, and I think this government is taking a particular interest in trying to become more populist in order to get re-elected next year,” Katz said. “This current Commission is spending an awful lot of time trying to be much more consumer-focused, and I think that’s a good thing… but again, part of that may in fact be because of the upcoming election and the need to make sure consumers are being best served in the short term in their day-to-day lives.”
Katz went on to say the incumbent telecom providers in Canada try to differentiate themselves through innovation, quality of network service, and branding efforts, as opposed to pricing discounts. On a recent trip to the U.S., Katz said he saw AT&T and Verizon stores with “prices splattered across the walls”, which is something you don’t see in Canada. Katz added he doesn’t believe bringing in more competitors is necessarily the long-term solution to lowering telecom prices to consumers.
“Forcing competitors to come into the marketplace, providing incentives and then protecting them to the extent they are protected, still doesn’t lower the price to the average consumer. I haven’t seen it,” he said. “I know Wind’s pricing several months ago was in the $35 to $40 range, relative to everybody else in the $65 to $70 range, but then again, the quality (of network service) that you’re getting is very, very different as well.”
Katz added that it isn’t the competition itself that drives prices down, but rather it’s the threat of competition that does so.
“The minute you hear there’s going to be an auction, there’s going to be a new entrant coming in, you see the scurrying of the parties trying to lock in their customers. At that point in time, you might find there are some price discounts, but it’s only for that period of time when that threat is manifesting itself,” Katz said.
Eventually, the prices go back up because the businesses can’t sustain the lower prices and maintain profitability at the same time, over the longer term, he said.
During the subsequent panel discussion on regulatory issues, Geist took the opportunity to respond to Katz, suggesting there is a tendency among the telecom incumbents to push the idea that there is “a perception problem on the part of consumers” when it comes to the competitive nature of the Canadian telecom market.
“I’m sorry, that’s utter nonsense.” – Dr. Michael Geist, U of Ottawa
“We keep hearing that it’s perceived to be uncompetitive, as opposed to actually being uncompetitive, and we hear that where there are public concerns on this, these are populist concerns, and that somehow this is just driven by elections. I’m sorry, that’s utter nonsense,” Geist said.
“(For) the millions of subscribers whose experience is real, in some ways they’re finding this to be a denial of the actual experiences that millions of Canadians have when they [travel] elsewhere or when they go into the shops as Len said and they don’t see anybody competing on price. The only thing they’re competing on is trying to keep competitors out of the marketplace,” Geist said.
At which point, Bell’s Jonathan Daniels interjected: “How can you say they don’t compete on price?”
To which Geist responded: “I have the former chair of the commission saying, ‘I don’t see a lot of competition on price.’ In fact, the place that we are seeing some amount of competition now is on customer service far more than on price — and Telus is kicking your asses as far as I can tell, if I take a look at the CCTS (Commissioner for Complaints for Telecommunications Services) report.”
(The CCTS report released on Tuesday revealed Bell received almost one-third of customer complaints last year, compared to Telus, which received less than 6% of complaints. Rogers customer complaints accounted for a little more than 20% of the total received last year.)
Geist argued many customers “who need to put food on the table, when they look at the prices that they’re paying, they’re willing to trade off customer service for better pricing.” And in fact, customers “are quite frankly appalled” when they see the telecom prices available in other jurisdictions as compared to Canada, he said.
“I do not accept your proposition to say there is not price competition.” – Jonathan Daniels, Bell Canada
Daniels again took exception to Geist’s suggestion there is no price competition within the telecom industry. “We’re here in Toronto. I do not accept your proposition to say there is not price competition, because Wind, for example, is here…and they are cheaper, and extensively cheaper than Bell in some cases,” he said.
He went on to say customers pick their telecom provider primarily based on “issues of quality determinations” — to which Tacit quipped: “You mean like lack of seamless roaming?”
Daniels continued: “We have excellent networks here. We can talk about price and so on. I’m not sitting here saying we are the cheapest price in the world or anything like that. But people are choosing quality over price.” Furthermore, he argued, customers’ monthly bills are higher today because they are doing so much more with their smartphones than they did five years ago.
Geist rebutted Daniels’s argument about customers choosing quality of service over lower prices, by saying that consumers don’t really have a choice in the matter. “They’re not choosing…That’s like saying they were choosing high roaming fees when they were going to the United States, because while they’re using the service, they’re paying these high roaming fees. These aren’t choices. Whether it’s perception or reality, this is a marketplace that offers very little choice, very little differentiation other than on things like customer service.”
Goldberg asked the panel to comment on Katz’s notion that it’s the threat of competition that brings telecom prices down, and only initially as incumbents try to lock in customers, whenever a spectrum auction is announced. Goldberg referred to the deferral account mechanism used previously by the CRTC, and asked: “Is it a good thing for the CRTC to intervene in pricing in the marketplace and distort the ability for new entrants to charge as much as they possibly can?”
Tacit responded by saying he would consider that market failure.
“Right now it is a cozy club, and those who are in it want to keep those who aren’t in it out, and Canadian consumers aren’t being served very well.” – Chris Tacit, Tacit Law
“It doesn’t surprise me that some of the new entrants don’t want others to access their spectrum, because those who have spectrum are gatekeepers of competition, and they’ve joined that club,” he said. “It doesn’t surprise me in the least, but is that the right thing to do for Canada? I don’t think so.”
He pointed out that spectrum has often been hoarded by incumbents in the past, and a lot of the spectrum gained by incumbents was bought “at very nominal cost” before they had to bid for it.
“That all matters, in terms of the degree of ability to foster competition. So, you have to create conditions where access to that spectrum is available because it is a scarce facility, it is the place where the gatekeeping of competition occurs,” Tacit said. “Right now it is a cozy club, and those who are in it want to keep those who aren’t in it out, and Canadian consumers aren’t being served very well.”
