Needs local data for a proper analysis
OTTAWA – It’s rare for a bureaucratic back-and-forth to be quite so public, but with so much at stake, the Commissioner for Competition doesn’t want to take no for an answer when it comes to the granular market data he wants from Canadian wireless companies.
As part of its submission to the CRTC’s review of mobile wireless services, the Competition Bureau wants to do a detailed study on what happened in regions and cities (not just in provinces and nationally) when new wireless competitors to the Big Three (Rogers, Bell and Telus) were introduced. To do that, the Bureau needs far more granular, detailed data than the CRTC has asked for in its original requests for information upon the proceeding’s call. The Bureau can not, in this proceeding, compel Canadian wireless service providers to provide the data it wants. Only the CRTC can.
In early March, the Bureau made its original request and in early April, it provided additional details. As we reported, wireless incumbents objected strenuously to the request for more information and on April 18, the Commission agreed and said the data ask was too onerous and denied the Bureau’s request.
On Monday, May 6, the Commissioner for Competition, Matthew Boswell, sent another letter asking that the CRTC reconsider that decision. Without local data, he wrote, “I will therefore have an incomplete picture of current and future competition in the Canadian wireless market. As a result, without additional information, the advice I can provide to the CRTC regarding the appropriate measures needed to stimulate competition, will be significantly limited.”
Boswell also once again modified his request so that the data ask was less onerous that the first two times and stated without this data “I am unable to assess the effects of the facilities-based entrants, which significantly limits my ability to provide advice on what marketplace changes are needed to increase competition in the wireless industry,” he added.
He notes the CRTC’s preliminary view in this proceeding is that Mobile Virtual Network Operators (MVNOs, or third-party resellers) will likely have to be forced on unwilling facilties-based operators, but also, however, that the Commission hasn’t properly studied the local impacts the launch of new entrants like Freedom Mobile and Eastlink have had in limited markets.
For example, the big three serve all of Alberta while Freedom’s network was, until recently, primarily only in Edmonton and Calgary. The big three also serve all of Ontario, but Eastlink serves only some smaller markets in Northern Ontario. Did those factors help or hinder the competitive market in those centres? Were there targeted offers made to the people in those cities and not elsewhere and what does or did that mean for the wireless market and competition in those markets?
“It is important to understand whether the CRTC’s existing policies aimed at promoting facilities-based competition are beginning to deliver lower prices for consumers.” – Matthew Boswell, Commissioner of Competition
“(I)t certainly may be the case that a regulated solution like mandated MVNO access is a necessary next step to promote competition in the Canadian wireless industry. However, before making that determination, it is important to understand whether the CRTC’s existing policies aimed at promoting facilities-based competition are beginning to deliver lower prices for consumers,” writes Boswell.
“If that is the case, the CRTC may also want to consider alternative and/or additional strategies to stimulate competition among facilities-based carriers. This is particularly the case given that a regulated solution such as mandated MVNO access is challenging to implement, could limit the incentive and ability for existing facilities-based entrants and regional carriers to disrupt the wireless market, and could reduce investment incentives.
“The growth and expansion of Freedom and Eastlink provide natural experiments to understand whether the CRTC’s existing policies aimed at promoting facilities-based competition are showing promise of disrupting the status quo in Canada. However, a complete analysis of whether these two companies are increasing competition requires the CoC-RFI data,” continues the letter. (CoC-RFI= Commissioner of Competition request for information.)
“Freedom can only service customers where it has a network and their network deployments tend to focus on individual cities, rather than entire provinces. It is possible that the national wireless carriers are responding to Freedom’s presence in certain areas by offering targeted promotions in those areas that are not available province wide. In other words, a provincial-level analysis may easily mask or obscure the competitive effects of facilities-based entrants like Freedom, which could lead to incorrect or inappropriate inferences on their competitive impact to date.”
The data requested from the carriers in this proceeding by the CRTC, which does not drill down to such a local level, will not allow the Bureau to do a proper analysis.
Boswell even brought a Nobel Prize winner into his latest letter, economist Jean Tirole. “A consensus in the economic literature has formed that ‘regulation should be adapted to suit specific conditions in each industry’,” wrote Boswell, quoting Tirole.
“In other words, choosing the right form of regulation requires an understanding of the likely current and future conditions, and then, assessing the benefits of any specific form of regulation relative to its costs. For example, if one is considering regulation in an industry where the exercise of market power is (or will soon be) unlikely, the benefits of regulation will likely be dominated by the costs – especially if the regulation itself threatens to limit the development of competition that would otherwise prevent the exercise of market power. Instead, a regulated solution is much more likely to improve outcomes if it is imposed in an industry where the exercise of substantial market power is likely in the present and future.”
Boswell also addressed the timing aspect of his request and acknowledged while time is tight (he asked for 100 days to analyze the data, should the CRTC change its mind and ask the WSPs for it right now), it was doable, but not if the Bureau is forced to wait until the CRTC’s own next RFI for this proceeding expected in July.
“(T)he probative value of the information sought outweighs the burden associated with complying with the request,” reads the letter.
When the CRTC responds to this, we’ll let you know.
