By Christopher Guly
OTTAWA – In Toronto on Thursday, Innovation, Science and Industry Navdeep Bains gave Canada’s Big Three wireless carriers an ultimatum to lower their prices within two years while increasing competition by giving smaller and regional telecom companies a chance to bid on 50MHz of a 3500 MHz spectrum auction to be held later this year.
Bains spoke to Parliament Hill correspondent Christopher Guly prior to making his major announcement.
Christopher Guly: So you’re forcing the big guys to lower their prices and giving smaller, regional guys a break to help do that.
Navdeep Bains: You’re right. The spectrum set-aside is designed to promote regional competition, and we’ve seen through the Wall [Communications price-comparison] report where we have strong regional competition, there are really good options for Canadians where providers were up to 45% lower with their plans. The set-aside is designed to move forward on that agenda – and we’re following through on our campaign commitment to reduce prices by 25%.
CG: The Wall report was released last November. Our current are the numbers in the study?
NB: Within the mid-tier, it’s been fairly flat in the 2 to 6 GB space that we’re moving forward with on today. There’s no significant price reduction there. In the lower and higher ends, as the report indicates, there have been prices coming down, but we have more work to do.
CG: The major telcos have said they’ve already reached the 25% rate-cut, so why would you want to cut further – and is such a rate-regulation appropriate?
NB: So we’re being very transparent with Canadians. The clock starts on Jan. 1, 2020, and over the next two years, prices must go down by 25% between the 2-to-6-GB-space. We’re going to be tracking the top three carriers [Bell Canada, Rogers Communications and Telus] to see those prices go down by providing a quarterly report that will be compiled by Statistics Canada and we will share that with Canadians.
CG: Will that be compulsory?
NB: We’ve been very clear with telecommunication companies and the top three carriers that if they fail to meet the 25% target within two years, we will look at additional measures to hold them accountable by promoting more competition. This could be by how we deploy future spectrum or also how we proceed with mobile virtual network operators (MVNOs) as a means to drive down prices for Canadians.
CG: That’s essentially what you did today with announcing rules for the 3500 MHz spectrum auction.
NB: The auction set-aside does promote more regional competition, and that is consistent with our past practice which has led to price decreases. We have made progress, but we need to do more. And more importantly, we’re being very transparent with the companies because we made this platform commitment during the campaign and we’re going to hold the telcos accountable if they are unable to meet those targets.
CG: Why are you targeting mid-range wireless plans?
NB: Because we’ve seen low-cost data plans come out and prices have come down. We’ve seen prices go down in premium plans, but we have not seen significant reduction in the mid-range – and 40% of Canadians fall within that range.
CG: When it comes to the set-aside spectrum, are you hoping companies like Freedom, Videotron and Eastlink get it, or are you hoping for new, smaller, local or even rural companies to launch wireless, because the spectrum is being sold in smaller geographic chunks, too, correct?
NB: Correct. The market will decide that. We’re not prejudging who gets spectrum. The set-aside is designed to provide regional players and possibly new entrants access a very valuable spectrum.
CG: Do you want the CRTC to mandate MVNO access to incumbent wireless networks and if so, should those MVNOs also have mandated access to the yet-to-be-built 5G networks to be run on the to-be-auctioned 3500 MHz spectrum?
NB: I think it’s too early to decide the future of MVNOs because the CRTC just completed its hearing, so I’m not going to prejudge its work. They heard from the different telecommunication companies, advocacy organizations – even the Competition Bureau – and so we’re monitoring it very closely. But we have not, at this point, made any final determination because we want to see what the CRTC recommends.
CG: So we’re at a point where you’re setting aside spectrum for smaller companies while potentially mandating MVNOs.
NB: The MVNO question, in this particular, case, is an accountability measure. If companies are unable to meet the 25% target then we will look at MVNOs.
CG: Why would anyone new buy spectrum, set aside or not, and build networks, if they can just be an MVNO?
NB: The set-aside is really critical for the deployment of 5G. If you look at 3500 MHz in the rollout of 5G it is very, very important spectrum.
CG: Do you believe MVNOs will bring about lower prices?
NB: I think additional competition is important. That’s the broader agenda that we have in play here. That’s why we’ve been doing the set-asides. We believe competition is good for innovation; it’s good for investment; and it’s good for consumers because we’re seeing lower price-points.
If you look at the Wall report, in regions where we have competition, prices are 45% lower. That’s an indication of the importance of having more competition, so we’re looking at all options.
CG: As for the auction, there have been complaints that its structure and spectrum set-asides drive up the cost of spectrum for the incumbents – which then of course drives up the retail prices. The carriers have complained about the high cost of spectrum during the recent hearing. Rogers said spectrum costs in Canada are twice that in the U.S. and up to seven times higher than other countries, like the U.K.
Telus CEO Darren Entwistle said at the hearing that “spectrum prices are 424% higher than its benchmark countries, and 65% higher than the United States. Indeed, if spectrum costs were as low in Canada as those paid by European carriers, Canadian mobile rates could be 12% lower.”
What do you make of that?
NB: Well I think the spectrum costs are driven by the auction, are driven by market forces – are driven by the companies who want to bid on this very finite resource. They recognize that it’s important for them as they deploy 5G.
If you look more broadly, the investment environment has never been better. We’ve got the lowest marginal tax rate for new investment at 13.8%, which is five points better than our American counterparts. We have some really low debt-financing options for the long term for some of these investments – the lowest that we’ve seen in decades. And we’ve got good competition in the market. If people want to grow their business and take advantage of 5G, these investments are going to be critical.
I think the conditions are really good for investment – and the government stepped up to de-risk some of these projects for internet connectivity in partnership with the telecommunication companies.
The Connect to Innovate program helped de-risk $500 million worth of investments that these companies were making and we saw an overall investment of $1 billion in rural and remote communities.
So our policies are very clear: We need to lower prices. We need to improve access. And we need to ensure high quality networks for internet and wireless services, and that’s what today’s announcement is about. It’s following through on that commitment to have greater transparency with quarterly reporting through Statistics Canada. We’re holding the telecommunication companies accountable. And we’re demonstrating that wireless services are not luxuries. They’re essential for work, for school, for accessing information.
CG: Mr. Entwistle, again at the CRTC hearing two weeks ago, said that if the federal government really wants to boost competition and lower prices, it should remove foreign investment restrictions in telecom.
NB: Well I believe that the strategy we have in place to promote regional competition is driving down prices. That’s what the Wall report highlights. That’s what the set-aside for the 600 MHz was about.
That’s what the set-aside for the 3500 MHz is about. And I believe that is achieving that goal. At the same time, we maintain high-quality networks and we continue to improve access for Canadians.
I’m confident that our strategy is working. And in all fairness, prices have come down and we do have some of the best networks, but more needs to be done.
CG: Still on Telus, the company is proceeding with Huawei for 5G. Where are things at on your end?
NB: We’re still doing our due diligence. We’re still working with experts who are constantly engaged with [Public Safety and Emergency Preparedness] Minister [Bill] Blair and [National Defence] Minister [Harjit] Sajjan and the national security agencies. We’re working very closely with our allies, and we’ll make a determination in the appropriate time that when we need to, to advance the safety, security and well-being of Canadians.
CG: The spectrum auction begins on Dec. 15. How much revenue do you think you will come from it?
NB: I wish I knew my friend!
