CRTC focuses on accelerating regional carrier network builds. Eyes now on Cogeco if regulatory conditions satisfy mobile entry
By Ahmad Hathout
GATINEAU – In requiring the country’s largest telecommunications companies to negotiate access to its wireless network with regional carriers, the CRTC has signaled its desire to bolster the fourth players and help accelerate the expansion and deployment of those networks, the Commission’s head Ian Scott said Thursday.
But the Regulator will not require those regional carriers to come to commercial arrangements with smaller players on that leased capacity, with Scott only saying they are permitted to do so.
In essence, Thursday’s decision will help regional carriers expand into new areas and accelerate network builds in areas they don’t yet cover. The other caveat is that they must continue to invest in their networks, so by the time the seven-year framework is phased-out, they will have migrated their subscribers onto their own spectrum-driven networks.
To qualify as a mobile virtual network operator (MVNO) under the new regs announced today, regional carriers must also be operating in tier 4 or higher areas, which is measured by geographic size. An even smaller tier 5 was added relatively recently in federal broadband mapping. The decision applies to the next-generation 5G network.
“What we’re trying to do through the MVNO is to facilitate the growth and effectiveness of the facilities-based competitors to the Big Three,” Scott said in an interview with Cartt.ca Thursday. The requirements are imposed on Bell, Rogers, Telus, and SaskTel.
“It will accelerate their growth effectiveness as a competitor,” he added. “That’s the idea; what we’re trying to do is make sure that those facilities-based competitors continue to grow in importance and impact pricing at the end of the day.
“They are the effective form of competition that is going to produce the results we want; meaningful competition that drives rates down.
The Regulator noted the regional carriers hold a market share of close to 20% or below in provinces and territories in which they operate, with most of them having less than 10% share.
“If you think about a working competitive market, one of the advantages of having facilities is that if someone fails, well the facilities are still there and someone else takes over and they have a lower cost of entry or they have a lower operating cost and they become a more effective competitor,” Scott continued.
“We believe that competition will be sustained and most effect in the form of facilities-based competition.” – Ian Scott, CRTC
“If you have a more limited form of resell competition, then parties will enter and exit, but then there’s nothing left; maybe more consumer confusion and more issues to deal with, but not investment in facilities and networks, and we believe that competition will be sustained and most effect in the form of facilities-based competition.”
Before this decision, the CRTC did not mandate negotiations between large carriers and network-less mobile virtual network operators and some small MVNOs are in operation in Canada. Some potential service-based competitors have complained of stonewalling from the big three when it came to negotiating network capacity to provide competitive service.
Despite voluntarily-negotiated MVNOs already existing in the market – Petro-Canada Mobility and 7-Eleven’s SpeakOut Wireless among them – smaller carriers, or those with more ambitions MVNO plans than the gas station’s and convenience store’s 3G-powered options, complained that no competitive market has emerged for MVNOs because the Big Three simply refuse to talk about it.
Bell, Rogers, Telus, and SaskTel are now required to submit terms and conditions for MVNO access, but no rates will be set by the CRTC unless intervention is required in the form of a final offer arbitration. A costing proceeding would be “long and time consuming,” Scott said, so “we wanted this to come into effect as fast as possible.
“So what we have said is, instead we are going to tell them they’re required to enter into commercial negotiations and we expect them to reach an agreement, and we backstop it… with arbitration.”
If parties cannot come to an agreement on rates, then the CRTC will receive proposed rates submitted by both parties and choose the best one.
“They created something that won’t get used very much.” – Matt Stein, CNOC
Therein lies one problem the framework poses for competition under the new model, according to critics. Since the Big Three have historically made it hard to enter negotiations on wireless access, the trend seems likely to continue.
Matt Stein, head of the Competitive Network Operators of Canada, an industry group representing independent ISPs, said he is “disappointed” the CRTC “took way too long and ultimately supported the status quo.
“They created something that won’t get used very much, and even [for those who] use them, they require them to negotiate rates,” Stein said. “And not negotiate rates easily; negotiate them with the exact same three companies that have done everything they can to thwart competition and prevent people from coming into this market and opposed this entire proceeding every step of the way.”
Because the regionals (primarily now Videotron, Eastlink, and Ice Wireless since Shaw/Freedom is provisionally sold to Rogers) are not required to wholesale to other carriers, Stein said it is unlikely they will do that. “You’re a regional player, you have gone through all the trouble of buying spectrum so that you can become the fourth player. Then you go through all the trouble of becoming an MVNO and you’ve actually managed to negotiate rates with the big guys… you think you’re ever going to get around wholesaling what you just set up to others – it just doesn’t stand to reason.
“Spectrum holders are not wholesaling to other parties – there’s no reason to believe it would be any different here,” Stein added.
Data On Tap, or dotmobile, which models itself as an MVNO, said it was disappointed to see the caveats to qualify for MVNO status under the new model, specifically network and spectrum ownership. It said the CRTC has a “convoluted” definition of an MVNO and “confusingly defines existing regional operators as MVNOs,” because those structures as historically defined, don’t have networks. The V stands for “virtual” after all.
“On top of that, they announced the requirement to own spectrum 10 days after closing registration for the upcoming [3.5 GHz] auction. A tough pill for some regionals to swallow.” – Alex Bauman, dotmobile
And while the decision “does allow these regional operators to resell their access to actual virtual operators like dotmobile,” it is wholly dependent on the regional’s business plan.
“The problem with this route to true MVNOs is that it relies on regional operators to commit to expansion plans,” dotmobile co-founder Alex Bauman said in an email. “The uncertainty around the seven-year mandate and whether anyone will get rates lower than their current mandated roaming rates make this all very unclear. On top of that, they announced the requirement to own spectrum 10 days after closing registration for the upcoming [3.5 GHz] auction. A tough pill for some regionals to swallow.”
Stein noted that the proposed Rogers merger with Shaw would also effectively eliminate a regional player, potentially complicating matters with respect to the new framework.
It’s a point that Sugar Mobile, a subsidiary of Iristel (which owns the far north’s Ice Wireless), made in a press release expressing disappointment with the “anti-MVNO” decision that will “stifle innovation and competition in Canada.” The CRTC said it didn’t consider the merger because it wasn’t part of the record of the proceeding; Sugar said this makes the decision “obsolete.”
“Despite their numerous complaints about lack of choice and resulting high prices, Canadians will be forever stuck with the same few mobile providers they have now as a result of this unfortunate status quo decision.” – Jay Thomson, CCSA
Jay Thomson, the CEO of the Canadian Communication Systems Alliance, said in a statement the decision is “a big blow for Canadians, especially those living outside of the major urban centres, who have now been denied the opportunity to have more choice in selecting their mobile provider and to benefit from the cost savings and innovation that competition would generate for them.
“Despite their numerous complaints about lack of choice and resulting high prices, Canadians will be forever stuck with the same few mobile providers they have now as a result of this unfortunate status quo decision,” Thomson said.
Free text and calling app TextNow (which is one of the largest MVNOs in the States but does little here, even though it was founded in Waterloo, Ont., where it still has its headquarters) said while it appreciates the regulator recognizing unaffordable cell phone service, “today’s ruling does not go far enough to solve the lack of competition in the wireless market [and does not] adequately address a system that excludes so many.”
The Public Interest Advocacy Centre said Thursday it believes the decision will benefit consumers. “Consumers made the case that they have too few choices and too high prices for cellphone service in Canada,” its executive director John Lawford said in a statement. “The CRTC has finally cleared a path for MVNOs and we trust they will find Canadians are very willing to try a new wireless option.”
Robert Ghiz, head of the Canadian Wireless Telecommunications Association, said in a statement that the industry association is taking “the appropriate time to analyze and study the findings of this review and what it means for our members.”
The barrier to entry in the CRTC’s new model is effectively spectrum, which must be owned in order to play under the framework. In December 2018, Cogeco, which is the only publicly-traded Canadian telecom to not have a wireless business, skipped out on the 600 MHz auction – which would’ve indicated higher interest in wireless – because it said the auction’s focus on large geographic areas made it financially prohibitive as it had to compete with the larger carriers.
That said, the company does own some spectrum and did throw its hat into the 3500 MHz auction ring coming in June. Will this decision finally give the company the “right circumstances” it has long campaigned for? The company made no announcement Thursday.
The CRTC’s decision to allow a limited MVNO strikes closest to a model proposed by Cogeco and the Competition Bureau. Both recommended an MVNO model that would ensure revenues would go into developing networks and that only those already running networks could take advantage. The Bureau had its eyes set on bolstering regional carriers.
Bell and Telus did not respond to a request for comment. Eastlink and Cogeco said they are reviewing the decision. Rogers said it will continue investing in networks. SaskTel said it is still reviewing the decision, including newly imposed low-cost wireless plans, to see how they would impact their business and operations.
“We see a hole in the marketplace.” – Scott
The decision also requires the large carriers to implement seamless roaming so that calls won’t be dropped when subscribers move between different carrier networks.
The large carriers will also need to carry and promote low-cost data plans on their main brands, rather than just on their flankers, which was a previous requirement imposed by the CRTC. Recall that the Regulator’s original wireless review decision was sent back by the federal government after the CRTC determined that mandating agreements with MVNOs wasn’t the right framework for competition, instead requiring low-cost data-only plans.
The federal Liberals, under then-Innovation Minister Navdeep Bains, pledged as a 2019 campaign promise to force the large carriers to reduce by 25% over two years certain middle-road wireless plans, which has yet to be achieved.
The government’s response was tepid, at best.
“The government has taken note of the CRTC’s decision today and thanks them for their continued important work during the ovid-19 pandemic,” Innovation Minister Francois-Philippe Champagne said in a statement. “We will be reviewing the decision and its implications to ensure they align with the government’s goals of promoting competition, affordability, consumer interests and innovation.”
Like the essence of Thursday’s decision, the order to have low-cost plans on the main brands is somewhat reflective of a Competition Bureau survey in the summer of 2019 that found consumers were uncertain about the quality of smaller competitors, or flanker brands. The survey found that consumers thought the big brands were more reliable.
“We see a hole in the marketplace,” Scott said in his interview, “and there’s clearly a need for some low-cost, low data, really basic services and we want them to be offered under the main brands because many of those consumers don’t know about or don’t trust the flanker brands or entrants and we want them to be…discoverable, so we’re saying we expect you to offer them, we expect you to offer them on a standalone basis…and we expect them to be fully findable on your website.”
We’ll have more when the companies themselves have more to say.
