Reiterates push for “granular data”
GATINEAU – The Canadian wireless market reaps $24.5 billion in annual retail sales, accounts for 155,000 jobs and 31.7 million subscribers (2017 figures*) so the stakes are rather high when it comes to another regulatory review of that market.
Old ways (facilities-based competition) may be thrown out with new ones mandated (MVNOs). The questions surrounding the CRTC’s latest review of the wireless market has created much unease and uncertainty inside Canada’s wireless carriers (and a glimmer of hope among those who want to launch new MVNO-based brands and consumers hoping for lower prices).
With the urging of the federal government, the CRTC determined it needed a deep look at the competitive landscape as soon as possible: “As part of this review, interveners will have the opportunity to make submissions regarding the definition of the retail market and whether the retail mobile wireless services currently offered by wireless carriers, including prepaid services and lower-cost data-only plans, are meeting the needs of Canadians and achieving the policy objectives of the Act,” reads the original CRTC notice of consultation February 28, 2019.
(Innovation, Science and Economic Development Minister Navdeep Bains also launched the jumble of nerves and questions inside Canadian wireless carriers with a proposed CRTC policy directive two days prior to that Commission announcement.)
So we should not have been surprised to see the Competition Bureau come forward and say it wants to “to assist the CRTC in making a determination on key issues related to competition,” by providing the CRTC “with objective economic evidence,” wrote Commissioner of Competition Matthew Boswell to the CRTC in a March 5th letter.
To add injury to perceived insult (and more than a few are perceiving the Bureau’s request as an insult), the letter went on: “The Commissioner (of Competition) employs a team of highly trained economists with experience in assessing competition issues, including competition issues in wireless services. In addition, the Commissioner has retained an external team of expert economists with significant experience assessing competition in telecommunications markets, including wireless services, to prepare an expert report for the CRTC.”
As we reported, Commission staff on March 25th asked the Bureau for clarification, saying it “requests that the Commissioner review the procedural request with a view to refining the information sought in order to ensure that the information is unconditionally necessary for the Commissioner to effectively address the competition issues relevant to this proceeding,” the letter read.
“In the alternative, Commission staff respectfully requests that the Commissioner elaborate on how the information being sought, as currently framed, is reasonably necessary to allow the Commissioner to ‘provide the CRTC with important economic evidence to assist it in assessing the state of competition across various Canadian wireless markets and how certain policy changes would likely affect outcomes in those markets’,” the CRTC letter went on.
After also receiving a response letter from Rogers and Bell on March 25th and 27th (and then Telus, Shaw, TbayTel and SaskTel subsequently) each of whom reacted strongly against or asked for caution and extensions should the Bureau’s requests be granted, the CRTC asked the Bureau to respond by April 5th.
All this scrambling gives us a sense of the tension surrounding this process – and friction is even more apparent when reading the correspondence.
At the heart of this of course, is whether there is enough competition in the Canadian wireless marketplace and what to do about it – and in its letter sent to the CRTC on Friday, the Bureau barely backed off, saying only it can do some good analysis with data from 2016 onward, but it would really, really, really, rather have data from 2008 as originally requested so it can do a proper “event study” on Videotron’s entrance into the wireless market that year.
The Bureau wants the granular, confidential, data from Canadian wireless service providers which it originally asked for – and it wants the CRTC to make the WSPs comply with that request.
“Allowing the Commissioner to conduct a rigorous and fulsome analysis will provide the CRTC with a more complete record upon which to base its decision.” – Matthew Boswell, Commissioner of Competition
“The CRTC places importance on evidence-based decision-making,” reads the April 5 letter. “To that end, the purpose of the Commissioner’s Procedural Request is to provide the CRTC with economic analysis that will allow the CRTC to make informed policy decisions grounded in objective and relevant evidence. Allowing the Commissioner to conduct a rigorous and fulsome analysis will provide the CRTC with a more complete record upon which to base its decision.”
The Bureau even added footnote in its letter noting where and when the CRTC’s executive director of telecom, Chris Seidl, told a government committee that it would be a good thing for the CRTC to be able to send commercially sensitive information to the Competition Bureau.
“Bill C-43 would enable us to disclose the commercially sensitive information we receive to the commissioner of competition. By giving the commissioner access to confidential information he and his staff will likely be able to participate more meaningfully in our public proceedings. This would give us a more complete public record upon which to base our decisions,” said Seidl in front of a 2014 committee examining an Act which implemented some of the federal budget that year.
That said, the Bureau is willing to limit its review of the market from 2016 to now. While it won’t be able to do a deep dive on what happened with Canadian WSPs when Videotron launched wireless in Quebec that year, it will be able to do an event study on Shaw Communications’ Freedom Mobile push from that year onward.
“The time period of 2008 to present in the Information Request is to allow the Commissioner to study Videotron’s entry into the wireless market as that study is likely to produce unique insights,” reminds the Bureau. “However, should the CRTC find that the probative value of this study is outweighed by the burden to WSPs a revised request limiting the time period is set out… which limits the time period to 2016 to present.
“(T)he shorter timeframe currently contemplated in the Revised Information Request is likely sufficient to conduct a study of Freedom’s recent expansion. However, it will not allow the Commissioner to conduct Event-Study Analyses of events that occurred earlier in time like the Videotron Study or a study of Eastlink’s entry into wireless.”
“Videotron in Quebec was the only new entrant who was disrupting co-ordination. Understanding why that is the case can inform policy recommendations aimed at replicating this effect.” – Boswell
The Bureau letter sent Friday went on, however, to continue to push for national WSP data from 2008, noting “Videotron in Quebec was the only new entrant who was disrupting co-ordination. Understanding why that is the case can inform policy recommendations aimed at replicating this effect.”
Now co-ordination, as the Bureau pointed out to Cartt.ca in a follow-up email asking for clarification, doesn’t mean anything nefarious. In markets with few big competitors, prices for certain things just tend to fall into similarities since they collectively control a market (Kraft peanut butter is pretty much the same price in every big grocery chain, for example). The retailers don’t collude, which is illegal, but their prices are all in the same ballpark as they try do their best to pull customers to their stores or services. In competition law it’s sometimes called “conscious parallelism”.
“Firms can exercise market power individually or jointly, by co-ordinating their behaviour,” reads the initial Bureau request for information in early March. “In 2017, when BCE… acquired Manitoba Telecom Services, the Commissioner concluded that, as a result of coordinated behaviour among Bell, Telus and Rogers, wireless prices in Canada were higher in regions where Bell, Telus and Rogers did not face competition from a strong regional competitor.”
The Bureau also swatted away each of the complaints made by the WSPs over the request for granular, confidential data, where Rogers, Bell and Telus insisted 10-year-old data is meaningless given how consumers use devices now as compared to 2008, that the companies just don’t have some of the data requested, that each company’s internal datasets may count things differently than the others, that it is too burdensome to gather up all this data, that the Bureau’s request oversteps legal boundaries and if the CRTC does grant the Bureau’s demand, and will delay this review by up to a year, among other complaints.
Telus even said in its letter objecting to the Bureau request for data that Boswell’s agency can easily render market analysis with publicly available data and not confidential company data.
Um, no. You already criticized us for just that, responded the Bureau. Its April 5th letter points to a written submission to the 2014 CRTC review into wholesale mobile wireless services market where a Telus expert said “there are significant problems with inferring market power” on the basis of public data.
“Granular data allows one to distinguish differences in prices from differences in usage. This insight would not be reflected in high level publicly available data.” – Boswell
“Granular data allows one to distinguish differences in prices from differences in usage. This insight would not be reflected in high level publicly available data,” says the Bureau.
As for any discrepancies in the way the WSPs count some things? Thanks, said the Bureau, but we’re pretty good at sorting that stuff out. “The Commissioner has extensive experience in data analysis including aligning multiple datasets from a large number of companies,” reads Friday’s letter.
As well, adds the Bureau “granularity and volume should not be equated with burden.” Besides, it already based its first request based on “previous discussions with certain WSPs about how their data is kept; the wealth of experience the Commissioner and his staff possess in collecting and analyzing data, including data from WSPs; and regular discussions with parties and their counsel to identify and assess the challenges companies may face in responding to information requests.
“For clarity, the Commissioner is not seeking information that WSPs would need to create but that which is already kept or produced in the ordinary course of business. This minimizes the labour, time and cost needed to comply with the information request by avoiding costs associated with tasks like combining databases and data aggregation, cleaning, and organization.”
As for the timing, the Bureau’s letter makes it clear it believes there is plenty of time for WSPs to see its analysis, to be submitted by the October 23rd deadline, review and respond by the January 13, 2020 hearing and if the CRTC wants to extend the timeline, it certainly can.
“The Commissioner would also not be opposed to answering questions in respect of his economic analysis that he may receive by a date set by the CRTC between 23 October 2019 and the hearing,” reads the Bureau letter.
As for the problem Bell flagged with The Brattle Group helping the Bureau with its analyses (Brattle has worked for Bell recently)? A red herring, says the Bureau letter which however added it would go ahead with other experts, if the CRTC wants them to.
We will be very interested to see how the CRTC and the WSPs respond to this latest demand from a Competition Bureau which seems to be getting a little more publicly feisty.
With files from Greg O’Brien
