By Denis Carmel
GATINEAU – When the Competition Bureau filed in November its intervention to the CRTC’s wireless policy review, it was expected that the reactions would be spirited, and they are.
First, some objected because the Bureau (and its specially commissioned Matrix Report) reached conclusions based on confidential information and asked that some information be shared. In that regard, Bell and Rogers got what they wanted while CNOC and Telus are still waiting for word from the Commission when it comes to that data. Telus has warned the Bureau’s intervention should be deleted from the record for procedural fairness purposes.
This week, 13 parties filed official comments on the Bureau report.
The comments were pretty predictable. The Bell response notes the Bureau concluded that “facilities-based competition is the most sustainable and effective form of competition” and that it will “drive lower prices, greater choice, and increased levels of innovation in Canada over the long term.” These are sentiments with which Bell and other network operators agree.
The Bureau also said mandating MVNOs would be “putting at risk the positive effects … on pricing, and may impact long-term incentives to invest in high-quality networks in Canada” and could “exacerbate existing network gaps for rural and remote communities.”
Bell, and others, liked that but the allusions to price co-ordination that the Bureau made against the Big Three (Bell, Telus and Rogers) were less appreciated. Later, Bell pushes back on the Matrix conclusions: “The Matrix Report wrongly attributes the pro-consumer trends in the wireless market to regional carrier penetration rather than to the ongoing competitive process among all facilities-based carriers.”
For the record the Big Three disagree with the Bureau’s conclusion that there is a lack of competition in the wireless market and they have dominant market power and above normal returns
Telus, for its part, attacked the Matrix Report and author Dr. Tasneem Chipty: “The Bureau’s remedy (limited mandated MVNO) is premised on findings that both itself and its expert, Dr. Chipty, have made that the Canadian wireless marketplace is not competitive. The Bureau relies on Dr. Chipty to justify its conclusions, yet Dr. Chipty’s report is incorrect and unreliable. Dr. Chipty makes errors such as inferring prices from metrics that are not prices, incorrectly defining the product market for wireless services, falsely analyzing the geographic market and basing her conclusions on obsolete data. For these and other reasons, the Bureau’s reliance on the Chipty Report is misplaced and leads to its proposed mandated MVNO remedy.”
To support its own comments, Telus provided studies from three experts, the same ones that they had proposed analyse the confidential information used for Matrix calculations.
Rogers, like the others, note the Matrix study is based on 2016-2018 data. “The findings drawn from the analysis thus reflect the market conditions during that period and not those following the dramatic pricing changes in mid-2019.” The company also objects to the fact that costs were not a variable used, acknowledging that it would have been difficult to give costs by census metropolitan areas or month.
“Contrary to its assertion… the analysis does not provide ‘strong evidence’ of market power. Therefore, the conclusions regarding market power and the impact of that regional competition on price are not reliable,” reads the Rogers reply.
“It should be recognized that econometric modelling can be highly resource intensive, involving multiple attempts at designing equations and collecting data that provide robust, reliable results. It cannot be concluded that the Matrix Study results represent the only reasonable and reliable estimates of the wireless services market.”
“The proposed policy itself in practice favours a single player (Shaw), is unfair to other players, and does not offer an industry-wide solution.”- TekSavvy
Because the solution proposed by the Bureau, mandated MVNO, should be made available only to companies that already have facilities and spectrum. TekSavvy disagrees, saying “the proposed policy itself in practice favours a single player (Shaw), is unfair to other players, and does not offer an industry-wide solution.”
Shaw, not surprisingly, supports the Bureau’s conclusions.
Quebecor is also on side with the Bureau, while Cogeco strongly disagrees. “The Bureau suggests a new entrant should have mobile spectrum in hand before being eligible to obtain wholesale services from the national incumbent MNOs. Cogeco submits that considering the complete lack of low-band spectrum available in Canada and the uncertainty regarding the availability of other spectrum in the future, access to spectrum remains a significant barrier to entry and the Bureau’s remedy in this regard is too restrictive to address this issue,” reads the company’s submission.
It also added that the Bureau’s solution is not helping the underserved and unserved communities.
This is a viewpoint shared by CNOC. “(I)f the Commission adopts the Chipty Report’s proposals, which necessitate an MVNO being able to acquire spectrum to convert itself to an MNO within a finite period of time, it will essentially be foreclosing any significant new entry into the Canadian mobile wireless market from entities that are not incumbent-owned. CNOC submits that such an outcome would not best serve Canadian consumers who should be entitled to enjoy the benefits of non-Incumbent owned MVNOs enjoyed by consumers in other jurisdictions around the world.”
As for the 5G implications, “importantly, the Bureau’s mandated MVNO remedy does not further the fundamental policy objective of this proceeding, the deployment of advanced 5G networks. The Commission needs a framework that actively facilitates 5G rollout across competing providers,” reads the Telus document. “A focus on facilities-based competition achieves this objective. The Bureau’s proposed remedy distracts from this objective in that it allows for companies to revert to service-based competition and not invest in facilities. Even a short term MVNO access remedy frustrates the building of 5G networks for Canada.”
There will be no reply phase to this reply phase, “The Competition Bureau can address the submissions at the public hearing and in its final replies after the hearing,” the CRTC told us in an email.
The Competition Bureau, however, also provided the following comment to us: “We welcome the perspectives of other interveners in this proceeding. Engagement on our agency’s analysis helps to ensure that our recommendations are fully informed with a clear understanding of the evidence.
“The Bureau stands by its recommendation that the CRTC pursue a Mobile Virtual Network Operator (MVNO) policy where Bell, Rogers and Telus would have to sell temporary access to their wireless networks to carriers who intend to invest and further expand their own networks. This recommendation strikes an appropriate balance between driving price competition in the short-term and preserving investment incentives in the long-term, particularly for disruptive and growing regional carriers.
“The Bureau’s submission reflects its position as an independent law-enforcement agency free from commercial interest in this proceeding. The submission was informed by the Bureau’s expertise on competition issues, including an extensive econometric analysis using confidential data from Canadian wireless carriers.
“We look forward to further engaging on the competition issues in this proceeding at the hearing on February 18, 2020.”
We look forward to that hearing, too.
