GATINEAU – Canada’s largest third party internet access provider, TekSavvy, wants to add wireless to its mix as a mobile virtual network operator and its executives warned the CRTC on Friday not to fall for the pretend competition it says the Big Three provide in the Canadian wireless market.
The flanker brands of the Big Three (think Koodo, chatr and Lucky, for example) were created as a way to make it look like there are loads of wireless companies in the market when Rogers, Bell and Telus own 90% of the wireless subscribers in Canada, just under various brand names, said company executives. “They have divided the market 30-30-30, and they’re comfortable with that and there is nothing to effectively disrupt it, said Andy Kaplan-Myrth, TekSavvy’s vice-president of regulatory affairs (pictured in a cpac.ca screen capture).
As for those flanker brands specifically, “the part that is competition theatre and we think is harmful, is marketing them under different names and very separately, and often not transparently at all. That is designed to create, really, the illusion of competition where there is no competition.”
TekSavvy’s profit margin is already razor-thin, Kaplan-Myrth added, because the company is committed to low prices and it needs to add another leg to its product stool. It already offers TV along with broadband and in order to compete with the Big Three bundles, it needs a way into the wireless market via mandated MVNO in order to grow and offer Canadians more affordable pricing, he said.
“It is more important than ever for independent competitors like TekSavvy to be able to offer wireless services. People come to TekSavvy because they want an alternative to the incumbents, but consumers today expect quad-play offerings, and mobile is a critical part of that. As long as consumers are stuck with an incumbent because of their mobile service, TekSavvy’s margins are likely to fall to unsustainable levels,” Kaplan-Myrth said during the company’s opening presentation.
He added the company has approached at least one of the Big Three to potentially re-sell wireless under the TekSavvy brand but was rebuffed as the provider he did not name would only let the ISP be a distributor of that mobile company’s wireless services, under the incumbent’s brand name.
Commissioner Christopher MacDonald asked why TekSavvy has not yet acted in a spectrum auction and purchased more MHz on its own in the way Eastlink, which appeared earlier Friday, has already done?
“MVNO is an end on its own.” – Andy Kaplan-Myrth, TekSavvy
That’s beside the point, explained Kaplan-Myrth, because Canada doesn’t need more facilities in order to have more competition. Besides, spectrum has historically been extremely expensive to buy at auction. “To try and create a new business model or a sustainable business as a new facilities-based carrier, we fundamentally disagree that ought to be the goal as a new competitor,” said Kaplan-Myrth. “Spectrum is limited, and a competitive model built solely on spectrum and facilities-based competitors will tend toward a monopoly or a duopoly, essentially, the two networks that we have now and with the three major carriers.
“The problems we’re trying to address here, the problems that you have heard from Canadians and the problems that various proceedings have tried to address… relate to services, and the focus on encouraging more facilities-based carriers in order to somehow deliver those services later, that has just not come to fruition,” he added.
“Why have we not purchased spectrum to launch a mobile carrier on our own? We would not have been able to afford it, and that ought not to be the way because we are trying to create competition on the service layer.”
Of the much-talked about mandated MVNO proposals, from the CRTC and the Competition Bureau, it’s been proposed there be sunset clauses for them, where mandated MVNOs would build facilities while their mandate be phased out in five years, which is a key part of the Bureau’s plan.
Again, that’s wrong-headed, said Kaplan-Myrth. “It really assumes the end goal is to have the spectrum and have the facilities and move people onto that where that’s going to be some kind of sustainable and sufficient competition between facilities.
“The reason we don’t believe that investment in facilities ought to be an obligation of MVNO is that MVNO is an end on its own, so sustainable competition is possible and, in fact, common outside of Canada on a wholesale… full MVNO model.”
