Bell also asks for return of long-term contracts
GATINEAU – Competition in the Canadian wireless market is already heated and getting hotter, resulting in an overall and ongoing decline in wireless prices while new competitors continue build out new facilities and take customers from them, so why upset that momentum now, and just at the dawn of 5G, Rogers, Bell and Telus have asked in their submissions to the CRTC’s review of mobile wireless services.
It will surprise no one that the submissions largely hit many of the same themes, especially in their stance against mandating mobile virtual network operators (MVNOs), and in favour of the CRTC being the sole arbiter of telecom facilities decisions over provinces and municipalities. The companies spent a lot of their submissions calling out the federal government for conflicting, even incoherent, policy stances.
The federal government has set aside blocks of spectrum in wireless auctions where the Big Three are not allowed to bid, in order that smaller providers to be able to get cheaper access to spectrum and build new networks. Conversely, that same government wants to see the CRTC mandate the arrival of MVNOs, wireless companies whose business case will see them build no networks at all, a move which will undermine those regional carriers (and the Commission is preliminarily on board with this idea).
“The 2017 Reconsideration OIC was itself part of a series of incoherent and inconsistent policies, where, on hand, the Federal Government stated a desire to incent the building of broadband networks in rural and remote areas, but then on the other hand, set out policies that are diametrically opposed to that objective,” reads the Telus submission, referencing the Order-in-Council which forced the CRTC to take another look at CRTC 2017-56, a decision which set mobile wireless roaming service tariffs. That reconsideration led to the CRTC-mandated creation of low-cost data-only wireless plans from the Big Three wireless carriers.
“As an example,” continues the Telus submission, “it has put in place spectrum set-asides, most recently in the just completed 600 MHz spectrum auction, that favour those WSPs that concentrate their builds in urban areas, taking away spectrum from those WSPs that are ready, willing and able to bridge the rural divide. It has also delayed release of spectrum bands that are integral to 5G networks, such as 3.5 GHz and mmWave, which positions Canada behind other countries that have already released such spectrum for their carriers.
“The Federal Government’s proposed Policy Direction to the CRTC that would place service-based competition as a regulatory objective on the same level as facilities-based competition is the most recent example of problematic policy. These mixed messages about the importance of facilities-based competition versus service-based competition confound the industry because they cause regulatory uncertainty and instability.”
All of that uncertainty can only negatively affect investment decisions, something that must accelerate as the wireless world moves to 5G. “Mandating MVNO access will unquestionably damage and delay the roll-out of 5G in Canada,” reads the Rogers submission, since having to make space on its network for resellers will slow and distract and building out advanced network facilities so that others may ride on them, especially in rural regions, will make far less economic sense – meaning rural regions will face long delays in network upgrades.
Forcing MVNOs of any kind (there are light MVNOs with no core network or numbering resources and full MVNOs which have both of those, but neither buys spectrum or runs radio access. it’s worth noting proponents of mandated MVNOs like CNOC and Cogeco are proposing full MVNOs) would decimate the federal government’s fourth carrier strategy (about which those fourth carriers have already raised alarm bells).
“The regional carriers would have to compete with MVNOs that would have instant national coverage despite not investing a single dollar in mobile wireless networks,” reads the Rogers submission. “MVNOs will then attempt to undercut the new entrant service providers on price, which is typically the prime advantage that regional carriers offer consumers over the national wireless service providers because of their inferior networks.
“It is not clear if Canada’s regional service providers would be able to weather the storm of mandated resale.” – Rogers Communications
“It is not clear if Canada’s regional service providers would be able to weather the storm of mandated resale. Certainly they would have to curtail their investments in expanding their networks. The Commission recently agreed with this, writing again in the context of Wi-Fi based MVNOs that ‘the risk to investment and expansion is greater for the other wireless carriers’,” adds Rogers, quoting the CRTC’s decision on the Order-in-Council referenced above.
All of the Big Three also quoted a huge range of prices and plans and brands now available in the Canadian marketplace, saying Canadians are already well-served with rampant competition. Rogers’ submission notes 3.3 million Canadian customers of the Big Three changed service providers last year (and this doesn’t mean a brand swap from Rogers to Fido or Koodo to Telus, but completely switching companies), as proof that keeping customers in a competitive market is a tough task.
The submissions also insist wireless prices here are in many cases equal to or lower than those in the United States, for example, and that our networks (based on a number of independent studies) are of a much higher quality of speed and reliability than just about anywhere in the world.
“OpenSignal found that ‘Canadian wireless subscribers enjoy the fastest average mobile download connection speeds in the G7, including twice the average speed found in the United States’ and PC Mag concluded that Canada has ‘the fastest 4G LTE speeds we've ever seen in North America’,” reads Bell Canada’s submission.
As well, these companies employ tens of thousands of Canadians (more than 150,000 Canadians, or more than the workforce of Google, Facebook and Twitter combined, notes Bell), invest heavily in research and development, too – and in places where MVNOs have been mandated in Europe, for example, investment in networks has lagged and innovation stagnated, say the submissions. The reason why MVNOs are more prevalent in the States, however, is the sheer size of the market – and those MVNOs target the biggest markets and certainly don’t do much for rural connections. Plus, their existence isn’t mandated.
“We see regulatory incentives for MVNOs and a desire for infrastructure deployment to be incongruous; global experience shows that regulatory intervention is more likely to be harmful to investment,” reads the Bell submission, quoting Citibank analyst research.
Given all of this – that competition from the likes of facilities-based companies Freedom, Videotron and Eastlink is really making an impact (Freedom and Videotron have added more net new wireless subscribers this year than the Big Three) and that the investments needed to drive 5G are only beginning and will be huge – Rogers, Bell and Telus all ask why the CRTC, pushed by federal government, would throw a mandated MVNO wrench into the gears where the only promise is the possibility of a few dollars off wireless plans.
“For 10 years, policy-makers in Canada have focused on supporting a fourth facilities-based competitor in markets across the country. These efforts, including regulation of antenna tower- and site-sharing and spectrum set-asides and aggregation caps amounting to $5 billion in public subsidies, have created significant market turmoil and increased costs for other wireless carriers,” reads the Bell submission.
“Nevertheless, it is clear these efforts are now achieving their objectives: the more recent entrants are credited by market analysts as being a key factor in an increasingly competitive wireless market in which prices are falling even as usage grows and quality improves.”
“The Commission should allow these costs to be amortized over three or even four year contracts.” – Bell Canada
One request by Bell, however, is likely to get a lot of attention. In 2013, the CRTC effectively banned wireless companies from offering customers any service contract longer than two years with the creation of the Wireless Code. This was something consumer groups demanded, but the shorter contract meant retail offers for new $0 phones dried up, especially as manufacturers prices for newer, niftier handsets rose to nearly $1,500 for the latest and greatest. Those types of equipment subsidies can’t be amortized over two years and still make sense.
So Bell wants the Commission to reconsider its stance on contracts. “(D)ue to the rules in the Wireless Code we are unable to give consumers the option of amortizing the cost with a plan of longer than two years,” reads the Bell submission.
“Providing access to these devices can therefore add $30 or more to a consumer's monthly bill. The Commission should allow these costs to be amortized over three or even four year contracts (while also requiring that two year contracts remain available) to increase the affordable options available to consumers and address one factor contributing to the perception that wireless prices are high.”
That word perception. That’s what really might be what this process is all about, and of course perception is in the eye of the beholder… We wonder what the CRTC and the federal government will perceive as this process continues.
The Commission will now digest all of the submissions and respond to parties with further requests for information by July 5th. Further interventions are welcome to be filed by October 23rd.
And, we’re still waiting on the Commission’s official response to the Competition Bureau’s most recent reconsideration request for more data. One former CRTC chair, Konrad von Finckenstein, says the Commission should certainly cede to the Bureau’s wishes on this.
