If you are to believe the chairman and CEO of Verizon Communications Inc., all the controversy stirred by the American mobile carrier’s arrival in Canada was much ado about nothing.
“It was always on the fringe for us,” said Lowell McAdam in a conference call Tuesday after Verizon unveiled a $130-billion (U.S.) deal to buy Vodafone Group PLC’s 45-per-cent stake in Verizon Wireless.
“So, we never seriously looked at [venturing into Canada] – I mean, we looked at it, but we never seriously considered the move,” he later added.
As the summer of the Verizon battle ends, it is one way to rewrite history. But in Canada it reads differently. Cheap financing and a high-flying stock gave Mr. McAdam a unique chance to clinch a deal that was a decade in the making. In comparison, buying two struggling Canadian mobile upstarts that looked like old leftovers and bidding for wireless spectrum in an entrenched $19-billion (Canadian) market wasn’t worth the trouble.
Mr. McAdam’s dismissive comments seem comical given the rancour that Verizon’s gold-plated invitation to Canada stirred up between the Harper government and Canada’s mobile phone incumbents – BCE Inc., Rogers Communications Inc. and Telus Corp.
Of course, the joke is lost on the Canadian government. Ottawa rolled out the red carpet to attract the U.S. mobile giant in the hopes of establishing a fourth mobile competitor in all provinces - not only in Quebec, where Quebecor’s Vidéotron is giving the Big Three a run for their money. So on the face of it, Verizon’s snub is a slap to the Conservatives and a victory for Canada’s established players. But appearances are misleading. In fact, the only clear-cut losers here are the consumers.
The Conservatives might have lost this battle, but they have not necessarily lost the next election. Their telecom policy, with its aim to increase competition, was written with a populist eye. Locking horns with the established mobile carriers throughout the summer has allowed them to score points with the Canadian electorate.
That said, the Harper government’s decision to grant Verizon privileged access to the next wireless spectrum auction as if it were on an equal footing with such wobbly upstarts as Wind Mobile, Mobilicity and Public Mobile was untenable. And Verizon’s Vodafone deal, which gives the U.S. phone carrier an implied value of $290-billion (U.S.) – roughly the gross domestic product of Alberta – makes it all the more blatant.
It also follows that while Verizon has put its Canadian plans to rest, in a Deus ex machina ending, the Big Three are still left with a telecom policy that cordially invites foreign operators to the country by treating them preferentially, as if all market newcomers are comparable in size. Who is to say an established European carrier won’t make a last-minute bid at the upcoming wireless auction in early 2014? Until that “loophole” is closed, and until the Sept. 17th application deadline for the next auction passes, the incumbents can’t really uncork the champagne.
In the meantime, however, consumers will lose the little traction they gained with the threat of Verizon’s competition.
That cloud had led Canadian carriers to introduce better-priced plans for families, businesses and high-volume data users through sharing options across multiple phones.
Increased competition could still emerge if Canada’s upstarts merge with the financial backing of private equity funds. But a strong alternative to the Big Three in all provinces is unlikely to rise soon.
Fortunately, consumers have a last-resort ally in the Canadian Radio-television and Telecommunications Commission, under the leadership of chairman Jean-Pierre Blais. The CRTC recently put in place a new code of conduct that makes it easier for upstarts to lure customers away from incumbents. Come December, consumers will be able to switch phone providers more rapidly without paying outrageous breakup fees on three-year contracts.
The CRTC is now looking into roaming rates, a sour point for consumers who have run up towering bills while using their phones abroad.
It is unfortunate that regulators must guard consumer interests when real competition would be preferable. But as Verizon is staying away from Canada and as the Conservatives’ wireless strategy remains unchanged, the CRTC has become the consumers’ only reliable defence.