The Canadian telecom industry has been slow to catch on that the days of easy money are over. So, in a read-my-lips message, Industry Minister Christian Paradis spelled it out as he killed Telus Corp.’s acquisition of the telecom upstart Mobilicity.
The minister’s point, in essence: What part of “the government wants more competition in wireless” do you not understand?
For the past five years, the Conservatives have been trying to weaken the wireless oligopoly, as Canadians have had the unfortunate distinction of paying some of the highest mobile bills in the developed world. This push was not entirely selfless: The Harper government hoped to transform the frustrations of smartphone-addicted users into political fuel.
To this end, the Conservatives have gone to considerable lengths. In 2008, they set aside a portion of the publicly-owned radio waves through which cellphone signals are carried so that newcomers could enter the market. Three upstarts, Mobilicity, Public Mobile and Wind Mobile, took part in the auction.
And when the federal telecom regulator ruled that Wind’s parent company was controlled by an Egyptian firm, disqualifying it for entry into the Canadian market, the government didn’t think twice. It simply overturned the ruling.
The highly publicized spat left a mark.
As new entrants struggled, the Conservatives opened up the telecom sector in 2012 to greater foreign ownership. International investors can now acquire a wireless firm whose market share is 10 per cent or less. And when the mandate of then-CRTC chairman Konrad von Finckenstein came up for renewal, the Harper government made it known that his successor would have to put consumer interests first.
It has been a year almost to the day since Jean-Pierre Blais started his mandate at the commission. And while the stunning rejection of the Bell-Astral merger has attracted the most attention, it is the new wireless code of conduct that will have a lasting impact.
The code unveiled Monday ends the most controversial commercial practices of wireless operators. In effect, it kills the three-year phone contracts with outrageous breakup fees. As well, it limits the extra charges and international roaming fees that were often invoiced, unbeknownst to the phone owner. As such, it goes further than the groundbreaking provincial consumer protections that were put in place by Quebec and three other provinces.
Of course, these moves will come at a price. Buying the “smartest” smartphone will likely cost more to consumers initially. But it is clearly preferable to pay more of the phone’s cost up front and to shop around for the best service package for the money.
Unfortunately, these measures will only come into effect in December. And they come too late for the telecom upstarts, which got only the crumbs of a $19-billion industry. Convincing consumers to switch wireless providers when they are tied to three-year contracts has proven very difficult, if not impossible.
With the exception of Quebecor, a formidable rival in Quebec to BCE Inc., Rogers Communications Inc. and Telus, the new entrants are close to collapsing. Wind Mobile is for sale. Public Mobile is considering its options with investment bankers. And Mobilicity thought it had found its white knight in Telus.
But just as Telus and BCE prompted Finance Minister Jim Flaherty to end the income trust gold rush in 2006, Telus’s proposed $380-million transaction for Mobilicity was the straw that broke the camel’s back. The government, quite rightly, feared that the deal would lead to other deals, with the Big Three swallowing all of the new entrants.
For weeks now, Mr. Paradis has signalled how unhappy he is with the prospect of the newcomers’ spectrum falling into the hands of incumbents, as deals between Shaw and Rogers and then between Rogers and Quebecor were brokered. You didn’t need to be a mind reader to figure how this would play out. It was predictable that the government would block Telus, a transaction that runs counter to everything the Harper government has tried to achieve so far.
The Conservatives were well intentioned. Unfortunately, they went at this backward. They invited the competition in before ensuring it had a fighting chance – with shorter service contracts and with the enforcement of stricter rules on roaming and on cell tower sharing.
Now, the newcomers are so weak – Mobilicity could well go into bankruptcy protection – it is unsure they will even make it to the crucial 700-megahertz auction, now postponed to early 2014, even if the government will set some spectrum aside for them once more.
By killing the Telus-Mobilicity merger, Mr. Paradis can keep up appearances. But when you cut through the static, everybody understands that Ottawa’s wireless plan is still a tangled mess.