The cable threat
But there are others who take a less dire view. Canada, with a population of about 34 million spread over a large geography, might not be able to sustain so many wireless companies. Experts say there is no magic number. “It is not clear to me that consumers aren’t well served today,” said telecom consultant Mark Goldberg. And there are some new competitors with deeper pockets. Quebecor Inc.’s Vidéotron unit has brought new competition to the Quebec market, and Halifax-based EastLink all bought wireless spectrum in 2008 – though in the West, Shaw Communications Inc. bowed out after deciding it couldn’t make a decent return in the wireless business.
With cable TV and broadband Internet, these companies have the ability to bundle services for customers and pose the most serious threat to the big players. “We’re probably the reason that competition is so aggressive now,” says Vidéotron CEO Robert Dépatie.
But Mr. Dépatie thinks the present era of competition is unsustainable and has joined the other new entrants in calling for preferential treatment in the coming auction. He argues that spectrum bought in 2008 isn’t enough to continue on. “[The incumbents]have proven, in the last spectrum auction, that price is no object.”
The issue is one of furious lobbying right now in Ottawa. And the issue is more complicated than just one of prices, says Wade Oosterman, president of BCE Inc.’s Bell Mobility unit. He says Canada’s small population already makes it difficult to bring the best technology to Canada – and to use scale to bring it here as fast and affordable as possible.
“Remember the uproar when we didn’t get the iPhone in time?” he asks. “Even Vidéotron, which is a big company, can’t even get the iPhone because they don’t have scale. If we had 10 Vidéotrons, would we really be better off as a country?”
Mr. Oosterman thinks the big players are good for the digital economy because they can pull in the world’s best devices. He adds that consumers who make the switch – like Brian Wilson in Vancouver – experience a drop in network quality, and that “the new guys lose a tremendously large number of subscribers every month.”
“What Canada has to come to grips with is [that]scale is enormously important and should be encouraged. Seven carriers is crazy for this country, and it leads to negative consequences for industry. ... What the government has to decide is whether we want to have the Apple of telecom or the Dollar Store.”
WIRELESS VS. WIRELESS
There is always bickering in Canada about the state of wireless competition.
One side (mainly consumer groups, academics and international organizations) argues that Canada’s large telecom companies are sheltered from foreign competition, operate in a regulated sector, and get away with high prices, poor services and little innovation.
The other side (mainly industry consultants and the large companies) argue that rival studies use flawed methodology that draws from a small sample of rate plans, and that measures small, densely populated European countries against Canada, which has a vast geography and a dispersed population.
Last June, after Organization for Economic Co-Operation and Development reports ranked Canada’s telecom sector as uncompetitive, Telus Corp. commissioned a report from consulting firm Nordicity. The report noted that Canadian wireless voice costs are 10 per cent lower than the OECD average, based on average income; and that the cost of wireless voice is declining more quickly here than in other OECD countries.
This week, SeaBoard Group issued a report arguing that there is no evidence Canada’s geography or population distribution have anything to do with the high costs facing Canadians. It noted that before new wireless firms launched in 2008, Canada had only 8,000 cellular sites, compared with 35,000 in the U.K. and 220,000 in the U.S.
The Seaboard report argues that Ottawa must set aside more wireless licences for new competitors, as it did in 2008, and remove foreign ownership restrictions. The report noted that when the Telus-owned Koodo cell brand raised prices, Bay Street analysts figured its rivals would do the same. “It speaks volumes when one carrier can make a pricing adjustment and the investment community automatically expects the other incumbent brands to follow suit,” SeaBoard said. “That is why Industry Canada must continue its work to enhance competition in the wireless market.”