As Canada’s telecom regulator considers new ways to promote competition in the wireless market, Cogeco Communications Inc. is pitching a “middle-ground” model to help it crack into the industry.
For more than a year, the Montreal-based cable company has harboured ambitions to sell cellular service to its television and internet customers in Ontario and Quebec, but has said it needs regulatory support to do it.
The Canadian Radio-television and Telecommunications Commission (CRTC) will hold a public hearing next year to consider the state of the wireless industry and has said its preliminary view is that Canada’s large national carriers – Rogers Communications Inc., BCE Inc. and Telus Corp. – should be forced to sell network access to smaller companies without their own networks. Those companies, which are known in the industry as mobile virtual network operators (MVNOs), are wireless resellers. The matter will be a major topic of discussion at a telecom conference in Toronto this week.
Cogeco is urging the CRTC to endorse a “hybrid MVNO” model that would only allow companies with existing telecom infrastructure to access the national wireless networks and resell the service to their own customers.
Shaw Communications Inc., which owns regional wireless carrier Freedom Mobile, has argued that any form of support for MVNOs would hurt it and other regional players, such as Quebecor Inc.'s Videotron and Eastlink in Atlantic Canada, companies that already offer an alternative to the Big Three.
Consumer groups support the idea of resellers, saying studies show Canadians pay more for wireless service than residents of other developed countries and that new competitors could lead to lower prices. The Big Three are opposed to it, arguing that forced access for resellers will undermine investments they have made and inhibit the rollout of 5G networks, the next generation of wireless technology.
Luc Noiseux, chief technology and strategy officer of Cogeco, said in an interview last week that his company tried to find a “middle ground” between the “pure-MVNO and pro-consumers view and the need to sustain investment in telecom infrastructure.”
“We tried to articulate a proposal that would break the logjam between polarized views on the issue,” Mr. Noiseux said. Cogeco spent about $30-million on wireless airwaves (known as spectrum) last year, but has maintained it will enter the wireless market only if it makes financial sense and has long lobbied for regulatory changes to help it.
Paul McAleese, president of wireless at Shaw, says that Cogeco could have invested more in spectrum and built its own network to support cell services.
“There’s been ample opportunity for players to get into the market, participate in the spectrum auction, and build out facilities just as ourselves and other regional players have done,” he said in an interview, referencing Cogeco’s decision not to bid in a public auction earlier this year for low-frequency spectrum licences. (Cogeco has said the licence areas in that auction were too large, making it too expensive for smaller players who want to serve only limited geographies to bid.)
“I don’t think we need a solution that solves just one opportunist’s dilemma," Mr. McAleese said of Cogeco, adding: “MVNOs are not the way to wireless affordability for Canadians. This is just not the way to get this done. … MVNOs are going to disproportionately weaken regional players and those players are the only catalyst for competition in this market.”
In a January report, Veritas Investment Research analyst Desmond Lau called 2018 “the year the gloves came off” for Canada’s wireless market. He wrote that in May, 2017, the Big Three charged an average of $31.10 a month for one gigabyte of wireless data. By November, 2018, that had dropped to $10.38 a GB.
Mr. McAleese said that decline shows current policies are working. “That’s solely attributable to the work of the regional players and principally attributable to Freedom.”
For his part, Mr. Lau said he does not believe Freedom Mobile was the only factor driving increased competition and lower prices for data. He wrote that as more people now own smartphones (which rely on more expensive data plans than devices used just to sent text messages and make phone calls), there is less room for growth and the Big Three started fighting each other harder for subscribers.
But still, he said, Freedom began gaining a larger share of the market for a couple of reasons. First, the company made several network upgrades in 2018 – putting new and existing wireless airwaves to work – leading to improved reliability.
And toward the end of 2017, it launched its “Big Gig” plans with larger data buckets, spurring the Big Three to dramatically cut their own prices for a week around the holiday shopping season and to continue regular promotions throughout 2018.