A decision by Canada’s telecom regulator to force the Big Three national wireless carriers and SaskTel to open up their networks to eligible regional players is unlikely to have a meaningful impact on competition or prices, according to industry observers.
The Canadian Radio-television and Telecommunications Commission (CRTC) announced Thursday that it will require the large wireless carriers to sell network access temporarily to regional competitors in the areas where those players own licences to spectrum, airwaves used to transmit wireless signals. The regional carriers will have seven years to build out their own wireless networks in those areas and transition their customers onto them.
The CRTC came to its decision after determining that the three national carriers – BCE Inc.’s Bell Canada, Rogers Communications Inc. and Telus Corp. – together exercise market power in the wireless industry in all provinces except Saskatchewan, where SaskTel has sole market power. Its proposed framework, formulated after nine days of public hearings and a lengthy review, aims to strike a balance between stoking competition and encouraging investment in network expansion, the regulator said.
Industry analysts called the policy neutral because it does not open up national wireless networks to competitors without their own infrastructure, known in the industry as mobile virtual network operators, or MVNOs. Some smaller telecoms, such as internet providers TekSavvy Solutions Inc. and Distributel Communications Ltd., were seeking network access for competitors with no wireless infrastructure, while the big telecoms had opposed any form of mandated access, arguing that it would discourage network investments and slow the rollout of 5G.
Fifth-generation wireless services promise faster speeds, less lag time and a vast increase in the number of devices that can be connected. The technology is expected to power applications such as smart cities and driverless cars.
“The ruling effectively keeps out truly disruptive players and preserves facilities-based competition in Canada,” Bank of Montreal analyst Tim Casey said in a note to clients.
Bank of Nova Scotia analyst Jeff Fan wrote that he does not expect a “material change to the competitive landscape” as a result of the decision.
Laura Tribe, executive director of OpenMedia, an organization advocating for widespread inexpensive internet access, said the criteria is too narrow to allow smaller, regional players to become national MVNOs. (The regional competitors can only access the national carriers’ networks in those areas where they own spectrum licences.)
“I don’t think this is going to change anything,” Ms. Tribe said. “It’s going to have a very limited impact ... I don’t think we’re going to see any dramatic shift in prices, service offerings or number of providers.”
How will the prices be set?
The rates will be negotiated between the parties, with final-offer arbitration available if they are unable to come to an agreement. The CRTC, which sets wholesale rates in the broadband market, said it decided not to regulate the wholesale wireless prices because the process can be lengthy.
Which regional competitors qualify under this new framework?
Only companies that own spectrum licences in the Tier 4 areas where they wish to resell wireless services will be eligible under the CRTC’s framework. (Tier 4 areas are defined by Innovation, Science and Economic Development Canada and are generally the size of a city and its surrounding area; there are 172 such areas in Canada.)
Currently, Bragg Communications Inc.’s Eastlink, Quebecor’s Videotron, Xplornet Communications Inc., Ice Wireless, SSi Micro and TBayTel would likely be eligible, according to the CRTC. RBC analyst Drew McReynolds said it’s unclear whether Cogeco Communications Inc., which has some spectrum licences in Ontario and Quebec, would qualify.
Cogeco said in a statement that it welcomes the decision, which provides the company with greater clarity as it develops its plan to enter the wireless market.
What does the decision mean for Rogers Communications Inc.’s potential acquisition of Shaw Communications Inc.?
The CRTC said it did not factor the acquisition, valued at $26-billion including debt, into its decision, as it was restricted to considering only the evidence that was part of the proceeding’s public record. That public record closed in July of last year, while the deal between Rogers and Shaw was announced last month.
The CRTC’s ruling could make it easier for the government to greenlight the deal between Rogers and Shaw because it strengthens regional competition, RBC’s Mr. McReynolds said in a note to clients. The acquisition is expected to face intense regulatory scrutiny as it would reduce the number of wireless competitors from four to three in Ontario, Alberta and British Columbia. It requires the approval of the Competition Bureau, the Ministry of Innovation, Science and Economic Development and the CRTC.
Some industry insiders have argued that Shaw’s wireless business, Freedom Mobile, should be excluded from the deal to prevent a lessening of competition. Mr. McReynolds said the framework being introduced by the CRTC could make Shaw’s wireless business more attractive to potential buyers if Rogers is forced to divest it.
Why haven’t MVNOs taken off in Canada?
In many countries, including the United States, MVNOs have taken off without specific regulatory interventions. That isn’t the case in Canada where, according to some telecoms and industry observers, the national carriers have been reluctant to enter into commercial agreements with resellers.
Cogeco, which has expressed interest in offering wireless service to its cable customers in Ontario and Quebec, has unsuccessfully tried to negotiate access to the larger carriers’ networks on “multiple occasions,” its president and chief executive officer Philippe Jetté said previously.
Ben Klass, a telecom researcher and PhD candidate at Carleton University, said the market structure in Canada has been less conducive to MVNOs compared with other countries. In the U.S., for instance, the “scrappier” of the major telecoms – T-Mobile and Sprint – were willing to sign agreements with MVNOs in a bid to get more traffic on their networks and gain a bigger foothold in a market dominated by AT&T and Verizon. (T-Mobile and Sprint have since merged.)
In Canada, meanwhile, the market share held by the major telecoms is in “relative stasis,” Mr. Klass said. “You don’t have that extra carrier nipping at the heels.”
Could SaskTel and the Big Three carriers challenge this decision?
Bell, Telus, Rogers and SaskTel could appeal the decision in court, petition the federal cabinet to overturn it or request that the CRTC review the ruling. (Bell, Rogers and several other telecoms pursued all three of these avenues in an attempt to overturn an August, 2019, ruling from the CRTC that lowered wholesale broadband rates.)
However, Ms. Tribe said the wireless decision is so close to the status quo that the telecoms may simply choose to accept it. “I wouldn’t be surprised if they appealed it, because they have the resources to push back, but this is as close to the status as they could have expected,” she said.
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