Fast-growing Freedom Mobile is warning the telecom regulator against introducing rules to support new wireless companies that don’t build their own networks, arguing that along with other regional carriers, it is already offering competition after years of struggling.
“Now is not the time for a regulatory U-turn,” the company said in a filing with the Canadian Radio-television and Telecommunications Commission on Wednesday evening, the deadline for the first round of submissions for a major hearing on the state of competition in the wireless industry in January.
The telecom regulator has said its preliminary view is that the national carriers – Rogers Communications Inc., BCE Inc. and Telus Corp., which together control about 90 per cent of the market – should be forced to sell network access to smaller companies that would resell the service.
Such players are known as mobile virtual network operators (or MVNOs) and while there are various MVNO models, typically they handle their own marketing, sales and billing but do not buy wireless airwaves (spectrum) or invest in their own infrastructure. MVNOs have sprung up in other parts of the world, in some cases through regulation and in others through voluntary commercial arrangements with large players who benefit from a buyer for excess airtime.
In previous proceedings, the CRTC has rejected MVNO models, but now seems to be leaning toward supporting some version of reselling, something the federal government has also said it supports.
Freedom argued that giving MVNO resellers “artificial advantages in the market will undermine [our] ability to gain market share and scale, thereby jeopardizing our ability to continue investing, including in next-generation technologies.”
The Canadian government and regulators have spent the past decade trying to encourage the development of new competitors who build their own networks. This policy saw cable companies Quebecor Inc. and Eastlink in Atlantic Canada start new wireless businesses and also led to the launch of a trio of startups (Wind Mobile, Public Mobile and Mobilicity) around 2010. But the pure-play wireless startups were beset by financing troubles and struggled to survive in the face of an aggressive response from the Big Three, who started their own discount brands to compete in the lower end of the market.
Of the three, only Wind Mobile remained out of the hands of one of the incumbents, eventually selling to Calgary-based cable operator Shaw Communications Inc., which rebranded the company as Freedom Mobile. Now, Shaw says it has invested $3.3-billion in its wireless operation (the figure includes the $1.6-billion acquisition cost plus capital investments and spectrum purchases) and argues it is making progress that is helping “drive sustainable competition against the Big Three.”
Regional players, which typically offer lower prices and more flexible terms than the Big Three, are concerned that MVNO operators would also target the lower end of the market. Eastlink said it is “alarmed” by the CRTC’s preliminary views and Quebecor said the commission risks “provoking the disappearance” of the smaller players that have invested in their own networks.
“The forced entry of MVNOs will result in a plethora of competitors that resemble duck-sized horses and a weakening of the existing fourth-carriers, who currently resemble horse-sized ducks,” wrote SaskTel in its filing. “But it is the smaller number of stronger competitors, the horse-sized ducks, that do, and will provide the most effective competition to the [Big Three].”
Consumer groups, such as OpenMedia and the Public Interest Advocacy Centre, point to studies that show Canadians pay more for wireless service than consumers in many other countries. They argue that more regulation, such as mandated network access for MVNOs at established rates, is needed to offer more choice and lower prices.
The Competition Bureau weighed in with its own filing, saying it has found that Canadians pay more for wireless services in areas without strong regional competitors. It said “wireless competition in Canada lacks vigour” but said it needs more information to determine whether mandated MVNO access is the right solution.
One intervention from three former executives who held positions at Public Mobile and Wind Mobile, including one-time chief executive officer of Wind Mobile Alek Krstajic, warned the CRTC not to repeat the mistakes of the past. They outlined how the wireless startups struggled in part because of a lack of regulatory support (for example the barriers they faced to installing their equipment on existing cell towers and the high prices they had to pay the Big Three when their customers roamed outside of their small home networks).
The former executives said if the CRTC does decide to implement an MVNO model, it must have the “appetite” and “commitment” to oversee and support it on an ongoing basis. “Supporting competition is not a one-off decision, but rather an on-going process,” they said, noting that the Big Three, staffed with “armies of legal and regulatory resources” will always fight back.
The Big Three have long opposed any mandated MVNO model and maintained that position in separate filings this week. They argued that MVNO regulations have not worked in Europe and would undermine incentives to make investments in 5G, the next generation of wireless technology, which carriers are expected to roll out over the next several years.
BCE and Telus both proposed that the commission reverse an earlier policy decision that effectively limits contract lengths to two years. BCE said that smartphones are now so expensive that it would provide a greater benefit to customers if they could repay the up-front subsidy carriers provide on devices over a longer period of time.
Cable operator Cogeco Communications Inc., which has long wanted to get into the wireless business, said it supports a “hybrid” model that would provide mandated access to cellular networks in areas where they have existing broadband internet infrastructure.
The Canadian Network Operators Consortium – which represents independent providers such as TekSavvy that buy wholesale access to internet service at regulated prices and resell it to their customers – said it supports an MVNO model and urged the CRTC not to place time limits on mandated access, which the commission said it is considering.