There is finally some good news for cash-strapped consumers: Wireless prices are falling in Canada.
Yes, you read that correctly. At a time when inflation is still eroding our purchasing power because of higher prices for food, gas and other essentials, our cellphone bills are actually coming down.
Consumer prices for cellular services decreased by 17.2 per cent in September, 2023, compared with the same month last year, according to Statistics Canada. The federal agency’s cellular-services index measures price changes for local and long-distance calls, text messages and data.
This is certainly a win for the Trudeau government, especially Industry Minister François-Philippe Champagne. After all, the federal Liberals vowed to make wireless services “more affordable” during the 2019 election campaign.
But will that downward trajectory continue over the coming years?
The competitive landscape has shifted after Rogers Communications Inc.’s RCI-B-T acquisition of Shaw Communications Inc. and Quebecor Inc.’s QBR-B-T takeover of Freedom Mobile. Additionally, all carriers are facing higher costs for labour, equipment and capital as they build out their 5G networks.
Although each telecom is responsible for managing those challenges, Ottawa should do its part by providing regulatory certainty to the industry through its spectrum policies. (Spectrum refers to the invisible radio waves that telecoms use to provide cellular services.)
Canada was slow to auction off the first two batches of 5G spectrum compared with other countries. The current 3800 MHz spectrum auction, which was continuing as of Thursday afternoon, began months later than originally planned. The previous 3500 MHz auction, meanwhile, was delayed because of the COVID-19 pandemic.
So, the government should not postpone making the next block of 5G wireless licences available to carriers.
Ottawa must also resist the urge to use future spectrum auctions – including for licences in extremely high frequency millimetre waves – as mega money-spinners to prop up government revenues. If carriers are squeezed by inflated spectrum prices, they will recoup those costs by hiking consumers’ bills.
Costs associated with spectrum already make up roughly 10 per cent of consumers’ cellphone bills, according to Navdeep Bains, chief corporate affairs officer at Rogers.
“It is a real cost that Canadians have to bear,” Mr. Bains said during a panel discussion at the Canadian Telecom Summit last week. “So, I think we need to be mindful of that.”
Mr. Bains, who previously served as industry minister with the Trudeau government, also acknowledged that Canadian carriers paid much more than their Organization for Economic Co-operation and Development peers when they shelled out a record $8.91-billion for 3500 MHz spectrum in 2021. (I would be remiss if I didn’t point out that planning for that particular auction began when Mr. Bains was still in government. But I digress.)
A new PwC report, published this month, also stressed that “Canada has the highest spectrum costs across peer countries.”
Should we be worried about more delays and jacked-up spectrum prices for the coming auction of licences in the millimetre wave bands?
The government hasn’t set a date for that auction or finalized the rules.
While it’s true that those airwaves are still not widely deployed internationally because of propagation and technology issues, the United States has already held three auctions for millimetre wave spectrum.
“Innovation, Science and Economic Development Canada is currently developing the licensing framework for the auction of millimetre wave spectrum, following the consultation held in 2022,” ISED spokesman Sean Benmor wrote in an e-mailed statement.
“The rules for the auction, including potential competitive measures and specific timelines, will be made public when the framework is published in the coming months.”
The millimetre wave bands are important because they will enable carriers to further improve the quality of their 5G networks by enhancing capacity and filling in any blind spots. Enhanced network performance is needed to support autonomous cars or manufacturing facilities that use robotics.
As for the potential costs, it appears that ISED proposed reserve prices in its consultation document that were 340 per cent to 770 per cent higher than what Britain’s telecom regulator, Ofcom, put forward in its own report.
“Canada is very much at a crunch point here,” said Ceri Howes, vice-president of government and external affairs at Opensignal, an independent analytics company.
“We know globally speaking any time you see a spectrum auction as a cash cow, that is generally passed down to consumers,” she later added.
“So, I would very much urge the government in Canada to see spectrum as really a way to enable accessibility rather than just a means to an end in terms of the financial aspect of it.”
Spectrum is the industry’s lifeblood, which makes auctions watershed events. The government should fetch the best possible price for wireless licences, but it should not risk undermining the current trend of lower consumer prices.
Ottawa must strike the right balance on price and release more spectrum in a timely manner. Regulatory uncertainty is an investment killer. Borrowing costs are high and upgrading networks requires much capital expenditure.
Our cellphone bills have nowhere to go but up if carriers continue to overspend, relative to their international peers, on spectrum licences.