The question of whether to regulate the exciting new technology of cellular phones landed at the CRTC in the early 1990s.
The telephone business, built on decades-old monopolies, was tightly regulated. Bell and others required approval from the Canadian Radio-television and Communications Commission for the prices they charged. After a review of the new wireless industry, the CRTC left it mostly unregulated. The hope was competition would prevail.
By the early 2000s, however, the Big Three of Bell, Rogers and Telus had cemented themselves, in the words of the latest CRTC review of the industry, released two weeks ago, as “the main and often only choices for Canadians.”
Regulators and politicians have ever since sought to shake up the wireless triumvirate by introducing more competition. The obstacles were daunting: It takes a lot of money to build a cellular network. The barriers to entry, as economists call them, were gigantic. Upstarts emerged but, soon or eventually, got swallowed.
By 2019, the monthly sting of high cellphone bills had gone on too long. Numerous studies – including from the Competition Bureau – showed the Big Three reaped bigger profits than pretty much every carrier in the world. The CRTC started a major wireless review that year – and declared its intended conclusion: the Big Three would be forced to open up their networks to new competitors.
On the political front, the Liberals promised the Big Three would cut prices by 25 per cent or face a regulatory cudgel.
But the fervour of 2019 abated. The pandemic swallowed everyone’s attention. Meanwhile, wireless prices, which had been tilting slightly downward, dipped lower. The Liberals’ mantra of affordability morphed into a worry about the wide availability of next-generation 5G networks across the vastness of Canada. And the debatable claims from the Big Three – that forcing them to share their networks with competitors gave them no choice but slash investments and fire workers – gained purchase.
So when the CRTC, after interminable contemplation, released its review in mid-April, it was far more timid than it had signalled it would be.
The CRTC said Canadians pay more than “what would prevail in a fully competitive market,” but it focused on signs prices were dropping. Thus, the Big Three will not be forced to open their networks to upstarts, except in regions where competitors already own wireless transmission spectrum and plan to build their own networks within seven years.
There’s an old Curb Your Enthusiasm episode where Larry David evokes Henry Clay, the 19th-century American politician known as the “Great Compromiser.” Mr. David says to another character: “Listen, you’re unhappy. I’m unhappy, too. A good compromise is when both parties are dissatisfied, and I think that’s what we have here.”
The quip hits a chord, but some might be more dissatisfied than others.
The Big Three braced for the worst. The result is something of a relief for them. For Canadians wishing for a break on their monthly bills, the words of one financial analyst will sting: “The ruling effectively keeps out truly disruptive players.” The CRTC chose caution. It resisted change and instead created a narrow path for the likes of Quebec’s Videotron to make a move in other provinces.
In the end, the CRTC got scooped.
Just before it announced its decision, the market upended the table. Rogers in mid-March bid $20.4-billion to buy Shaw. It’s an East-West merger of cable-internet companies in which one of the Big Three could hoover up the No. 4 wireless player. Shaw’s Freedom Mobile is a big reason prices are coming down in Canada. The Competition Bureau says one fledgling No. 4, with a 5-per-cent market share, can ratchet prices down by a third.
The Rogers-Shaw merger requires three reviews – the federal government, the Competition Bureau and the CRTC. The latest CRTC decision should be required reading for anyone doing the reviewing. In justifying its reticence, the regulator pointed to improved competition, and to upstart companies that build their own networks. Well, that sounds a lot like Shaw’s Freedom Mobile.
The CRTC ragged the puck for two years and came up with a timid compromise. No one’s happy, and now the Big Three could become an Even Bigger Three.
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