As the father of two young boys I know how fun it can be to play make-believe. So, let's pretend for a moment that all of Industry Canada's recent policies for the wireless communications sector – limiting foreign ownership to firms with less than ten percent market share, capping the number of blocks that Bell, Rogers, and Telus can win in the upcoming auction of 700 MHz spectrum, requiring incumbents to share their infrastructure with new entrants, etc. – are really just swell.
If the public interest truly is served by ensuring a minimum of four competitors in each market and actively constraining the spectrum capacity of the big three players, then the reported moves by Rogers to gain access to frequencies held by Wind Mobile and Mobilicity via a network-sharing agreement with a third-party investment firm solve nothing.
The cornerstone of Industry Canada's spectrum policy since the last major auction in the summer of 2008 has been to keep a specific set of licences out of the reach of the country's three largest firms. Allowing Rogers to get its hands on this spectrum while wearing gloves borrowed from a friend is not consistent with this policy: the grip will still be there, albeit without the fingerprints.
Rogers, Bell, and Telus argue for a "level playing field" in that they want equal access to all frequency blocks in the 700 MHz spectrum auction. What they fail to mention when making this argument is the fact that each of them already holds upwards of 40 MHz and perhaps more than 80 MHz of mobile spectrum depending on the market in question, while any newcomer enters the market with no Canadian spectrum at all, or maybe 10 to 20 MHz scattered across the country if the newcomer were to acquire Wind or Mobilicity.
The big three do have a point, though, with regard to some of the unintended consequences of Industry Canada's suite of rules and policies.
At the root of the problem is the government's desire to engineer a fourth competitor via the small upstart model. The provision of mobile phone service is a highly capital-intensive business, and, as demonstrated by the evolution of competition in the landline phone marketplace, when smaller firms can or must depend on access to their competitors' infrastructure for survival, they tend not to grow into strong, independent, facilities-based rivals.
If only the Verizons – or T-Mobiles or Oranges or NTTs – of the world had been allowed to, say, acquire Microcell or Clearnet a decade ago, or participate as equals in the 2008 spectrum auction, then we might actually have vibrant four-party competition today, with service providers focused on winning and satisfying customers, rather than bemoaning their lot in life and invoking the American boogeyman in radio ads.
Ian Munro is an independent consultant based in Halifax. He formerly was Senior Economist in the spectrum management program at Industry Canada.