Canada's telecom regulator is poised to rule Tuesday on a key element of competition in the wireless industry, with many observers expecting the decision to give new entrant carriers a boost.
The Canadian Radio-television and Telecommunications Commission (CRTC) has spent more than a year and a half examining the issue of wholesale roaming – the rates Canada's cellphone carriers charge other companies when their customers roam on each other's networks – and held a five-day hearing on the subject last fall.
The prices customers themselves pay to use their mobile devices when outside their home-coverage area are not at stake, but the CRTC's ruling is expected to be yet another factor in whether alternatives to Canada's three national carriers can thrive as they work to expand their own networks and service areas.
Quebecor Inc. has said the outcome will be a key factor in its decision on whether to expand its Videotron Ltd. wireless business outside Quebec. Meanwhile, Wind Mobile Corp. has already taken advantage of temporary caps on wholesale roaming rates to lower its roaming prices and says it wants to continue to offer attractive plans in a bid to win market share in Ontario, British Columbia and Alberta.
The commission has refrained from directly intervening in prices in the cellular market since the mid-1990s, but could set prices for what the companies charge each other if it concludes the market for wholesale roaming services is not sufficiently competitive.
The federal government has already highlighted its own interest in wholesale roaming and pledged to address it in the 2013 Speech from the Throne as part of its consumer-friendly agenda. Last June, it passed legislation to cap the rates carriers charge each other to no more than they charge their customers at the retail level for phone calls, texting and data.
The caps were intended as an interim measure pending the outcome of the CRTC's inquiry. At the hearing, new entrants such as Wind and Videotron said they needed even lower rates. On the other hand, the incumbents – Rogers Communications Inc., BCE Inc. and Telus Corp. – argued artificially low rates would limit their incentive to invest in new infrastructure. (BCE owns 15 per cent of The Globe and Mail.)
The CRTC could conclude there is sufficient competition in the wholesale market and decline to intervene with any rate structure at all. However, that seems unlikely in part because the regulator issued a decision last July stating it found "clear instances of unjust discrimination and undue preference" in roaming agreements between Rogers and new entrant providers entered into before the government's temporary caps.
The commission operates at arm's length from the government, but Scotia Capital Inc. analyst Jeff Fan pointed out that CRTC chairman Jean-Pierre Blais said at the hearing: "Arm's length doesn't mean you can't touch."
"Unless the CRTC wants to have its decision varied [by the government] … it may be in the CRTC's best interest to follow through with a 'government-friendly' decision," Mr. Fan said in an April research report. "We believe this decision [will be] a low-enough wholesale roaming rate to encourage additional capital injection to support Wind."
If the CRTC does nothing, the interim rates would theoretically remain in place, but they are viewed as a blunt instrument while the CRTC has the expertise to implement a more tailored solution.
The caps have had some potentially unintended effects, such as allowing the national carriers to roam on the rural networks of regional players such as SaskTel and MTS Inc., which have complained that the lower rates have reduced their ability to negotiate favourable deals. Rogers also said recently that it increased the footprint of its network by 56 per cent last year, thanks primarily to the roaming rate caps.
Some industry groups and companies such as Cogeco Cable Inc. also asked the CRTC to open up access to wireless providers' networks for companies that have not built their own infrastructure. Most observers do not expect the CRTC to rule in favour of a model supporting mandated access for these companies, which are known mobile virtual network operators (MVNOs).
"While we expect the CRTC to lower wholesale roaming costs, we expect it to maintain a facilities-based model and not mandate access for MVNOs without them building their own network," said Maher Yaghi, telecom analyst at Desjardins Securities.
The commission plans to issue its ruling at 4 p.m. Tuesday.