A ruling from Canada's telecom regulator that will put limits on what the country's national cellular carriers can charge their competitors for roaming access is being hailed as manageable for the industry's biggest players.
Many stock watchers took the intervention on wholesale roaming rates by the Canadian Radio-television and Telecommunications Commission (CRTC) in stride, variously calling it "benign," "neutral" and "manageable" for the Big Three wireless providers – Rogers Communications Inc., Telus Corp. and BCE Inc. At the same time, they pointed out that the commission has yet to finalize the rates and that the process could be lengthy.
The CRTC released its decision Tuesday on wholesale roaming, the rates carriers pay to other wireless providers when their customers roam on one another's networks. It found the Big Three collectively have the ability and incentive to impose conditions that make the wholesale market uncompetitive. Based on this finding, the CRTC said it will regulate the rates the three charge their competitors under a new regime that will be in place for five years.
"The commission, since the dawn of cellular service, has been pretty hands off this area," CRTC chairman Jean-Pierre Blais said in an interview in the regulator's Gatineau, Que., headquarters. But the wireless business has grown dramatically, he said, noting it now serves about 28 million subscribers and accounts for close to half of the $45-billion in annual revenues Canada's overall telecommunications industry takes in.
"If you think about it, our intervention – first with the wireless code, and now this on the wholesale level – I think is not insignificant," Mr. Blais said, referencing the commission's 2013 national code governing retail service standards and contract terms. "But it also represents the importance that wireless has in our lives," he added.
Scotia Capital Inc. analyst Jeff Fan increased his price targets Wednesday on all three of the incumbents and upgraded his ratings on Telus and Rogers to "buy" (he already had a "buy" rating on BCE, which owns 15 per cent of The Globe and Mail).
For the interim, the CRTC is limiting the wholesale rates the Big Three can charge competitors to no more than the highest rate they are currently charging under temporary government caps introduced last year. BCE, Telus and Rogers must all file proposed tariffs detailing their actual costs by Nov. 4 and the CRTC will conduct another analysis using an approach that adds a markup to calculate final rates.
Mr. Fan said that approach is likely to result in a rate "well below the interim rate," but added, "we estimate it will take at least a year for the CRTC to issue a final decision given the lack of history with wireless costing and the time typically required for tariff decisions."
Although the decision is largely beneficial for new entrants Wind Mobile Corp. and Quebecor Inc.'s Videotron Ltd., some analysts said the wait for those final rates could delay potential plans. Wind still needs to persuade investors to put more capital into its network, and Videotron has long been mulling an expansion outside Quebec without making a firm commitment.
In a statement Wednesday, Quebecor welcomed the decision but did not directly address expansion, noting simply, "The final rates set by the CRTC will be decisively important for the viability of genuine competition."
National Bank Financial analyst Adam Shine wrote in a report Tuesday, the "incumbents have to be generally pleased with this outcome."
"While some may argue that today's decisions will add incremental pressure for Bell, Rogers and Telus, there was no big bone thrown to the new entrants, who at best appear to have received perhaps a few extra crumbs," he said.
Many also argued the commission did not go as far as it might have because it ruled against making access to the incumbents' networks mandatory for companies that do not have wireless networks of their own (known as mobile virtual network operators or MVNOs).
The Canadian Network Operators Consortium called the decision a "missed opportunity," arguing it "will not invite new mobile wireless operators to the market, thereby perpetuating a status quo of high prices, limited levels of choice and no additional innovation when it comes to mobile wireless services, providers and plans."
The CRTC acknowledged the important role MVNOs can play in creating competition but ultimately ruled in favour of continuing an approach that supports players who invest in their own infrastructure.
Mr. Blais said the commission was "cognizant that we have a number of players that have, or are continuing to, or are planning to put in extremely important facilities-based investments and we want to support the development of that, particularly outside core urban areas where we could have put that at risk by mandating MVNOs more widely."