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While wholesale roaming is only a small part of the revenue picture for Rogers, Bell and Telus, the costs are significant to small carriers and will be a factor in whether they can offer certain types of plans.Li Zhongfei/Getty Images/iStockphoto

Canada's telecom regulator has taken the next step toward setting final wholesale roaming rates for wireless carriers – a complicated process to be sure, but one with significant implications for the competitive structure of the industry.

The Canadian Radio-television and Telecommunications Commission last week approved interim "tariffs" submitted by the Big Three telecom companies – Rogers Communications Inc., Telus Corp. and BCE Inc. – for the wholesale rates the trio can charge competitors for voice, data and text messages when their customers roam outside their home coverage area. The CRTC is expected to set final rates in mid-2016.

The interim rates include a 40-per-cent markup over the carriers' estimated costs, but are still 40- to 60-per-cent lower than what the Big Three had been charging in previous periods, according to Maher Yaghi, an analyst with Desjardins Securities Inc. Yet he does not believe they are so low that they pose a significant threat to the incumbents' business models.

"The fear was that if the CRTC used a scorched-earth method, wireless new entrants could have used this opening to launch national wireless operations," Mr. Yaghi wrote in a report Tuesday. "At this point, this does not seem to be a reasonable outcome, as under the … costing methodology that the CRTC requested incumbents to use, the cost estimation and the associated markup still make the final pricing uneconomical for a new entrant to be a price aggressor."

The federal government's wireless policy since 2008 – when it first reserved cellular airwaves in an auction for new players – has been intended to spur competition in the sector, and there has been much discussion of whether a fourth truly national carrier would emerge.

The previous Conservative government shifted its messaging slightly over time to argue that its goal was to have at least four players in all parts of the country.

Seven years later, that is largely what has unfolded, with established regional telecom players operating wireless businesses in Manitoba, Saskatchewan, Quebec and parts of Atlantic Canada and Wind Mobile Corp. offering stand-alone wireless services in Ontario, British Columbia and Alberta.

Quebecor Inc.'s Vidéotron Ltd. also holds licences to operate a network outside its home province, leading to speculation that it could roll out across Canada. The company said in September that it does not plan to build a network "from scratch in the rest of Canada" and is instead considering a sale of its licences or some sort of partnership with Wind.

Outside Quebec – where it sells cable television, Internet and home phone lines – Quebecor loses the advantage of being able to offer a "bundle" of telecom products, making it harder to compete, Mr. Yaghi said, noting that "the additional risk of rolling out nationally would require a significant financial return."

"We do not expect the [CRTC] costing approach to result in low enough roaming rates to make the commercialization decision outside Quebec straightforward," he said, concluding that he expects the final roaming rates set by the CRTC to be "manageable" for the Big Three.

Manageable for the incumbents or not, the rates are vitally important to smaller players and will still shape competition within regional markets. The fact that the CRTC decided in its May ruling to set rates in this market was a landmark outcome after years of complaints from the new entrants that they were unable to negotiate affordable roaming agreements.

While wholesale roaming is only a small part of the revenue picture for the Big Three, the costs are significant to small carriers and will be a factor in whether they can offer certain types of plans, such as unlimited Canada-wide calling or data roaming.

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