Welcome to Plan C of how to make the wireless telecom sector more competitive.
Plan A was to let the free market figure it out itself. After 15 years under Canada's not-so-free foreign-ownership restrictions, the result was a market dominated by three Canadian players and characterized by high prices, rigid contracts and unsatisfied customers. Plan B was to let new competitors enter the market by way of a reserved spectrum auction five years ago. That led to the creation of a spate of marginal, financially imperilled wireless providers and many still-unhappy consumers, under partially relaxed foreign ownership rules.
So now it's on to Plan C. Since the carrot approach of a freer market didn't work to placate consumers, and since the industry remains largely dominated by the troika of incumbents, it's up to the Canadian Radio-television and Telecommunications Commission to save the day with the stick approach: a new wireless code.
The telecom regulator's code unveiled Monday after public consultations over the past year, is a win for consumers, but not outright, and not overnight.The code does effectively address many of their frustrations: It ends the dreaded three-year contract (making two years the maximum, as is the case in other countries).
It caps roaming and international usage fees and makes it easier for customers to switch between carriers. Plain language, transparency and clarity are now requirements of contracts and other communications from companies to consumers.
But the code doesn't necessarily mean wireless phone service is about to get less expensive any time soon. If anything, costs may rise before they go down, while many of the benefits won't be felt by consumers for two years (the code only goes into effect in six months, and only applies to pre-existing contracts 18 months later).
The key element for consumers is flexibility. Customers get a 15-day grace period to exit a new contract, can unlock their phones with greater ease (if not at reduced cost) and are no longer locked in to overly lengthy contracts. That introduces an element of flexibility and mobility into the mobile phone market, and makes it more plausible that new entrants will be able to win a greater share of the incumbents' customers. Combined with the upfront disclosure of many fees that were largely hidden, the sector should ultimately become more price-conscious and price-competitive.
While consumers complained about three-year contracts, the fact is the cost of those apparently cheap or even free phones they received with their plans was slowly worked off over the course of their terms. Now, with shorter terms, many Canadians can expect their monthly costs to rise. Handset costs, data fees or surcharges might go up in response; consumers will have only themselves to blame.
But over all, consumers should be satisfied, and telecom companies, who knew the code would cost them millions of dollars in new costs, should be relieved. CRTC head Jean-Pierre Blais has shrewdly struck a balance that both sides can live with.
As for the federal government, it is largely a spectator to its telecom regulator's work after watching its attempts to create a fourth wireless player across Canada largely fizzle out. (Although Industry Minister Christian Paradis is not willing to give up the fight just yet, with an announcement expected Tuesday morning.)
One has to wonder if the government's dwindling free-market exponents aren't feeling deflated by the need for Ottawa to finally get action by donning the nanny-state apron. Within three years, the CRTC will be back to review the wireless code and determine if more action is needed. Unless and until the government finally has the courage to eliminate the telecom sector's foreign-ownership restrictions, this hands-on regulatory approach looks to be the best of the next-best set of options.
Sean Silcoff