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Wind Mobile executive pushes Ottawa to increase telecom competition

WInd Mobile's newly appointed CEO Alek Krstajic is pictured at the Telecom Company's Toronto offices on Monday March 23 2015.

Chris Young/The Globe and Mail

The chief executive officer of Wind Mobile urged Ottawa to keep taking steps to "level the playing field" as it fights to steal market share from the Big Three incumbent players.

In his first public speech since taking the helm at the Toronto-based wireless carrier in March, Alek Krstajic argued that competitive pressure will help "keep everyone honest," saying he's determined to offer lower prices than BCE Inc., Rogers Communications Inc. and Telus Corp.

"I know I can do that, but it will not and cannot be done in an unsustainable way or an extremely disruptive way," he added, arguing that Mobilicity, which is under creditor protection, launched with a misguided strategy of pricing its products at too low a level for long-term success.

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At a speech at a Toronto telecom conference Tuesday, Mr. Krstajic chided the dominant three wireless providers for launching a public relations campaign against the federal government in the summer of 2013, when they feared spectrum-auction rules favouring new entrants could pave the way for the entry of foreign giant Verizon Communications Inc.

"Our industry rides on assets given to us by the regulator. We forget that and it's at our own peril," Mr. Krstajic said, noting the "attack on the government may have scared off American suitors," but Ottawa stuck to its approach.

The government has since held three auctions for the airwaves used to carry cellular signals and reserved spectrum for small players in two of them. The Canadian Radio-television and Telecommunications Commission ruled last month it would depart from its hands-off policy on wireless prices and regulate the wholesale rates the Big Three charge smaller competitors when their customers roam on the large national networks.

"At the end of the day, [the incumbents] have to feed the beast that is this 49-per-cent [profit] margin and so it's very difficult for them to drop prices and sometimes do what a new entrant would do," Mr. Krstajic said, after noting the incumbents often announce similar price changes and product launches at roughly the same time as each other.

Meanwhile, during an earlier panel discussion of regulatory issues, the focus was largely on the Internet and policies that have been designed to promote alternatives to the cable and telephone companies that historically dominated local markets.

Like Wind Mobile, small Internet providers argued that Ottawa – through Industry Canada and the CRTC – has taken the right approach to regulation and needs to continue down that path to promote choice for consumers.

"Consumers want multiple players so that one or two companies can't hold the consumer hostage," said Bram Abramson, chief legal and regulatory officer at TekSavvy Solutions Inc., the Chatham, Ont.-based Internet service provider (ISP).

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To encourage competition in the Internet market, the CRTC has put in place a regime of mandated wholesale access by independent ISPs such as TekSavvy to parts of the networks owned by the incumbent cable and telephone companies.

At a hearing last fall, the commission heard submissions on whether it should extend that mandatory access to the next generation of high-speed and fibre-based services. A ruling should come within the next couple of months.

On top of the issue of getting access in the first place, Mr. Abramson argued that the mandated rates that have been set are too high and prevent TekSavvy from offering the highest speeds possible, because the rates of return on those products are prohibitively low.

Executives from Rogers, BCE and Telus countered that the CRTC has to ensure the players who build their own networks from end to end continue to have an incentive to invest.

"I think what Bram is really getting at here is that his company buys capacity from our various companies and he doesn't like the price," Telus senior vice-president of regulatory affairs Ted Woodhead said, arguing that the retail market is actually competitive and that is why TekSavvy's margins are low.

"Resale models are not sustainable, they are not durable and we will be here every year until I retire having the same discussion," Mr. Woodhead said.

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"It's the right structure, it's the wrong number," Mr. Abramson later said of the wholesale-pricing regime.

BCE chief legal and regulatory officer Mirko Bibic argued regulatory decisions can affect the "pace and breadth of deployment" even though the company will continue to invest. (BCE owns 15 per cent of The Globe and Mail.)

As an example, he pointed to the CRTC's January ruling barring the simultaneous substitution of Canadian signals and ads for U.S. feeds during the Super Bowl, an event for which Bell Media holds the rights.

"Of course that's going to affect the profitability and financial health of some of the local stations that we have, that depend on Super Bowl revenue," Mr. Bibic said, noting that while the company would not shut down local networks, it would think twice before investing in items such as new HD cameras.

"It's about those investments that make the product better, that make the content on screen better," he said. "That's how these decisions affect investment."

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