Canada's telecom regulator says it is trying to strike the right balance in a ruling it hopes will support sustainable competition in the wireless industry without discouraging the country's three dominant carriers from investing in improvements to their networks.
The Canadian Radio-television and Telecommunications Commission (CRTC) ruled Tuesday that it will regulate how much Rogers Communications Inc., Telus Corp. and BCE Inc.'s Bell Mobility charge for wholesale roaming – the rates cellphone carriers charge other companies when their customers roam on each other's networks.
However, the commission will not impose any restrictions on the wholesale prices charged by regional players like MTS Inc. and SaskTel, or new entrants such as Quebecor Inc.'s Videotron Ltd. and Wind Mobile Corp.
The decision is a move some consumer advocates say is long overdue and comes after the commission found the Big Three have market power in the wholesale roaming market and use that to hold back competition by charging high rates and including restrictive conditions in wholesale roaming agreements with smaller carriers.
This is a significant finding for the CRTC, which has relied on market forces for the wireless industry and refrained from setting rates since the mid-1990s.
Yet, some say it does not go far enough, as the CRTC said it would not mandate access to the networks of existing cellular providers by companies that do not operate their own wireless networks, which will come as a relief to the Big Three.
"Today's decision is about finding the right balance," CRTC chairman Jean-Pierre Blais told reporters in Gatineau, Que., after the ruling. "We want sustainable competition that increases choice for Canadians. But we also need to make sure that wireless companies continue to invest in innovative and high-quality networks."
Wholesale prices don't dictate directly what customers pay at the retail level, but Mr. Blais said that once the commission finalizes the rates Bell, Telus and Rogers can charge – which will be based on their costs, plus a markup – he expects there will be "downward pressure on wholesale rates."
"The [new] entrants will then have a choice to make: Do they want to reduce their retail rates to their customers or do they want to continue to build out their own networks going forward or a mixture of both of those?" Mr. Blais said.
"We took down roaming rates very dramatically with the last change in roaming rates, and Wind's intention is going to be to continue to pass on savings to customers," said Wind Mobile chief executive officer Alek Krstajic, adding that he welcomed the decision as another move in the right direction for competition.
Wind, and other smaller carriers, reduced their retail roaming rates last year after the federal government legislated interim caps on the rates in June, limiting them to no more than what they charge at the retail level. The move was part of the Conservative government's seven-year push to boost competition in the $21-billion industry, where the Big Three together still control more than 90 per cent of both subscribers and revenues at the retail level.
And in July, the CRTC issued a ruling banning exclusivity clauses in roaming agreements.
The commission said those two factors have helped, but smaller carriers "still encounter difficulties in obtaining access to wholesale mobile wireless services at reasonable rates, terms, and conditions from other wireless carriers, in particular the national wireless carriers."
The CRTC is now recommending the government repeal the legislated caps, which would leave interim rates in place for Rogers, Bell and Telus, but take the restrictions off other players. Industry Minister James Moore said Tuesday the decision "will create greater competition in the wireless sector and that is why our government has continuously advocated for these changes."
Regional operators in particular complained that the caps reduced their bargaining power by allowing the Big Three access to their rural networks at fixed rates. MTS chief corporate officer Paul Beauregard said the company is still reviewing the full ruling but added, "We are pleased that the CRTC has recognized the important role" that MTS plays in offering wireless choice in Manitoba.
"After years of debate over what most Canadians already know about the state of competition in the wireless market, this is a long-overdue recognition that competition … is lacking," said Jean-François Léger, counsel to the Public Interest Advocacy Centre, who called the ruling a "positive step forward."
The CRTC has asked Rogers, Bell and Telus to file information on what their actual costs are for providing voice, texting and data services by Nov. 4. At that time, the commission will conduct a further analysis and set the final rates based on costs, plus a markup of some sort. It could also decide at that point to make the final rates retroactive to the date of Tuesday's decision.
The interim rates will be no more than the highest rate Bell, Telus or Rogers are currently charging for wholesale roaming services.
The conditions the CRTC is putting in place with this ruling will remain in effect for five years, which is less than some new entrants were hoping for but is intended to give investors more confidence.
A spokesman for BCE said the company would comply with the ruling while representatives for Rogers and Telus said the companies were still reviewing it. (BCE owns 15 per cent of The Globe and Mail.)
Quebec's Videotron has said this ruling will be crucial in determining whether to expand its wireless business outside of its home province, but the fact that it must still wait to see what the final rates are could delay any decision on its part. The company declined to comment Tuesday.
In a win for the Big Three, the CRTC said it would not make it mandatory for wireless providers to sell access to their networks to companies that do not build their own wireless infrastructure, which are referred to as mobile virtual network operators (MVNOS).
Cogeco Cable Inc., plus the Canadian Network Operators Consortium (CNOC) as well as several consumer advocates had urged the commission to mandate MVNO access to help increase competition and bring new players into the wireless market.
The Big Three had warned that such mandated access would reduce the incentive to innovate and invest in their networks.
CNOC called Tuesday's decision a "missed opportunity."
As it stands, companies wishing to operate as MVNOs are permitted to do so, but must negotiate access on commercial terms. Google Inc. recently launched an MVNO business in the United States after negotiating network coverage from Sprint Corp. and T-Mobile U.S. Inc.
The CRTC did rule Tuesday that an MVNO that negotiates access with one carrier – Wind, for example – can also take advantage of any roaming agreements that carrier has in place with other operators to extend the service it can offer to customers.
The commission also ruled that it is not mandatory for the carriers to provide wholesale roaming on a seamless basis – meaning there would be fewer dropped calls when users are travelling between coverage areas – which the national players said is complex and expensive.