Last week telecommunications firm Wind Mobile dropped out of a spectrum auction after VimpelCom Ltd., its Dutch parent company, withdrew financial support for the bid.
This seemingly innocuous business decision is getting lots of airplay in the Canadian media, as some see the dropout as a sign of the failure of the Canadian government’s promise to increase competition in the country’s mobile phone and wireless sector.
The Conservatives have made consumer protection a key pillar in their economic platform going forward, and Canada’s wireless sector is a prime target.
“The situation you have here is pretty bad for consumers,” said Ben Klass, a master’s student in the political studies department at the University of Manitoba and commentator on the Canadian telecoms industry.
“The government knows there is a problem, and they are putting forward policies that are going to get them votes. They are concerned about getting re-elected, so they have a serious interest in making it work [ . . . ] and in bringing more competition to the cell phone market.”
Canada’s telecommunications sector has long been criticized as being an oligopoly—a market of limited competition shared only by a small number of vendors—with a lack of competition resulting in high prices and poor service.
The government has been eager to show that it is championing the interests of consumers, and recently launched an advertising campaign aimed at promoting its efforts at increasing competition in the wireless sector.
“Money spent on advertising could probably be better spent elsewhere. But it’s a signal. The fact that they’re being loud on this has turned it into a bit of a political issue now,” said Klass.
Last year, American telecoms giant Verizon scrapped a plan to enter the Canadian market, and mobile start-up Mobilicity filed for creditor protection.
“Verizon decided not to come to Canada; it saw that there were three large companies that were dug in. A reasonable person might conclude that [Verizon] thought, ‘It’s not worth the trouble, we’ve got some really angry dogs here in Canada and we’ve got other fish to fry,’” said Klass.
With Wind backing out of the bid, the push for more competition in the sector has been dealt a blow. Klass pointed out that there still are other players besides the big three (Rogers, Telus, and Bell) and this recent news does not signal a breakdown of the government’s agenda.
“Wind backed out of this bid, yes, but they could acquire the spectrum they need to compete if they buy Mobilicity. And if Wind doesn’t acquire Mobilicity, what’s to prevent Videotron or Eastlink from doing so and expanding?” said Klass.
Last year the federal government intervened in the market to block the sale of Allstream to an Egypt-based company, citing national security concerns.
Klass noted that Allstream is not a consumer wireless company, and handles a sensitive network used by businesses and the Canadian government.
“It’s important to remember that that decision was taken right around the time all these revelations about spying were going on, so that probably factored into their decision. Allstream doesn’t provide the kinds of services that the government is targeting with their focus on consumers.”
The Canadian wireless sector has long had stringent rules on foreign investment. These protections were set up to foster the growth of strong Canadian telecoms firms, and to ensure the vast and varied regions of Canada received quality service.
“Other countries have foreign firms operating in their markets and have seen their firms expand operations into other countries as well. This is something that is unusual in that the Canadian companies are national companies,” said Klass.
Klass is hopeful that the Canadian Radio-television Telecommunications Commission (CRTC)—the government body that oversees the industry—is starting to take notice of the problems in the sector.
“The CRTC is starting to be more active on consumer protection. For a long time they were asleep at the switch, but they have woken up.”
Klass will host an event on Jan. 25 at the University of Manitoba, sponsored by OpenMedia, to discuss Canada’s telecommunications and media markets.