The prospect of Verizon moving into the Canadian wireless market has resulted in an unprecedented ad campaign from the Canadian Wireless Telecommunications Association (CWTA). Not since the days of the proposed “cable tax” that would have required cable, satellite and other video distributors to pay broadcasters for their signals, has there been a public policy ad battle like this one in the InfoComm industry .
With the cable tax, both the broadcasters and the video distributors took their case to the public with long and expensive radio and television ad campaigns. This time, the CWTA is trying to change the government’s mind on the shape of the wireless market. They do not want Verizon as a competitor and they are pulling out all the stops to prevent that from happening.
In 2008, Industry Canada granted spectrum licences to new entrants Mobilicity, Wind, and Public Mobile as well as cable companies Shaw and Eastlink. Prices at Bell, Rogers and Telus dropped substantially and very quickly demonstrated the impact of competition yet again. However, Shaw never launched and Eastlink only launched last year. Mobilicity, Wind and Public Mobile have all had difficulty getting market share, competing mostly for the independent customer market. Concurrently, foreign ownership prohibitions have been relaxed for the smaller market players. Still, they have all been struggling. The prospect of Verizon coming into Canada to pick up and consolidate these companies and operate them under its own brand has the big three running a huge lobbying effort to stop it.
Industry Canada has repeated its objective to have four competitors available to consumers in most parts of Canada. If Verizon is allowed in then the big three will all of a sudden be the little three in relation to the US giant. This may trigger the often rumoured merger of Bell and Telus, especially since they already share the same physical network in much of the country. What happens to the policy of four competitors if this happens? As I have pointed out in earlier blogs, the government’s policy development in this area has been patchy. Why would they have thought that licensing three new entrants and two cable companies would result in any of them winning enough market share to succeed in a market already dominated by the big three?
It looks like the government has been making it up as it goes along, reacting to developments instead of leading with a clear, consistent and successful policy and regulatory environment. Because spectrum is limited and there has to be some kind of allocation method the government is going to be heavily involved in any case. Ditto for the vast body of interconnection rules that makes it all work. But the big three do have something to complain about over shifting rules and regulations.
Nevertheless, maintaining the level of competition that forced the big three to drop prices in 2008 is important for the Canadian wireless market. Because of spillover advertising Verizon is a well known brand in Canada. I would prefer to see a European or Asian competitor enter the Canadian market directly because they have been the source of much of the creativity in the industry, not the offshoots of US incuments.
Although the US implemented landline telecommunications much better than the Europeans in the last century, the tables have been turned. European and Asian wireless companies have leapfrogged the stodgy old government departments that ran their phone companies and been much more creative. As a result, Vodaphone owns a large chunk of Verizon, the Japanese have just bought Sprint and the Germans own T-Mobile.
What makes us think that Verizon will act as a nimble and creative competitor in Canada when it is an incumbent in its home market? Nevertheless, this looks like the best bet to maintain strong competition in the Canadian wireless sector, a result that will benefit consumers across the country.
N.B. The author consults for Ice Wireless, a competitive wireless carrier in the northern territories.