Think a 4th national wireless carrier will lower prices? Think again, MEI says

Consumers were on the losing end of a gamble by the former Conservative government when it sought to create more competition in the wireless market by interfering in it, says a new report released Thursday.
Ottawa's obsession with creating a 4th national wireless carrier won't have the impact that consumers hope, the Montreal Economic Institute says. (Carlos Barria/Reuters)

Consumers were on the losing end of a gamble by the former Conservative government when it sought to create more competition in the wireless market by interfering in it, says a new report released Thursday.

And researchers at the Montreal Economic Institute say the country's telecom regulator can learn from that failed policy by backing away from calls to interfere in the broadband Internet marketplace.

The report, titled The State of Competition in Canada's Telecommunications Industry, says the sell-off of broadband spectrum last year that resulted in the takeover of Wind Mobile by Shaw Communications created "phoney" competition and will likely result in higher — not lower — wireless prices.

The Tories under former prime minister Stephen Harper touted the wireless spectrum sale as a way to create a viable fourth national wireless carrier.

That, they said, would create more competition and cut consumers a break on their cellphone bills.

It was a populist move that fed off a perceived sentiment of consumer outrage over some of the highest cell phone rates in the industrialized world.

Shaw deal for Wind

But the study authors say the creation of that fourth player through Shaw's $1.6 billion takeover of Wind last December means the company will have to invest hundreds of millions of dollars in equipment upgrades, with an expected increase in Wind mobile rates to pay for it.

"By insisting on the benefits of a fourth wireless player, the previous federal government went against a worldwide trend of consolidation in the wireless sector and embraced a static view of competition," said the report.

"Can we have a sensible policy of not encouraging phoney competition but encouraging real competition?" asked study co-author Martin Masse, who sees the sale this week of Manitoba's MTS to BCE as a prime example of how true market-driven competition should work.

Despite that province's loss of a major wireless service provider — and analysts who predict higher smart phone rates as a result — Masse said Manitobans may actually benefit from better service and stable, if not lower, pricing.

Masse notes that Bell and Telus are still small players in the province, which has been dominated by MTS and Rogers and already enjoys the lowest prices for wireless plans that include one gigabyte of data. BCE's takeover of MTS will result in three major service providers instead of two large and two small players.

"I think that will increase competition there," Masse said.

Canadian prices higher than EU but lower than US, Japan

The report notes that Canadians are among the highest users of tablets and smartphones in the industrialized world and enjoy some of the most advanced wireless networks.

It adds the prices they pay for wireless services remain higher than in most European countries but lower than in the United States or Japan. But the report emphasizes that European countries have not kept up with investments needed to improve wireless services.

So far, the federal Liberal government has been hesitant to say anything regarding its broadband policy, other than to pledge investments to get telecom infrastructure built in places that currently don't have access to high-speed Internet.

Innovation Minister Navdeep Bains said this week he'll soon roll out a plan as part of the government's innovation agenda.

"We committed up to $500 million for broadband connectivity to rural and remote regions," Bains told The Canadian Press.

"This is direct fibre connectivity when it comes to broadband with particular institutions like hospitals and schools."

Broadband internet

During public hearings last month on the future of broadband, the chairman of the Canadian Radio-television and Telecommunications Commission expressed disappointment that Internet access and affordability received little attention in last fall's federal election campaign.

Jean-Pierre Blais also noted that broadband funding announced in the March budget didn't "appear to be tied to a clear policy on broadband and its deployment in Canada."

In a speech, Blais called on the government and the telecom industry to develop a "national broadband strategy."

But the MEI researchers note that 96 per cent of Canadian households already have access to download speeds of 5 Mbps in 2014 and over three quarters subscribe to providers offering even faster service.

"In this context, it is superfluous for the CRTC to try to duplicate what market players are already doing by imposing new regulations and taxing telecom company revenues to fund more broadband infrastructure rollout," said Masse.

"Soon, all Canadians will be able to connect to the Internet at very high speeds," said co-author Paul Beaudry. "And this is not because of any comprehensive national strategy devised by civil servants in Ottawa; it is because of competitive pressure on companies that need to adapt to consumer demand and attract more customers by offering faster broadband services at affordable prices."


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