ROW Editorial

Don’t be fooled by speculation or rumour that the federal government is going to endorse or encourage the creation of a new fourth national wireless operator. Setting aside spectrum in an auction that is at least two to three years away, implementing mandated tower-sharing, eliminating foreign ownership restrictions, even phasing in wireless number portability will do very little to increase competitive rivalry in the country. They will help, but consider this: a set-aside of spectrum is perhaps one of the more effective ways of stimulating competition in the wireless sector, but waiting two years to participate in an auction will only give the incumbent cellcos time to increase their share of the market, perhaps to as much as 65%. Industry Canada has also resisted setting aside spectrum in the past. This doesn’t mean it won’t happen, but a set-aside would go against the grain for the department. In addition, the cost of this spectrum will be astronomical in Canadian terms. While it will likely be nowhere near the US$9 billion some 3G licences in the United Kingdom fetched a number of years ago, it will still be cost-prohibitive for all but the most well-financed and deep-pocketed to enter such an auction. We will have a much better idea on how much this spectrum will be worth after the US Federal Communications Commission conducts its 3G spectrum auction, scheduled to take place this summer. Mandated tower-sharing is a good idea, but it’s too late. Microcell called for this a number of years ago and it would have helped lessen the costs of the company building out its network – money it could have used for marketing, promotions and other customer acquisition activities.Removing foreign ownership limits might represent the best opportunity for improving competitive rivalry, but without a set-aside of spectrum this foreign competitor would likely want to scoop up an existing player rather than spend the time and money to create a new one.Wireless number portability (WNP) will create some competitive rivalry, but as the experience in the United States showed us, WNP didn’t wreak havoc as some had said it would. Canada once had a fourth national wireless carrier that pushed the envelope in terms of pricing and promotions, helping to spur mass-market acceptance of the cell phone and other mobility services. But the government allowed it to be swallowed up. The elimination of Fido about 18 months ago only gave the heads of the three remain wireless carriers the green light to pursue "profitable growth" and "rational pricing," something that has done very little to jump-start wireless penetration growth in the country.There has to be something wrong with the wireless industry in Canada when the three national carriers can simply change the evening start clock at least three times without any significant jump in churn. Since when does an evening start at 9:00 p.m., anyway? When optional service pricing starts to creep up churn should increase as well, but the industry hasn’t seen that happen.Sure, wireless devices are now being used by more than 17 million Canadians and penetration is in the low-50% range, but the mobile phone should be playing a much larger role than it is in the telephony habits of Canadians. Policy makers have spent the last couple of years trying to figure out how to increase the competitive rivalry in the country. One way to look at it is "profitable growth" and "rational pricing" have to be replaced by "accelerated growth" and "aggressive pricing." It was those same policy makers, however, that created the current environment, and now consumers have to live with it. The opinions expressed in this editorial are those of the author and do not necessarily reflect those of Decima Reports.

ROW Editorial

News | March 9, 2006

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