Analysts divided on competitive nature of Canada’s wireless market

In Part II of Report on Wireless’ examination of Canada’s wireless market, Leonard Eichel explores the state of competition in the Canadian wireless market and the possibility of conducting an industry-wide review. The Telecommunications Policy Review Panel report suggests that competition could be at a lower level in Canada because of the makeup of the market. "The smaller number of mobile providers in Canada – and the fact that all three national wireless service providers are also owned by large telecommunications service providers that also provide wireline services – may mean that there is less competition in the Canadian wireless market than in the US market, which consequently has resulted in higher prices, less innovation, lower uptake and lower rates of usage," reads the report. It concludes that Canada should endeavour to develop a more efficient and vibrant wireless industry. Johanne Lemay, co-president of Lemay-Yates Associates, doesn’t go quite so far in her assessment though. "Canada’s wireless market is a competitive market, but only to a point. It’s an oligopoly and there are pros and cons with such a market," she says. "There is a managed evolution of the market and you no longer have the pesky competitor of Fido putting downward pressure on prices. However, you also have less competitive rivalry than a fully competitive market, a more subdued competition than otherwise," she says. Wall Communications’ report on the TPRP’s recommendations strenuously objects to the report’s conclusion. "Overall, the TPRP report mischaracterizes the relative position of Canada to other OECD countries including the US," it reads. "We believe that given the limited and selective data which was examined by the TPRP, it is premature to conclude that there is ‘a need to develop a more efficient and vibrant wireless industry in Canada’, as proclaimed by the TPRP." Despite the reduction from four to three competitors, Wall Communications concludes that "Canadian consumers still enjoy a healthy and growing number of alternatives, both in suppliers (at retail) and in mobile services and features." Further, the consulting firm concludes that wireless pricing in Canada compares favourably with the US and other OECD countries and that the loss of Fido as an independent company has been offset by the introduction of several new mobile virtual network operators (MVNOs). Lawrence Surtees, VP of communications research at IDC Canada, agrees. "In addition to three players – and three is better than two – there’s actually the emergence of another class of player, that is not a spectrum owner, in the MVNO. I think we’re going to see more of this, more rivalry through partnerships with MVNOs and content producers that may stimulate pricing changes." Industry Canada, despite its status as spectrum supplier, is watching intently from the sidelines. "We are aware of the debate and we are taking all points of view into account. By and large, we feel we have three fairly successful competitors nationwide," says Pat Carey, a senior policy advisor at the department. Does Canada need to review the wireless industry?New Zealand has recently announced that it will conduct a review of its wireless industry in light of low penetration rates and high prices for its wireless services when compared to other OECD countries. Asked whether a review of the industry would be necessary in light of Canada’s apparent lag in take-up rates and the concerns expressed about wireless pricing, Surtees is adamant. "No, not at all, it would be a waste of time. The market is what it is. People are obsessed about the cup being half-empty, while I’m looking at the cup being half-full, and the fact that wireless is now the largest segment of the Canadian telecom industry, worth more than $10 billion at the end of 2005. Over the next two years, you will see phenomenal growth in the sector," he concludes. Industry Canada indicated that it doesn’t feel review is necessary at this time. "We’re not planning any," says Carey.Lemay agrees, stating that she is "not sure we need to do the same as New Zealand. It’s the only country without a regulator and has some of the highest prices as well. Industry Canada needs to issue its consultation on new spectrum and award new spectrum as soon as possible" as a way of stimulating discussion about the state of the wireless industry. However, she does see an expanded role for the commission: "The CRTC needs to improve its understanding of the wireless market. Just because you forbear, doesn’t mean that you shouldn’t monitor it. Wireless is the largest telecommunications segment and the fastest-growing as well and it is crucial that you have a good understanding of it." Iain Grant from the SeaBoard Group has the same issue with the commission. "The CRTC has chosen to forbear, so they don’t pay attention to the wireless market. It is one of the reasons that Industry Canada is looking at letting in more entrants. They are expected to introduce new rules for spectrum in the fall that may address new entrants in the mobile side." While no official review is planned, Industry Canada also indicated that there will be a lot of activity in the coming year regarding spectrum. "We announced a policy statement in March this year concerning the 2500 MHz band. The MDS licensees in this band could convert to mobile," he said (RoW, April 6/06)"This fall", Carey continues, "we will be issuing a consultation paper on advanced wireless services in 1710 MHz band, paired with the 2110 MHz band, the main 3G band (RoW, July 27/06). With respect to set asides, we always have questions related to competition, such as set asides and a spectrum cap, so all that is yet to be determined." So, Canada’s wireless industry may be competitive, but it’s not as competitive as other markets such as the United States or even Australia. It is also irrefutable that our wireless penetration rate lags almost every other member of the OECD. Canada is a difficult market to ascertain whether our wireless prices are too high or are comparable, but they certainly are not too low and that may be affecting our take-up rate. There is no question that the commission should pay more attention to the wireless market in Canada and, in particular, monitor pricing trends on a consistent basis. Leaving such analysis to one side or the other of the debate is not necessarily advancing our understanding of pricing trends nor is partisan information useful for policy purposes. Industry Canada should be thinking of all the options when releasing new spectrum for mobile services, whether it be for a fourth spectrum-based provider, or awarding more spectrum to existing players so they can attract more MVNOs to their networks. Canadian consumers need, and deserve, as many choices as possible.

Analysts divided on competitive nature of Canada’s wireless market

News | November 17, 2006

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