Incumbents become ‘political punching bags’ as Tories appeal to public opinion

Incumbent wireless carriers may be forgiven if they can’t wait for this week to be over. For two days, on Monday and Tuesday, the CRTC and the Conservative government struck at the country’s three largest wireless players in the arena of public opinion, releasing two unfriendly policy decisions and playing into a public perception that wireless services are too expensive in this country due to a lack of competition. “They’ve made the industry a bit of a political punching bag,” Nik Nanos, president and CEO of public opinion firm Nanos Research, said in a phone interview. “In most instances, industries are not used to this type of approach in terms of their relations with the federal government." Nanos said incumbents Telus Corp., BCE Inc. and Rogers Communications Inc. have fallen behind public opinion as more Canadian consumers believe they pay more for wireless services than in other countries. He said the Conservatives, who have tried to frame themselves as a pro-consumer party, are latching onto that sentiment to appeal to voters. On Monday, it was the CRTC releasing a new code of conduct for how wireless carriers issue contracts with their customers. That code, which the incumbents had asked for to ease the cost of dealing with a patchwork of provincial laws, banned the lucrative three-year contracts that the big players have long used to try to keep customers from switching providers. It also limited how much they could charge in monthly overage fees for roaming or data. The Conservative government said Monday it supported the CRTC's decision and Treasury Board President Tony Clement told reporters on Parliament Hill that code will give consumers more choice. A day later, Industry Minister Christian Paradis announced that he would block the incumbents’ efforts to obtain wireless spectrum licences that had been set aside, for five years, for new entrant players in a 2008 auction, and that the government would not allow any wireless provider to accumulate an “undue spectrum concentration." Paradis added that he would use “any and every tool” at his disposal “to support greater competition in the market.” Later Tuesday, the governing Conservative party launched an online campaign that said it was “Standing up for Wireless Consumers” by preventing the incumbents from gaining a stranglehold of the mobile wireless market. “We will not allow the big telecommunications companies to shut down competition by buying up undue amounts of wireless spectrum—the highway over which cellphone and wireless data signals travel,” the Conservative party said in a note to its to mailing list. “We know Canadians are relying on their wireless devices now more than ever—that’s why we’re putting Canadian consumers first and making sure there is more competition in the market," the note said. As part of his announcement, Paradis said he will block Telus’ proposed acquisition of new entrant carrier Dave Wireless Inc., which is now facing potential bankruptcy if it cannot find another suitor or partner. The minister said that the timing of the announcement is linked to an approaching deadline for carriers to apply to take part in the upcoming 700 MHz spectrum auction. That deadline, which was previously June 11 but has now been pushed to Sept. 17, is also the de facto deadline for consolidation among industry players registered for the auction, because the rules say bidders can't consolidate or engage in merger talks after that point. Nanos said it’s likely that the government hoped to distract the public from a scandal over Conservative senators' expenses, and questions about involvement from the Prime Minister's Office, by playing into public sentiment about the big wireless players' and a lack of competition. “In a way, industry’s become a victim of the federal government trying to score political points,” Nanos said. “You should expect the government to be desperate to try to change the channel. That usually involves attacking other organizations … This has more to do with politics than public policy.” David Coletto, CEO of market research firm Abacus Data, said the incumbents are “easy targets” due to their size and household names as providers of other services such as TV and Internet. He said the government, in this case, opted to side with the average consumer instead of big corporations that “Canadians like to hate.” According to 2011 data released last year in the CRTC’s Communications Monitoring Report, Bell, Telus and Rogers had a combined 93 per cent market share of the $19.1 billion wireless industry. Coletto said that since the Tory government prohibited companies from making donations to political parties in 2003, it’s been harder for the private sector to influence policy decisions. The majority of Canada’s voters now own a mobile phone, he added, which diminishes the carriers’ political clout even further. “In the minds of policy makers, that’s the consideration. You’ve got three incumbents versus 30 million consumers,” he said. Mike Colledge, president of Canadian public affairs at Ipsos Reid, said despite the bad publicity, the incumbents can weather the storm of public opinion. The real problem for them, he said, is from a legislative or policy standpoint if public opinion slows down and negates favourable decisions. He said the incumbents’ efforts to acquire more spectrum may be counter-productive. “It may put hurdles in front of them, where they have to prove that, ‘This is how we’re going to use the resource, we’re not going to take advantage of having more resources and we will have competition,’” he said. Nanos and Coletto said the incumbents should go on a public relations offensive to help tilt Canadians’ opinions in their favour. “They can’t roll over and just accept what the government is saying,” Nanos said. “They have to continue to drive home the value that they give to consumers, and how they benefit from the products and services that they provide.” He said the big wireless providers should “play a long-term game” and realize that the government's tone “might soften a little bit as the political environment changes.” Coletto said the incumbents should rely on “good old-fashioned marketing” to reverse public opinion by focusing on consumer perceptions that wireless prices are higher here than in other jurisdictions. “It’s all about perceptions,” he said. “The perception that we as Canadian consumers pay more than others. That perception is powerful.” That was one of the central messages of Mirko Bibic, executive vice-president and chief legal and regulatory officer at BCE, when he rose at a telecom conference in Toronto this week and delivered a list of Canadian "wireless facts." Canadian consumers, burdened by a large geography and relatively small population, Bibic said at the Canadian Telecom Summit conference, have a world leading wireless industry that leads globally in network investments per capita. “We have better pricing than the U.S.,” Bibic said Tuesday, the same day Paradis made his announcement, as he presented slides comparing pricing for tablets and smartphones in Canada against those in the United States. “As of last Friday, we’re cheaper.” —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Incumbents become ‘political punching bags’ as Tories appeal to public opinion

News | June 6, 2013

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