Government wireless policy blasted at telecom conference

OTTAWA — Participants at a conference discussion about the wireless industry on Thursday blasted the federal government for its approach in trying to bring more competition to the sector, and a consensus emerged that there is too much overlap between Industry Canada, the CRTC and the Competition Bureau in regulating the mobile-services industry. Mobilicity founder John Bitove said during a discussion at the New Developments in Communications Law and Policy conference in Ottawa about this year’s 700 MHz spectrum auction that the government's statements about promoting new entrants and increasing competition in the wireless industry mean nothing without good policy. "Real competition is going to need real help, if that's what the objective is," said Bitove, who picked up a slice of 700 MHz spectrum as head of Fenix Wireless Inc. "In terms of what's next for new entrants, I truly wonder whether it's too late for anyone." Ken Engelhart, vice-president of regulatory affairs at Rogers Communications Inc., called Canada's new-entrant wireless carriers a "spent force." “They really haven't been doing much in the past two years," he said. " have happened because of competition between the three incumbents. The new entrants haven't been much of a force." The government is reportedly poised to block the third attempt by Telus Corp. to buy Mobilicity, which entered bankruptcy protection in September 2013, because of spectrum bought in 2008 AWS auction that would be transferred to the incumbent. "We bought spectrum with an understanding at the end of five years we could do whatever we want with it," Bitove said of the situation with Mobilicity. A moratorium on the sale of that spectrum expired in February, but Industry Minister James Moore has maintained that his department has the power to veto spectrum transfers indefinitely and, according to a Globe and Mail article, has threatened to lock Telus out of the 2500 MHz spectrum auction in 2015 if it persists in its pursuit of Mobilicity. Bitove said the government's spectrum-management policies aren't clear or consistent. "Policy on the fly is not sustainable at all," he said. "And it's populist policy on the fly. Nothing has ever been done to mediate some of our issues." Engelhart said the incumbent advantage that allows the big three wireless carriers to invest billions in spectrum and wireless infrastructure makes it “almost impossible” for a new carrier to enter the market and compete “unless that new entrant has a different technology or a different business plan.” “The government should stop worrying about creating new entry in businesses with massive economies of scale,” he said. “They shouldn’t be trying to create a fourth carrier if it’s just so hard.” Steven Globerman, an economist with the Fraser Institute, told the audience that, despite his fellow panelists’ skepticism, he believes there is room for new-entrant carriers in Canada’s marketplace, although he questioned the wisdom of investing in a market with unclear regulatory oversight. "There's always going to be the opportunity for innovation in new wireless services," he said. "The real trick is to be able to have fluid and liquid market for the spectrum. If companies aren't using it profitably and efficiently, they should be able to sell it to the highest bidder. I would worry very much if the emerging consensus to a perceived competition problem was more regulation. From my view, the solution is to make the market work better.” Lawyer George Addy, formerly chief counsel for Telus and a former federal competition commissioner, said this year’s 700 MHz spectrum auction seemed designed to raise money, not increase competition. If the spectrum auction were aimed at increasing competition, he said, “the policy itself is an abject failure.” Addy said that the government's stated policy of encouraging a fourth wireless player in every region won't necessarily increase competition and lower prices. "That, frankly, is rubbish," he said. "I don't know of a competition authority in the world who would say that more participants has to result in more competition. That just doesn't hold water in theory or in practice. It's a populist, non-reasoned approach." All four speakers identified a problem with the splitting of regulatory responsibilities between Industry Canada, which controls spectrum allocation, the CRTC, which deals with broadcasting, wireless contracts and Canadian content regulations, and the Competition Bureau, which monitors all sectors in Canada for anti-competitive behaviour. "Most of the issues that are being dealt with by Industry Canada on the question of spectrum are really competition issues, and I think they should be dealt with by the Competition Bureau," Engelhart said. Bitove agreed, saying that the spectrum management role of Industry Canada and the broader role of the CRTC on wireless-sector issues should be combined into one entity. “What we're facing now is symptomatic of having that impractical approach to the wireless industry,” he said. Addy said that if spectrum allocation is going to be “encumbered” with expectations on usage then it should be with the CRTC because of its industry expertise. “Multiple arbitrators or controllers of policy and usage, I think it’s very inefficient and creates investor uncertainty,” he said. “Uncertainty raises capital costs and higher capital costs means less investment and less innovation,” said Globerman. “Intentionally created or inadvertent uncertainty because the policy goals are obscure; that’s inexcusable. I think really it is for the government to decide what it really wants to accomplish with this industry.” — With reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Government wireless policy blasted at telecom conference

News | 05/01/2014 11:57 pm EDT

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