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UPDATED – CRTC rejects broad MVNO model, will mandate limited access for regional players

News | 04/15/2021 4:01 pm EDT
The CRTC's headquarters at the Terrasses de la Chaudière complex in Gatineau, Que.

Incumbent telecom companies will be required to sell access to their mobile networks to some regional service providers, but only those that have some level of spectrum and make a commitment to a certain amount of investment in building out their own networksand only for a mandate of seven yearsunder a long-awaited CRTC policy announced Thursday. 

“Regional providers that invest in network infrastructure and spectrum will be able to offer competitive services to millions of Canadians as mobile virtual network operators in areas where competition is limited,” the CRTC said in a release. “These companies have already been contributing to greater competition and helping to lower prices.”

BCE Inc., Rogers Communications Inc., and Telus Corp. will be required to grant wholesale access to regional competitors, as will Saskatchewan Telecommunications Holding Corp. in Saskatchewan. 

In limiting the MVNO model, the commission rejected calls from TekSavvy Solutions Inc., the Competitive Network Operators of Canada (CNOC), and a number of smaller players hoping to enter the MVNO space. 

In a statement Thursday evening, Innovation Minister François-Philippe Champagne said that the government “will be reviewing the decision and its implications to ensure they align with the government’s goals of promoting competition, affordability, consumer interests and innovation.”

In a statement emailed to the Wire Report, Canadian Wireless Telecommunications Association (CWTA) president and CEO Robert Ghiz said the association “will take the appropriate time to analyze and study the findings of this review and what it means for our members.”

In the lengthy decision, the CRTC wrote that while it was not swayed by incumbent arguments that a broad MVNO mandate would hurt investment, it was convinced that such a broad mandate would hurt regional competitors and require sustained regulatory intervention. 

A broad mandate would “have a moderate positive impact on price as MVNOs first enter the market, but that these effects would be difficult to sustain over the long term without careful and ongoing regulatory intervention,” the regulator wrote. 

“Arguably, while a broad-based wholesale MVNO access service would encourage broader service-based competition,” the regulator continued, “this would likely come at the expense of more sustainable competition brought about by facilities-based competitors.” 

One significant regional wireless competitor, in the form of Shaw Communications Inc.‘s Freedom Mobile, may not be around for much longer as Rogers announced plans to buy the company in March. Most industry analysts expect the Competition Bureau, as part of its review of the merger, will require Shaw to divest its wireless assets. 

When asked about whether or not the potential Rogers acquisition of Shaw meant the MVNO decision was based on a different market than the one that exists today, CRTC chair Ian Scott said in an interview with the Wire Report that the acquisition was not yet approved. 

“We decide on the record that we have, and the industry that is today. And if it’s fundamentally different in the future, we will assess whether or not that requires that we adjust the framework,” Scott said. “If necessary, we would.” 

With its mandate for access only to those with spectrum licenses and a seven-year sunset provision, the decision more closely aligns with the investment-prioritizing models called for by the Competition Bureau and Cogeco Inc.

“The CRTC took far too long to do the smallest thing possible and still call it MVNOs,” CNOC chair and Distributel Communications Ltd. CEO Matt Stein said in a phone interview with the Wire Report. 

“I don’t see how this leads to more competition, I don’t see how this leads to more innovation, I don’t see how this leads to lower prices,” Stein said. “Canadians ought to be disappointed.” 

For Iristel Inc. CEO Samer Bishay, whose Ice Wireless brand will now be able to negotiate network access with Bell in the North, it may well mean the end of his Sugar Mobile effort in Canada. “It’s enough, we need to move on,” Bishay said in a phone interview with the Wire Report.

“We’re not giving up, but we’re better off building a good momentum in a market that appreciates innovation, in a market that spurs competition, and then come back stronger.” 

The decision has language that allows for regional providers to resell their wholesale wireless service to MVNOs, which would have no requirements for spectrum or infrastructure investment.

It will be up to the parties, however, to negotiate rates. 

“Wholesale rates will be negotiated between providers, while the terms and conditions will be established by the CRTC,” the regulator said in a release. The arrangement will be mandated for a time period of seven years from the date an agreement is finalized. This period, the CRTC said, “will give regional carriers time and incentive to expand their wireless networks.”

The incumbents will be required to submit proposed terms and conditions for service, which the regulator will review. The terms and conditions set by the regulator are intended to govern the types of services offered by the MVNO. Once terms and conditions for the type of service are reviewed by the regulator, incumbents and the potential MVNO can negotiate rates. If parties can’t come to an agreement on rates, they can come to the CRTC for arbitration. 

“While there are encouraging signs that prices are trending downwards, we need to accelerate competition and more affordable options for Canadians,” Scott said in a release. “The competitive model we are introducing today will result in greater choice and cheaper mobile wireless services for Canadians, who rely on their smartphones now more than ever.” 

In the CRTC’s decision, the regulator did find that Bell, Rogers, and Telus “together exercise market power in the provision of retail mobile wireless services in all provinces except Saskatchewan,” while Bell alone exercised market power in the North. 

“Retail prices, although higher than what would prevail in a fully competitive market, are clearly trending down across Canada, and there is evidence of rivalrous behaviour among wireless carriers.”

As for the issue of whether or not the timing of the announcementjust a week after telecom companies had to decide whether or not to participate in the 3,500 MHz spectrum auctionnegatively affected companies seeking to enter the MVNO space, Scott said the commission released the decision as quickly as it could have. 

“Would the sequence have been better if our decision was known on this before the deadline to register for the auction? Yes. Could I get it out earlier? No,” Scott said in an interview. “Could ISED have delayed? They could have. They didn’t, and they have their reasons.”

— Reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Hannah Daley at hdaley@thewirereport.ca





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