Industry analysts said it is no surprise that the CRTC selected Quebecor Inc.’s offer to enter into a mobile virtual network operator (MVNO) access agreement with Rogers Communications Inc.
The two parties entered final offer arbitration to resolve an impasse over the price of access to Rogers’s wireless facilities. Monday, the CRTC chose Quebecor’s offer – which remains undisclosed – having concluded that it would better maintain “the ability and incentives for both parties to invest while providing it with the ability to expand into new geographic areas and grant it more pricing flexibility to better discipline rates in the retail market for the benefit of all end-users.”
In a Tuesday note, Canaccord Genuity analyst Aravinda Galappatthige said the decision is “not necessarily a surprise and is a natural step in a process that began two years ago when the CRTC made the decision to go the MVNO route.”
Galappatthige said the decision will further position Quebecor to expand out West – a condition put on the company when Industry Minister Francois-Phillipe Champagne approved the Rogers-Shaw merger and Quebecor’s purchase of Shaw’s Freedom Mobile.
“We believe that this decision supplements the favourable conditions secured by Quebecor in terms of roaming arrangements with Rogers, as well as bundled rates and backhaul access. The more Quebecor utilizes the MVNO framework, the less it needs to dip into its roaming bucket with Rogers,” Galappatthige wrote.
RBC analyst Drew McReynolds also noted that the decision was no sock given the CRTC’s policy objectives. McReynolds expects the decision to be a benefit to other regional providers such as Cogeco Communications Inc. – which is still in the process of negotiating its own rates – “and directionally negative for the national incumbents as stronger regional wireless operators leverage the MVNO framework to make greater market share inroads over time.”
According to the CRTC’s Monday decision, both companies had agreed on the terms and conditions for wholesale MVNO service and text messaging rates but were unable to compromise on voice and data rates.
In April, the commission accepted their application for final offer arbitration. It assesses the applications based on the strategic objective laid out in the Telecom Act, “namely that of bringing new competitive choice into the retail mobile wireless service market (retail market), while also encouraging network expansion and sustainable competition over the longer term.”
According to the commission, both proposals would have allowed Quebecor to provide wireless plans at lower prices outside of Quebec and contributed to the policy objectives. Under Rogers’ proposal, however, Quebecor would only be able to offer limited data, and a limited range of plans, without incurring losses.
A spokesperson for Quebecor said the decision is “consistent with the expressed desire of the government and regulatory authorities to continue their policy of encouraging competition in Canada’s wireless industry.”
“The decision indicates that the CRTC and its new leadership are committed to increased competition in Canada’s telecom industry and to encouraging network investments. The rates… will enable Quebecor and its subsidiaries to continue offering plans that are still more affordable, accessible and competitive and to extend Quebecor’s services across Canada, to the benefit of consumers,” the company stated.
–Reporting by Jenna Cocullo at jcocullo@thewirereport.ca and editing by Paul Park at ppark@thewirereport.ca
