The CRTC’s wireless inconsistency

Regulator is mandating wholesale rules in broadband and TV, so why not cellphones?

wireless inconsistency

One of these things is not like the other.

Wireless Inconsistency:

The CRTC on Tuesday announced it was taking control of the wholesale rates that Bell, Rogers and Telus charge smaller competitors. And with that, perhaps a more boring sentence has never been written.

In actuality, the move has big ramifications for any Canadian who owns a cellphone.

In a nutshell, the regulator is going to cap how much the Big Three can charge smaller providers such as Wind and Videotron to connect to their networks. In theory, that means the fees that customers of these companies must pay when using their phones outside their home coverage zones will go down.

That’s good news for all consumers, because if smaller cellphone providers can become bigger threats, it will force Bell, Rogers and Telus to offer more competitive services too.

The exact details of these fees have yet to be ironed out. The CRTC says that effectively immediately, the Big Three aren’t allowed to charge smaller carriers anything more than what they’re charging each other. The problem is, those charges are almost mystical in nature as nobody knows exactly what they are.

Bell could be charging Rogers $10 per megabyte and vice-versa, but because all three big companies have roughly the same number of customers and thus the same amount of traffic coming and going, there probably isn’t much money changing hands.

The story isn’t the same with smaller carriers, who pay through the nose every time one of their customers hops onto a Big Three network. Those charges unfortunately get passed on to customers. Wind customers, for example, pay five cents for every megabyte they use outside of the company’s network, on top of their regular monthly bill.

The final rates won’t be hammered out till late this year, if not early 2016. Until then, it’s anybody’s guess as to what’s going to happen.

The bigger issue is what the CRTC isn’t doing. A number of intervenors in this long-running wholesale debate asked the regulator to implement a set of rules that would essentially let third parties rent access to Big Three networks for the purpose of reselling wireless service under their own banner.

In the United States, this is an increasingly popular way to get more competitive wireless services up and running. Google Fi, the search company’s recently launched wireless service, is essentially using rented space on the networks of Sprint and T-Mobile.

In Canada, such wholesale operations – known as Mobile Virtual Network Operators (MVNOs) – are non-existent because of an equilibrium between the Big Three.

In the U.S., Sprint and T-Mobile are way behind market leaders AT&T and Verizon so they have nothing to lose in selling wholesale access to Google and a host of other comers. It’s a competitive dynamic that doesn’t exist in Canada, which means that none of the Big Three have any impetus to offer decent wholesale deals to third parties.

Cable company Cogeco and the Canadian Network Operators Consortium, a group of small independent internet providers, asked the CRTC to provide mandated access to the Big Three networks, but they were denied. In doing so, the regulator parroted the network owners’ chief concern: that forcing mandated access would decrease their incentive to invest in networks.

It would be all well and good, except for the fact that it’s an argument that has been rejected in both broadband and television. In both cases, the CRTC has either upheld and strengthened mandated access (in broadband) or is in the process of introducing it (in television).

The CRTC currently sets the rates and terms under which independent ISPs can access the broadband networks owned by the likes of Bell, Rogers and Shaw, and it will by this fall have established similar rules for television service.

In both cases, the regulator has decided that the additional competition and therefore lower prices that come through wholesale competitors is worth the commensurate investment disincentive for network owners.

So why, then, is the CRTC singing a different tune in wireless, a market where more competition and lower prices are arguably most needed?

The reason is the government. Industry Minister James Moore has made a mantra of his desire to have four strong, infrastructure-based competitors in every part of the country. Whether it’s Wind, Videotron, MTS, Sasktel or Eastlink, his belief is that network owners make better long-term competitors than wholesale providers.

Maybe he’s right, but then again, maybe he’s wrong.

In its decision on Tuesday, the CRTC noted that mandating wholesale MVNO access now could be detrimental to the growth of smaller cellphone companies. It’s probably right, but since when is that the regulator’s concern?

The CRTC’s chief concern should be promoting as much competition as possible and therefore as much choice as the market can bear, rather than looking out for the health of any specific companies.

That’s the approach it has taken in broadband and television, so why the inconsistency in wireless? Isn’t the CRTC supposed to make decisions independent of the government’s wishes?

(Photo courtesy of JD Hancock)

Tweet about this on TwitterShare on FacebookShare on LinkedIn

2 Trackbacks & Pingbacks

  1. Government, CRTC aren't delivering wireless savings - AlphaBeatic
  2. May the fourth carrier be with you | Angelus Novus

Leave a comment

Your email address will not be published.