Why Competition in Wireless Matters
Quick Facts
Canadians pay too much for wireless services
· The average US basic wireless plan provides twice as many airtime minutes compared to the average basic Canadian plan but costs only $2.00 more per month.
· Basic Canadian domestic long distance mobile calling prices are in the range of $0.20 to $0.30 per minute, whereas mobile long distance charges have mostly been eliminated in the U.S. market.
Canada lags behind the world in new wireless investments
· The three large companies which control the Canadian wireless market invest less in new capital investment than their U.S. counterparts.
o In 2005, capital investment intensity stood at 20% in the US and only 13% in Canada.
o “Canadian deployment of 3G wireless systems lags not only the U.S. (2004), where every major operator is in the late stages of building and marketing these services, but also significantly lags deployment in Europe (2002), South Korea (2002) and Japan (2001)” -(Telecommunications Policy Review Panel)
· The advanced wireless services enjoyed by consumers in countries as diverse as Ireland and Turkey and Australia are still not generally available in Canada.
· New mobile services which are becoming an integral part of modern business life (such as lightning fast internet connections, video-conferencing, video and TV steaming, and interactive application sharing) are not being introduced in Canada at the same rate as the rest of the world.
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Why are we falling behind?
· Lack of competition.
· The average medium sized city in the U.S. has wireless service from 6 independent providers. In Canadian cities, three is the most that can be hoped for and in many cases, two independent providers is the reality. This lack of competitive pressure allows pricing to steadily rise while new service deployment is slowed.
o The Big Three Canadian wireless providers meanwhile, have become amongst the most profitable in the world The lack of new entrant competition has facilitated a steady increase in profit margins that approach monopoly returns.
The advanced wireless auction –time for more competition, faster better service
· This year the Canadian government will set the rules to auction off additional radio-spectrum. It’s the perfect opportunity for new competitors to enter the market.
· New competitors will:
o Work their way into the market with lower prices and better service plans.
o Invest heavily in the innovative new technologies.
o Give Canada the advanced wireless technologies it needs to stay competitive, at a price we can afford.
The auction rules need to remove barriers to competitive entry
· The Big 3 received the bulk of their cellular spectrum without even having to bid in an auction and with no upfront fees of any kind.
· Their aggressive reaction to even the possibility of further competitors confirms that if permitted, they will use their economic power of incumbency to purchase all spectrum on offer or failing that to deny a new entrant necessary roaming and tower sharing while building out a new network.
· There must be spectrum for which only new entrants can bid and a guarantee of fair roaming and tower sharing.
· Even though the Big 3 don’t want to admit it, they have been subsidized by receiving spectrum without having to compete in auctions and by not having any possibility of competition from international carriers due to foreign investment restrictions. The government must ensure they are not permitted to acquire all of the limited public resource that is spectrum so as to avoid having to face competitors.