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Ottawa’s Wireless Policy is Doomed to Fail, Study Says

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competition

Mobilicity, one of the smallest wireless players in Canada, has won creditor protection from an Ontario court as it struggles for survival. Although this is a good sign for the struggling wireless carrier, it also raises doubts about the government’s plans to encourage competition, Yahoo reports.

In fact, if we look at the short and rugged history of the wireless startup, the government’s plans don’t look bright at all: Mobilicity entered the market in 2010 after shelling out $243 million to reserve spectrum during the 2008 AWS spectrum auction. Since 2010 it has managed to provide coverage in a limited number of regions, which are Toronto, Edmonton, Vancouver, Ottawa, and Calgary. It also managed to top 250,000 subscribers, but this figure has dropped since May to 200,000 as of October 1.

However, this didn’t save the company: in February, it announced fiscal restructuring, and then Telus bid $380 million, which was rejected by Ottawa. It was also in talks with Verizon, but since then the red US carrier has said it isn’t interested in the Canadian wireless market.

And this isn’t the only example: Public Mobile also struggled to obtain customers, but the carrier was fortunate enough to have been bought by two private equity firms.

From this perspective, Ottawa’s effort to encourage competition was doomed to fail, according to a recently released University of Calgary School of Public Policy paper, “Wireless Competition in Canada: An Assessment.” And this includes the forthcoming 700 MHz spectrum auction as well.

Efforts to create competition in the short run, that increase the number of carriers, will simply squeeze margins in the short run and likely will not be sustained in the long run, as carriers exit and consolidate to reduce competition and restore margins consistent with profitability and the natural limit,” the paper says. “And, while consumers might gain in the short run from lower prices, everyone is likely made worse off in the long run from the misallocation of spectrum, reduction in scale of carriers, and reduction in incentives to invest from such intervention.

What do you think?

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  • Fireeast

    I
    don’t think the conservative plan is bound to fail, don’t get me wrong there
    will be casualties like any other business. Realistically the new entrants need
    to come together to create a larger company that can compete against the big
    three. The Calgary report claims that the big three could utilize the spectrum
    more effectively which makes sense since they have 30 years of operation and
    free spectrum to begin with. But consumers need a fourth player, compare Sask,
    Manitoba, and Quebec against any other province especially Alberta and there’s
    like a 20 dollar and 1 gb difference between them.

  • Chrome262

    Well said sir. One other thing, hey forgot to mention that the big three aren’t sharing spectrum, and they are ordered to. You can plan whatever you want, but you have to enforce the policy. They did it with cable internet, and we are now starting to see competition, its slow and a struggle but it is happening.

  • Pat

    I’ve been saying this since the beginning… The new entrants are going to fold, we’ll be right back to where we started. Expand the Wireless Act to include pricing caps and other strategies is far more efficient that trying to spread limited spectrum and infrastructure 7 ways in every province. Everyone is obsessed with “more competition” which simply means less spectrum to go around and more (unnecessary and redundant, and not the good kind of redundant) infrastructure which costs large amounts of $$$. The smart way to do it would be to take the current spectrum and network we ALREADY HAVE IN PLACE and find a way to control prices in a way that benefits consumers. We don’t need more competition and more redundant (and costly) infrastructure, we just need lower monthly bills. Many people seem to miss this fact.

  • JMCD23

    I agree with you up until the controlling pricing bit. I think the best way to do it is forcing the big 3 to lease out their networks at cost + 5-10%. These costs have to be proven and should be quite low realistically. The same model we use for third party internet should be used for cellular infrastructure IMO. Do you have any examples of countries that limit prices and how that’s worked out?

  • Pat

    No sorry i don’t have any examples of other countries. I’m not opposed to introducing wireless resellers at all, if we can come up with a system that works it could be the best solution. I suppose my skepticism on this approach is that wireline resellers don’t do a very good job of providing good competition and controlling prices. TekSavvy is the only exception I can think of, however their only claim to fame is high data caps which only serves a certain type of customer (some would use the word “niche” here but I don’t wanna open that pandoras box).

    Any solution that leverages the current infrastructure we already have while reducing monthly consumer bills is the best solution in my humble opinion. Until then, I’ll continue relying on the big 3 for my cell services.

  • JMCD23

    I hear you on the skepticism, the odds of Ottawa setting it up properly aren’t that great. The cable/dsl resellers certainly are cheaper – but not by the leaps and bounds they should be. The capacity pricing they have to pay to Bell/Rogers/Cogeco etc is pretty outrageous. I’m currently living in Germany and brought my own smartphone and am using a reseller here. 9.90 euros for 200mb/200text/200mb. For about 20 euros you can get unlimited calls/text and 1-2GB data. It’s pretty decent and there are also some good laws like free incoming and no overage on data. So my plan is 200mb, after that runs out it is down to 56kbps or I can buy more data if I’d like. It seems pretty well done here, it’d be nice to see the same at home. My phone runs on a good network for a fraction of the price. I

    I at least think with the proper regulations resellers could do far more for us regarding prices and service quality than a fourth carrier ever good. It’d certainly be a much cheaper option to explore than what the government has already done.

  • Pat

    Very well said!! I’m impressed with your plan in Germany. I’m going to be spending 2-3 weeks in the UK next summer and looking at prepaid SIMS while I’m there. Amazing how much cheaper it is over there.

    Oh well, we can hope right? I’m not expecting low European style prices, but it would be nice to pay less without having to sacrifice network/service quality. Perhaps good regulations surrounding resellers is the best option? Time will tell I suppose.

  • Chrome262

    Network sharing isn’t happening, in other countries its enforced and accepted. Hell there are Canadian companies in the states reselling spectrum and doing well in their markets. They left here because the Big 3 shut them out. That is where the government should be focusing. How about penalties for price fixing, cap on reselling rates. Then you would even get more competition because smaller companies can then come in with little initial costs and grow over time. If you want more competition you have to make the market favorable for it. How many stories have their been where potential entrants to the market have backed down because the market isn’t favorable to them?

  • JMCD23

    Check out Giffgaff if you’re going there. The deals in the UK are insanely good! I hope we get prices like that one day, but have very little faith in the CRTC.

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