With some of the most expensive cell phone and wireless rates in the world, the federal government and CRTC are justifiably concerned that Canada will fall behind in the high-tech economy. Hence the decision five years ago to licence a chunk of the wireless spectrum to start-up companies like Wind Mobile and Mobilicity to create more competition in the marketplace and drive prices down.
The idea has worked for the most part — Wind Mobile is hugely successful in a few urban areas like Toronto — but after five years both those companies are looking to sell and the big three, Telus, Bell and Rogers are looking to buy them, reconcentrating the market in the hands of a few key players.
The government believes you need at least four options in every market to have real competition, and when the next round of wireless spectrum goes on sale next year (delayed from this fall) we could very well wind up with a fourth company.
While the government was preventing the sale of Mobilicity to Telus, American giant Verizon has actively joined the bidding to buy Wind Mobile. Verizon is also expected to enter the spectrum bidding process next year, creating a permanent beachhead for the company in Canada.
The big three are concerned. Not only does Verizon have more resources than they do — all three companies combined are smaller — Verizon would also have an advantage with things like offering customers U.S. roaming, bulk rates discounts on headset purchases and buying power when it comes to things like advertising and branding.
Would it reduce wireless costs? Probably a little bit, although Verizon is a high-end company in the U.S. and is usually not the discount option in most markets there.
I hate to say it, but I do side with the big three on this one. They can't compete with Verizon on a level playing field and Canada's future ambitions won't be well served by yet another big corporation funnelling profits out-of-country.
And the federal government's claim that four companies are needed is somewhat ridiculous. In the U.S. the competition between the American big three — AT&T, Verizon and Sprint — has kept prices low and service levels high. The real question isn't how many companies it takes to create real market competition, but rather how you make the companies you already have compete.
I don't want to imply that the our big three are colluding or price fixing, or have reached some kind of backroom agreement where they agree to only lower rates so much in the name of competition, but it certainly feels that way.
Adding Verizon or another player to the mix could certainly help, but I'd rather our existing companies started asking themselves "how little can we charge to win marketshare and still turn a profit," rather than "how much can we charge before the federal government gets involved and breaks up our monopolies?"
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