Wireless carriers start a week-long hearing today before the federal telecommunications regulator, another in a series of fights that always seems to be about survival of the smallest.
This time it might be true.
The hearing is into the wholesale rates Bell Canada, Rogers Communications and Telus Corp. charge new entrants for roaming on their domestic networks, sharing antenna space on their towers and other arrangements.
The Harper government ordered the big three to let new entrants like Wind Mobile, Mobilicity, Videotron and Eastlink Wireless to roam on their networks and share towers so the newcomers would have a chance. However, it said the fees they had to pay would be negotiated.
With Mobilicity struggling before the weight of creditors and Public Mobile swallowed by Telus, only three new carriers that bought spectrum in the 2008 auction are left: Wind, Videotron and Eastlink.
And they’ve so far been unable to push the big three’s grip on the number of the country’s 28 million mobile subscribers to below 90 per cent.
The hearing started with the federal Competition Bureau declaring that the big three carriers “may have the ability and incentive to profitably raise the rates they charge new entrants for wholesale services. When they are prohibited from doing so (by recent changes to the Telecommunications Act) they may degrade the quality of their offerings. In other words incumbents may have an economic incentive to raise their rivals costs. These practices harm the Canadian economy.”
The Competition Bureau commissioned an independent report that concluded incumbents “are making above normal returns on their investment, consistent with the exercise of market power.” The report also concludes that incumbents could push up competitors’ costs by 29 per cent by raising wholesale rates.
It also predicts a fourth national carrier that isn’t inhibited by incumbents forcing its costs up would increase wireless spending by five per cent, increase choice, expand wireless penetration from 78 to 81 per cent and drive down the incumbents’ rates to subscribers by two per cent.
“We think that the hearing starting today in Ottawa is amongst the most important the Commission has heard,” Iain Grant, managing director of the SeaBoard Group telecom consultancy said in an interview. ” The establishment of a fair wholesale rate for access to incumbent wireless networks is critical to providing Canadians more choice and better prices.”
Ottawa badly wants more competition. Wind Mobile, which operates in B.C., Alberta and Ontario, is the biggest of the new entrants with some 750,000 subscribers and wants to expand. Videotron’s parent, Quebecor Inc., has bought spectrum in those three provinces in addition to its home in Quebec and says it’s willing to offer service outside its base — if it gets the right domestic roaming wholesale rate.
“Given the importance of mobile wireless services in Canada,” the commission declared in February, it promised to hold a hearing “to determine whether the wholesale mobile wireless services market is sufficiently competitive and, if not, what regulatory measures are required.”
It’s not clear what will happen if the new carriers don’t get a wholesale framework they like.
The are clearly betting that the government has issued enough hints to the commission.
Last December Industry Minister James Moore promised the government would cap wholesale roaming fees, and it did so as a temporary measure ammending the Telecommunications Act in the spring budget, pending this hearing. As a result Wind Mobile was able to change its rates.
Then in July the commission found Rogers had discriminated against smaller carriers in setting its wholesale roaming rates.
The commission will also look into the rates incumbent carriers charge those who want to lease space on their networks to become mobile virtual operators (so-called MVOs), who sell service but don’t own a network. Today Primus Canada and President’s Choice are among those who are virtual carriers.
Today’s session will start with presentations from the federal Competition Bureau, Wind Mobile and Mobilicity, as well as from Cogeco Cable Inc., a Quebec and Ontario cableco that says it wants to be a virtual carrier if the conditions are right.Â
