The federal government is still saving a seat for a fourth major telecom competitor, but it’s debatable whether anyone wants to take it.
On Tuesday, Industry Canada announced its denial of a request by TELUS to buy up the spectrum licenses of flailing wireless provider Mobilicity. The federal government sees its decision as a way of encouraging more competition with Canadian telecom “incumbents” Rogers, Bell, and TELUS.
“I believe the basis of a strong economy is a competitive marketplace and consumer choice,” said Industry Minister Christian Paradis in a statement.
“We will continually review the regulations and policies that apply to the wireless telecommunications sector to promote at least four wireless providers in every region of the country so that Canadian consumers benefit from competition.”
But just how viable are the economic prospects for a fourth national competitor?
Dave Heger, an analyst with Edward Jones, understands the government’s goal in fostering competition, but is skeptical that a fourth competitor could survive, especially in today’s capital-intensive telecom industry.
“Just to have the financial wherewithal to invest in the wireless networks, make the investment in sales and marketing, and having retail locations and going after subscribers – it’s a pretty hefty financial commitment,” he said.
Heger also said a fourth competitor faces the problem of brand recognition. Bell and TELUS were already established as wireline providers. Rogers was a cable television heavy hitter, before entering the wireless service industry and bringing their financial resources with them.
But University of Ottawa law professor Michael Geist says being the new kid could also work to a fourth competitor’s advantage. Canadians are frustrated with the major wireless providers, as proven by the cheering of a recent CRTC announcement that could end three-year phone contracts and exorbitant roaming charges.
“It’s very clear that a lot of Canadians are very pleased with the regulator taking a stronger stance against the incumbents,” said Geist.
“If [a fourth competitor] can gain the trust of Canadians, they’ve also got an opportunity to position themselves as providing something new.”
There are still myriad problems for smaller wireless providers though, Geist added. The limited availability of certain spectrum has been an issue for WIND Mobile, for example, which doesn’t have the right spectrum licenses to support some popular devices, such as certain models of the iPhone. In addition, there are legal limits for the involvement of foreign operations in Canada’s telecom system, which makes the task of becoming the fourth competitor less attractive to international companies.
Bernard Lord, president and CEO of the Canadian Wireless Telecommunications Association (CWTA) lobby group, said the spectrum issue could be addressed when the federal government holds its next spectrum auction in January 2014, but more is needed.
“[One] thing we expect to continue is this phenomenal demand in growth for wireless services and data consumption,” said Lord.
“We need more spectrum… and we need smart regulation.”
The emergence of a fourth competitor is also up to the market, Lord said. There are major regional fourth competitors in Canada, including Vidéotron in Quebec, EastLink in Nova Scotia and P.E.I., and SaskTel in Saskatchewan, he noted – it remains to be seen if Canadian consumers want a fourth national telecom player.
Ultimately, said Lord, “the consumers will decide what they want.”