Consumers didn't benefit from creation of fourth wireless carrier, says study

OTTAWA – Consumers were on the losing end of a gamble by the former Conservative government when it sought to create more competition in the wireless market by interfering in it, says a new report released Thursday.

And researchers at the Montreal Economic Institute say the country’s telecom regulator can learn from that failed policy by backing away from calls to interfere in the broadband Internet marketplace.

The report, titled “The State of Competition in Canada’s Telecommunications Industry,” says the sell-off of broadband spectrum last year that resulted in the takeover of Wind Mobile by Shaw Communications created “phoney” competition and will likely result in higher — not lower — wireless prices.

John Lawford of the Public Interest Advocacy Centre calls the study findings “misguided” and contrary to multiple voices heard at recent public hearings hosted by the country’s telecom regulator.

Many service providers told the Canadian Radio-television and Telecommunications Commission last month that installing broadband infrastructure in isolated communities where small numbers of people reside is a money-losing venture — and will be for the foreseeable future.

Waiting for those service providers to act on their own doesn’t make sense, said Lawford.

“If there’s no business case, I don’t see how competition or whatever they’re proposing is going to solve this no matter how long you wait,” he said.

The chairman of the CRTC expressed disappointment at the hearings that Internet access and affordability received little attention in last fall’s federal election campaign.

In calling on the government and the telecom industry to develop a “national broadband strategy,” Jean-Pierre Blais also noted that broadband funding announced in the March budget didn’t “appear to be tied to a clear policy on broadband and its deployment in Canada.”

But the MEI researchers note that 96 per cent of Canadian households already have access to download speeds of 5 Mbps in 2014 and more than 75 per cent subscribe to providers offering even faster service.

“In this context, it is superfluous for the CRTC to try to duplicate what market players are already doing by imposing new regulations and taxing telecom company revenues to fund more broadband infrastructure rollout,” said Masse.

“Soon, all Canadians will be able to connect to the Internet at very high speeds,” said co-author Paul Beaudry. “And this is not because of any comprehensive national strategy devised by civil servants in Ottawa; it is because of competitive pressure on companies that need to adapt to consumer demand and attract more customers by offering faster broadband services at affordable prices.”

The Tories under former prime minister Stephen Harper touted the wireless spectrum sale as a way to create a viable fourth national wireless carrier.

That, they said, would create more competition and cut consumers a break on their cellphone bills.

It was a populist move that fed off a perceived sentiment of consumer outrage over some of the highest cellphone rates in the industrialized world.

But the study authors say the creation of that fourth player through Shaw’s $1.6-billion takeover of Wind last December means the company will have to invest hundreds of millions of dollars in equipment upgrades, with an expected increase in Wind mobile rates to pay for it.

“By insisting on the benefits of a fourth wireless player, the previous federal government went against a worldwide trend of consolidation in the wireless sector and embraced a static view of competition,” said the report.

“Can we have a sensible policy of not encouraging phoney competition but encouraging real competition?” asked study co-author Martin Masse, who sees the sale this week of Manitoba’s MTS to BCE as a prime example of how true market-driven competition should work.

Despite that province’s loss of a major wireless service provider — and analysts who predict higher smart phone rates as a result — Masse said Manitobans may actually benefit from better service and stable, if not lower, pricing.

The MEI report notes that Canadians are among the highest users of tablets and smartphones in the industrialized world and enjoy some of the most advanced wireless networks.

It adds the prices they pay for wireless services remain higher than in most European countries but lower than in the United States or Japan.

So far, the federal Liberal government has been hesitant to say anything regarding its broadband policy, other than to pledge investments to get telecom infrastructure built in places that currently don’t have access to high-speed Internet.

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