Money Talk(s) and Competition Conflict: The CTS17 Regulatory Blockbuster

Earlier this month, I attended the 2017 Canadian Telecom Summit and covered the Regulatory Blockbuster panel. The Regulatory Blockbuster is an annual event where regulatory representatives from telecom companies (this year, TELUS, Rogers, Bell, and TekSavvy) and other representative stakeholders (this year featured the Public Interest Advocacy Centre) debate regulation, pricing, and future challenges to the telecommunications industry. The 2017 talk was foreshadowed by the comments of the Hon. Navdeep Bains, Canada’s Minister of Innovation, Science, and Economic Development, who spoke at the beginning of the Summit and issued a clarion call to cut wireless and broadband rates and pushed for affordable pricing for Canadians.

The Minister’s comments echo Canadian and international research regarding the costs of wireless services across the country. For example, a 2016 Nordicity report (Nordicity is a consulting firm that produces an annual telecommunications services price comparison study), prepared for the Canadian Radio-television and Telecommunications Commission (CRTC) found that Canada ranks the highest out of 8 selected Organisation for Economic Co-operation and Development (OECD) jurisdictions in Level 1 service basket pricing of Mobile Wireless Telephony (the lowest usage basket) and second highest in Service Basket 3, 4, 5 and 6 (denoting higher usage). The OECD, in 2016, stated that to bring down the cost of mobile subscription, Canada needed more competition in the telecom sector by removing foreign ownership restrictions.

David Watt, Rogers Senior Vice President of Regulatory, argued that such reports and claims are flawed, because they only factor in the premium players and do not account for flanker brands like Freedom, Chatr, Fido and Koodo.

This claim is not entirely true; although the flanker brands were not used to calculate the national aggregate, they were analyzed in a separate matrix to demonstrate the price difference between incumbent brands (TELUS, Rogers and Bell), the flanker brands, and new entrants such as Videotron (which recently sold its spectrum for the Greater Toronto Area to Rogers). Overall, these flanker brands were 14% cheaper than incumbents and the new entrants’ prices were a further 20% lower than those of the flanker brands. Thus, the new entrants were almost always cheaper than the incumbents. In certain price brackets (such as Level 4, that includes unlimited calling, 2GB data and 300 SMS), they would cost over 60% less than the incumbents. Consequently, competition from new entrants is good for consumers, as was re-iterated by John Lawford, Executive Director and General Counsel, Public Interest Advocacy Centre, who bemoaned the lack of a fourth national carrier that could effectively compete against the incumbents.

Minister Bains also announced that the government has directed the CRTC to re-think its decision on WiFi based providers that route phone calls, texts and data through WiFi networks. Earlier this year, the CRTC ruled against WiFi-based providers, ordering that they cannot continue piggybacking on infrastructure set up by incumbent services providers. These Mobile Virtual Network Operators (MVNOs) have had a fair deal of success south of the border; for example, Republic Wireless, which operates off the Sprint network, has had plans starting from as low as US$5 currently offers plans beginning at US$15.

However, Ted Woodhead, the Senior Vice President of Federal Government & Regulatory Affairs at TELUS, argued that this approach works because Sprint is the weakest network in the US and has an excess network capacity. He argued that ninety-nine percent (97.4% as of 2016) of Canadians have access to LTE networks because Canadian telecom companies have been successful on the fronts of coverage, quality, and investment. He went ahead to offer cautionary advice against the WiFi first approach saying, “Don’t mess with success because that is actually what has got us here.” Bram Abramson, Chief Legal & Regulatory Officer for TekSavvy Solutions, countered that MVNOs like Republic Wireless have at least been successful in stirring competition, bringing the prices down for certain customers.

To end the panel, the participants were asked to place themselves in the shoes of the federal government for the upcoming reviews of the Telecommunications and Broadcasting Acts. Mirko Bibic, Chief Legal & Regulatory Officer and Executive Vice President for Corporate Development at Bell Canada, argued that Over-the-Top (OTT) services like Netflix should be treated the same as other broadcasters. For the Telecommunications Act, he argued that since there is a significant amount of facilities based competition, there should be less regulation. He was also in favour of keeping §27 that stipulates carriers to charge a just and reasonable rate for their services.

Interestingly, Bibic was in favour of keeping §36, which provides the CRTC with powers to enforce net neutrality (the CRTC decided in favour of net neutrality earlier this year in its net neutrality governance framework). While Abramson batted for more transparency in the process, Woodhead was of the view that not much needs to be done in the Telecommunications Act. Woodhead also argued that §7, which deals with the objectives of Canadian Telecommunications Policy, needs to be looked at as it is conflicting and gives the CRTC broad powers and having a regulatory answer for everything is a bad macroeconomic policy.

Finally, Watt aptly summed up these conflicting opinions saying, “I think we can all see why the rewrite will probably take five years. I wish us all well.”

The price of telecom in Canada has only gone up with the three big players controlling eighty-nine per cent of the market and the lack of competition from a fourth national player. It will be interesting to see how the CRTC responds to the call for review of its decision against Wi-Fi based MVNOs. Till then, Canadians can only hope to get deals like they do south of the border.

 

Prasang Shukla is an IPilogue Editor and an International Business Law LL.M. candidate at Osgoode Hall Law School.

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The Canadian Telecom Summit brings together the leadership of Canada’s telecom, broadcast, and IT industries. For its 16th year, the CTS focussed on “Competition, Investment and Innovation: Driving Canada’s Digital Future” and featured keynote presentations and panel discussions on the range of issues facing industry and public policy makers in Canada. IP Osgoode and the IPilogue team members thank the CTS’ organizers (Mark Goldberg and Michael Sone) and Wind River for their generous support to allow us to attend.

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