Should mobile giant Verizon come to Canada?
George Cope, president and CEO of Bell Canada, isn't a happy man. Late last month, he wrote an open letter to Canadians, complaining that the government is being unfair. There is “critical situation impacting their world-leading wireless industry,” he warned: US mobile giant Verizon wants to enter the Canadian market, and the way the law is set up means that it will have an unfair advantage. But is he being fair himself?
There are three issues that would make it easier for Verizon to do business in Canada than the existing large mobile companies, he warns. Firstly, Verizon will be allowed to buy twice as much radio spectrum as companies like Bell can. Secondly, Verizon will be able to use Canadian telcos networks to offer its mobile services instead of investing in its own, he warns. Thirdly, Verizon can buy smaller Canadian mobile firms when Bell and other large Canadian telcos can't.
That all sounds fair enough on the face of it. There's nothing like a bit of nationalistic fervor to rouse the rabble and fend off Johnny foreigner. "Industry experts say a [sic] Verizon wouldn't need to build its own network throughout Canada, invest in Canada's rural communities, or support Canadian jobs like Canadian wireless companies do," said Mr Cope, before threatening in the same paragraph to cut jobs himself if Verizon comes to town.
The thing is, Canada’s wireless business has languished in the grip of the three large incumbent companies for decades. They have had a stranglehold on the market, and in 2013, Canadian mobile telecommunications prices are among the highest in the world.
An OECD report, released just days before Mr Cope’s letter, found that Canada ranks among the 10 most expensive countries in the OECD in virtually every category. Whether it was low usage, medium usage, or high usage of talk and data, there were tens of countries offering cheaper mobile telecommunications than Canada.
The upshot? Canada ranks last in the OECD in wireless subscriptions per 100 people, and yet Canadian operators ranked fourth highest in mobile revenues. There are fewer people per capita using wireless contracts in Canada, but the incumbents make a lot of money from those that do.
Naguib Sawiris, the financier behind Wind Mobile, said that he regretted bringing his money to the Canadian wireless market, arguing that the rules were not fairm and that the incumbent operators were 'pampered'. The Canadian government has said that it won’t set aside any of the new wireless spectrum that will be auctioned off next year specifically for new entrants, which would encourage competition. New entrants such as Wind complain that incumbents (two of which share each other's networks) often put up roadblocks when it comes to tower sharing with newer firms, which makes it difficult for the emerging competitors to do business.
This blog post from Benjamin Klass provides an intelligent response to Mr Cope's letter. It argues that Bell pays far less for its wireless spectrum and the market price, and criticizes Bell for ignoring rural communities in his home province of Manitoba, such as Thomson, Churchill, and the Whiteshell, with its mobile coverage. Where Bell does provide coverage, it often piggybacks on Telus towers, he points out.
It also points out that new entrants are generally either put under financial pressure, or simply acquired – a point seemingly supported by news of this crowdfunding campaign to save Mobilicity after Telus was blocked from buying it.
"After every challenger contesting your dominance of the wireless market has been bought out or squashed, is it any wonder that the government wants to act to promote real competition?" asks Mr Klass. "The 'critical situation' I face comes every month, when I open my wireless bill wondering whether I'll be able to afford to pay it."
Indeed. Bell raked in $17.6 billion in revenues during 2012, a third of which came from wireless services. It made $2.62 billion in profit, an increase of almost a fifth over the prior year.
If Verizon came to Canada, it would provide a fourth large player with adequate muscle to do some real damage to the incumbents' market share – and they wouldn't be able to take it off the table by simply buying it. It would also potentially relieve many long-suffering Canadians who travel south of the border from agonising roaming costs.
Should Verizon come to Canada? And does Bell have the right to complain?
Danny Bradbury, MSN Tech & Gadgets