More competition is always better than less

26 Aug

By Geoff Meeker

August 26, 2013 – Many of us are wandering sleepily through summer, oblivious to most news stories.

However, there is a battle going on that should occupy our attentions.

On one side are the big three wireless service providers in the country, who are warning of lost jobs and unfair business practices.

On the other is the federal government, who say that Canadians need more competition in the wireless marketplace.

Caught in the middle are you, me and millions of other cellular and smartphone users across the country.

What’s up for grabs might seem on first glance like no big deal. A swath of new cellular bandwidth was created when cable TV switched from analog to digital, opening up new lanes of traffic on the “information highway” – an additional 10 percent of cellular network space.

The feds are putting this valuable new bandwidth up for bids and Verizon – the largest wireless company in the U.S. – is interested in a piece of the Canadian action. However, our three big wireless operators – Bell, Telus and Rogers – have launched a counter-offensive, claiming that terrible things will happen if Verizon gets a toehold here, through the acquisition of Wind Mobile, a Canadian upstart. In fact, the Big Three are working together to shut down this incursion onto their turf, through a major advertising and Internet campaign.

“The Government of Canada is risking the future of the Canadian wireless industry,” says the opening paragraph at fairforcanada.ca. “The policy loopholes, which give giant American corporations an advantage in the wireless spectrum bidding process, are unfair and will have massive consequences for Canadians.”

The “policy loopholes” are limitations that prevent Canadian companies from buying this new bandwidth, despite their best efforts (including a reported attempt by Rogers to acquire part ownership of Wind Mobile through a third party buyer).

“This policy could undermine Canadians’ ability to connect to one another, threaten Canadian jobs, and raise significant concerns regarding privacy and security,” says the fairforcanada site. To summarize, the Big Three claim that holding the door open for Verizon while blocking their access is not competitive, and could result in substantial job losses for the Canadian telecom industry.

It all sounds very dire.

But I’m not buying it.

Nor is Michael Geist, technology expert and Canada Research Chair in Internet and E-commerce Law with the University of Ottawa. According to Geist, a recent report by the Organization for Economic Cooperation and Development (OECD) found that Canadian wireless prices are among the highest in the world.

“The OECD report confirms that Canada wireless pricing is not competitive with the majority of the world’s developed economies and supports what policy makers, consumers groups, and now the government believe: that experience elsewhere indicates that new entrants should result in greater competition and better pricing,” Geist wrote, on July 15. (You can read more at michaelgeist.ca)

Having read the claims and commentary from both sides, I conclude that the Canadian wireless industry is crying wolf. Verizon’s entry into the Canadian marketplace may indeed cut into the Big Three’s profit margin, but it won’t exactly put them out of business. According to the same OECD report, wireless rates in the U.S. are actually higher than Canada’s. If anything, they will probably settle into a fee structure that is the same, and maybe marginally lower, than current rates. Why rock the boat, when there is so much money to be made in the current pricing model?

That said, it’s worth a try and more competition is always better than less.

Critics have accused the Conservative government of playing cheap politics with this issue, taking on the wireless industry – an easy target for disgruntled consumers – and pandering to the Canadian electorate. This may indeed be the case, but isn’t that the motivation behind most political decisions?

I seldom agree with the Conservative Government’s policies, but I’m with them on this one.

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