With new entrant signals weakening, what happens to wireless prices?
Video: The Harper government’s promise to drive down cell phone bills is in disarray after Wind Mobile, one of the companies expected to bid in a wireless spectrum auction, backs out. Jacques Bourbeau reports
Less than a day after the bombshell announcement that Wind Mobile is pulling the plug on plans to buy up much-needed spectrum that could see the carrier compete head to head with Rogers, Bell and Telus, consumers may rightly question what the ultimate fallout on wireless prices may be.
That largely depends on where you live.
If you reside in Saskatchewan, Manitoba, Quebec or Prince Edward Island, that answer is: nothing.
Cellphone customers in those provinces won’t be affected by the sudden withdrawal of Wind from the auction because the carrier doesn’t operate there.
For the majority of the country’s inhabitants, or those who live in British Columbia, Alberta and Ontario, however, Wind’s departure poses a serious threat to wireless prices in big cities from Vancouver to Toronto.
The sudden exit strongly signals that Wind is no longer prepared to make the necessary investments in its network, marketing and the like that would keep the pressure up on the big three to offer more competitive rates, experts say.
Instead, it appears the dominant wireless players will strengthen their collective hold on big regions like Toronto, Vancouver, Calgary and Edmonton by delivering far superior services than what Wind or Mobilicity, another new entrant (operating under creditor protection) are equipped to deliver.
Enhanced wireless experiences are obviously a good thing, but they could come with a trade off: The return of the kind of pricing witnessed a few years ago, when Canadian cellphone bills were the highest in the developed world.
Some experts suggest that without a stronger new entrant presence in key markets like Toronto, that’s where things are headed.
“The marginal competitive gains of the past few years are now at risk,” Michael Geist, a University of Ottawa professor and consumer advocate said Tuesday.
On his blog, Geist warned that with Wind out of the auction, Ottawa “cannot simply sit back as the big three carriers solidify their dominance and the prospect of viable competitors steadily disappears.”
The clock is ticking.
Even now, the battle between Wind and the Big Three has waned, and prices have crept steadily higher (see graphic). It’s a trend that could well continue to gather momentum as competition diminishes further, experts warn.
Geist suggests that if Ottawa “still believes that a competitive wireless environment remains a crucial economic concern” there’s one course of action left: “Targeted regulatory reform.”
That means wading further into actively managing prices in the market place – limiting how much carriers can charge for text messaging, voice minutes and wireless data services.
Ottawa is already moving to cap rates on how much the smaller operators will be billed by Rogers, Bell and Telus for allowing their customers to patch into the bigger networks when outside their home coverage zones.
With limited spectrum to run their networks on, new entrants like Wind and Mobilicity will require additional breaks from the government, experts say.
And with a “pro-consumer” government seemingly immovable in its objective to keep wireless pricing down, it appears further interventions are forthcoming.
“We believe the government will stay the course,” Amit Kaminer, analyst at SeaBoard Group said this week.