Wireless service in Canada remains expensive, but should Ottawa intervene?

Canadians are still paying some of the highest prices in the G7 for cell phone service,.
Canadians are still paying some of the highest prices in the G7 for cell phone service,. THE CANADIAN PRESS/Hannah Yoon

Canadians are still paying some of the highest prices for basic cellphone service in the G7 group of nations, a recent CRTC report suggested, but does that mean Ottawa should meddle in the market?

Opinions on that question are divided, with some saying the federal government has an important role to play in encouraging competition, while others argue that the market should be left to grow and change on its own.

Martin Masse of the Montreal Economic Institute falls into the latter camp. He has spent a lot of time examining previous attempts by the federal government to support the establishment of new telecom companies. The strategy was simple: drive down prices by encouraging more competition.

But in the case of cellphone service providers, Masse argues, one doesn’t necessarily follow the other. Canada is a huge country, and establishing the infrastructure needed to provide consistent, reliable service over thousands of square kilometres is much harder here than in smaller European nations.

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“Many people say we should force the big (companies) to open their network to the small ones, and we would get real competition, but it’s not real competition,” Masse said.

“It’s just piggybacking on others’ networks, but (the small companies) are not investing anything.”

READ MORE: What’s the best, cheapest cellphone plan in Canada?

That lack of investment, he said, can translate into spotty service for customers, and slower introduction of new technologies. In Europe, where governments have managed to start price-wars between carriers through policy decisions, Masse said, consumers have already seen this happen.

“The governments and the European Commission encouraged more players and more competition, but the effect is that (companies) invested very little … and they’re behind us in terms of deployment of technology.”

What has the government done so far?

The previous Conservative government left its fingerprints all over Canada’s telecommunications industry, using policy and regulatory changes to encourage small carriers and upstarts, and to stop bigger players from swallowing them up.

Among the moves made by Ottawa were favourable spectrum (radio frequency) purchases for the little fish, as well as the ability to use existing infrastructure built by the three big providers: Rogers, Bell and Telus.

There were also preferred options to buy future spectrum at a discounted price. It worked, at first, as carriers like Public Mobile, Mobilicity and WIND Mobile emerged starting in 2010.

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Ultimately, the government wanted to see a fourth national wireless carrier go toe-to-toe with Rogers, Bell and Telus.

Mobilicity was eventually taken over by Rogers, however, and Public Mobile went to Telus. But a sell-off of broadband spectrum last year opened the door for a takeover of WIND Mobile by Shaw Communications, finally providing the fourth competitor Ottawa sought.

Alek Krstajic—the founder and former CEO of Public Mobile — is now WIND’s CEO. He vehemently disagreed with Masse’s suggestion that his company will be forced to increase its upstart prices in order to pay for the infrastructure upgrades it needs to compete with the ‘big three.’

“But we have been really, really clear … our cost to build the entire network where we operate, a whole new LTE network so that we could be on par with the incumbents, is $250 million. That’s already been budgeted and most of it is all well under way to being spent.”

READ MORE: Shaw completes deal for Wind Mobile

Krstajic added that the cost of equipment, like the cost of electronics themselves, has “come way, way down” in recent years, making WIND’s expansion more affordable.

Krstajic, who admittedly has a vested interest in government helping new entrants like WIND, said he firmly believes Ottawa has a role to play in wireless – particularly when it comes to doling out spectrum.

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“Governments tend to want to have a light touch wherever possible and let the free market prevail. That was the case in wireless for 20-some-odd years … (and) we have the highest prices in the free world.”

Liberal plan still murky

The Liberal government, meanwhile, still seems to be mulling its policy options when it comes to wireless. A spokesperson for the office of Innovation, Science and Economic Development Minister Navdeep Bains said Ottawa will “continue to support competition, choice and availability of services, and to foster a strong investment climate,” but offered no specifics.

“The Government understands the need for accessible, reliable and affordable telecommunications services. In our Innovation Agenda consultations we are hearing from many Canadians how important wireless and internet services are to their lives and their businesses,” added Philip Proulx.

But lawyer and former CRTC commissioner Timothy Denton is arguing that no less than a complete system overhaul is needed. Ideally, he said, there should be universally shared infrastructure.

“It’s as if you bought a car and certain kinds of cars had to use certain kinds of highways,” Denton said.

“British Telecom provides common infrastructure on which cable, telephone and every other kind of competitor runs their service. You mention it here, and as usual, the people paid to go ballistic, go ballistic.”

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Denton included other tips for driving down prices in a recent blog post, including a suggestion that the CRTC should be “regulating to targets.” In other words, telling regulated companies that Canada will drive its telecom prices toward international prices, whatever it takes.

Price check

In the meantime, are Canadians really getting a bad deal on their monthly bills compared to consumers around the world?

The recent CRTC report confirmed that we definitely pay the most for entry-level wireless service (average of $41.08) in the G7. In Germany, where entry-level service is the least expensive, people pay $17.15 on average.

Still, the report did not measure the quality of the networks in various countries, and few Canadians use the basic packages. We’re big  consumers of data, Masse said, and more complex data plans in Canada actually cost less than they do in Japan or the United States.

This has remained largely unchanged for years, he noted.

– With files from the Canadian Press.

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