Wireless services: The CRTC should not favour resellers

Montreal, November 9, 2017 – By asking the CRTC to favour resellers of wireless services, Innovation Minister Navdeep Bains runs the risk of discouraging investment in the telecommunications industry, all while creating a new category of privileged players protected from competitive pressure, shows an Economic Note published today by the MEI.

After having encouraged, for the past ten years, the emergence of a fourth player with its own network in every region of the country, Ottawa now wants to allow resellers, which are small businesses with no network of their own, to benefit from the mandated sharing of the networks owned by wireless providers.

The reasons offered by the minister to justify a regulatory change are groundless. “It is just not true, despite what Minister Bains says, that Canada lags behind other industrialized countries in terms of adopting new technologies,” explains Martin Masse, co-author of the publication. “On the contrary, international comparisons show that Canadians are among the biggest users of data, those who use smartphones the most, and those who are most likely to be connected to the fastest network.”

This request by the Minister follows a dispute between Rogers and a reseller, Sugar Mobile, whose clients use their devices primarily by connecting to private and public Wi-Fi networks. The Minister wants the CRTC to expand the definition of a network to include Wi-Fi. This would allow resellers like Sugar Mobile to access the networks of facilities-based providers at regulated rates, even if they themselves possess no infrastructure.

If the CRTC were to favour resellers in its decision, the consequences for the industry, and ultimately for consumers, would be considerable. “A policy aimed at propping up small players without a profitable business model by giving them privileged access to the resources of other providers runs the risk of discouraging the owners of infrastructure from investing and innovating, because they will have to share the resulting benefits,” notes Paul Beaudry, co-author of the publication. “Such a policy would also not encourage resellers to invest in order to build their own infrastructure, since they would be able to piggyback on someone else’s at prices guaranteeing them a margin of profit.”

Resellers of wireless and wireline Internet services account for only a tiny fraction of all infrastructure investments made every year by telecommunications companies. Over the past few years, they have invested on average $30 million a year, versus $11.3 billion for national and regional providers that possess their own infrastructure.

“Over a decade ago, the federal government instructed the CRTC to rely on market forces to the maximum extent feasible. Today, it is sending the opposite message by asking the regulator to undermine property rights, market forces, and sound competition. Canadian consumers will clearly be better served if the CRTC informs the minister, after reviewing his request, that it sees no need to modify its rules,” concludes Martin Masse.

The Economic Note entitled “Wireless Services: Should Regulation Favour Resellers?” is signed by Martin Masse, Senior Writer and Editor at the MEI, and Paul Beaudry, Associate Researcher at MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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