Consumers should welcome the end to a four wireless players policy

With Shaw Communications’ acquisition of Wind Mobile last March, supporters of the previous federal government’s “fourth wireless player” policy must have been popping champagne corks. Indeed, this transaction was the culmination of the government’s decade-long effort to bring about a fourth player in every region of the country. With Shaw entering the wireless business, Canadians from coast to coast would now have at least one viable alternative to the so-called “Big Three” of Bell, Telus and Rogers.

Such celebrations, however, would have been premature. Last week, BCE announced it had struck a deal to acquire Manitoba Telecom Services, Manitoba’s incumbent provider. The BCE-MTS deal would bring the number of wireless players in Manitoba down from four to three, against the letter and spirit of the fourth-player policy. But does it necessarily constitute a bad deal for consumers?

Many Manitobans appear to think so and have voiced concerns their wireless bills might rise. It is true that Manitoba wireless bills are currently among the country’s lowest. But that situation is likely unsustainable and explains why MTS was in a precarious financial situation and a prime acquisition target.

From another perspective, it can be argued that the Bell-MTS deal is good news for consumers. Post-transaction, Manitoba will have three – rather than two – large wireless competitors. Indeed, MTS and Rogers currently dominate the province’s market, with a combined wireless market share of about 84 per cent, whereas Bell and Telus have limited presence and outdated infrastructure.

As the proposed transaction includes the sale of about one-third of MTS’s and Bell’s Manitoba customer base to Telus, it will allow not only Bell, but also Telus, to become important wireless players in Manitoba. This could lead to more competition, not less.

The deal also means increased network investment. Bell has announced that it plans to spend $1-billion over the next five years to upgrade the MTS network. This will give Manitobans access to better networks, improved data speeds and more innovative media platforms.

More importantly, the proposed transaction appears to signal the end of the fourth-player policy, born in 2008 based on the Conservatives’ belief that regulatory interventions were needed to improve competition and service quality, and reduce prices.

The founding premises of the policy were inaccurate: Canadians already enjoy quality wireless services at reasonable prices. Canadian penetration and usage rates for newer wireless technologies such as tablets, smartphones and LTE connections are among the highest for industrialized countries, and Canadians benefit from some of the most advanced and efficient wireless services in the world.

As for prices, they are generally higher than in Europe, but lower than in the United States and Japan. And beware of the European example: Telecom price wars in many European countries have resulted in weak and unprofitable providers, falling capital expenditures and a lagging deployment of new technologies. This has led to consolidation, with many countries going from four to three providers in recent years. Just as in Manitoba.

The fourth-player policy has also delayed by several years the use – or the more efficient use – of spectrum frequencies that were wasted on failed companies such as Public Mobile and Mobilicity or that were simply unused, such as Vidéotron’s licences outside of Quebec.

The main beneficiaries of the fourth-player policy have actually been the shareholders of Wind Mobile and Public Mobile, who arbitraged their government-subsidized spectrum to secure a windfall, and Vidéotron, which might do the same.

Moreover, the purported benefits of having a fourth player across Canada might ultimately prove dubious. In the case of Wind, upgrading its network to LTE is expected to require hundreds of millions of dollars of investment. This is surely why Shaw chief executive Brad Shaw, when asked about Wind’s pricing going forward, stated that it would be “somewhat discounted, but probably closer to the incumbents as we go forward.”

In any event, with Shaw’s recent entry in the wireless business, Canada’s new wireless entrants are no longer small, poorly capitalized companies that need to be protected by the CRTC and Industry Canada. The country should return to a regime of light-handed regulation, with a renewed focus on fostering a competitive environment that is conducive to innovation and investment. Approving BCE’s acquisition of MTS and abandoning the fourth-player policy would be a good start.

Martin Masse et Paul Beaudry, respectivement rédacteur-réviseur principal et chercheur associé à l'Institut économique de Montréal, et auteurs de L’état de la concurrence dans l’industrie canadienne des télécommunications – 2016.