Executive summary of the Bureau’s submission to the CRTC on mobile wireless services
Competition Bureau proposes wireless policy to lower prices for Canadians
This proceeding is an important opportunity to ensure that Canadians can access affordable and high-quality wireless services. The Canadian Radio-television and Telecommunications Commission (CRTC) initiated this proceeding to ensure their regulatory framework facilitates “sustainable competition that provides reasonable prices and innovative services, as well as continued investment in high-quality wireless networks in all regions of the country.” As a key driver of these outcomes, competition is at the forefront of this proceeding.
In this submission, the Competition Bureau (Bureau) aims to provide the CRTC with advice on enhancing wireless competition based on a principled and evidence-based assessment of the state of wireless competition in Canada. To this end, the Bureau and its economic expert have conducted in-depth analyses of Canadian wireless competition using extensive confidential data from Canadian wireless carriers. Additionally, the Bureau has completed an extensive scan of international wireless markets in order to inform its recommendations.
The findings of the Bureau and its economic expert can be summarized as follows:
Bell, Telus and Rogers (the Big 3) possess market power at both the retail and wholesale level in most regions in Canada. The Canadian wireless market is highly concentrated in the hands of three players who enjoy high levels of profitability compared to both their international and domestic peers.
Where the Big 3 face a wireless disruptor, prices are significantly lower. Facilities-based regional competitors who operate their own wireless networks, such as Sasktel, Videotron and Freedom Mobile, are increasingly disrupting the Canadian wireless landscape. Prices are in the range of 35-40% lower in the parts of Canada where wireless disruptors have achieved a market share above 5.5%.
Wireless disruptors offer the most promising path forward. They drive lower prices, greater choice and increased levels of innovation in Canada over the long term. As opposed to service-based Mobile Virtual Network Operators (MVNOs), who are necessarily beholden to incumbents’ networks, these regional disruptors have the required independence and infrastructure to act aggressively to fight for their share of the pie.
Canadians could save substantially through more competition from wireless disruptors. While many Canadians are increasingly benefitting from competition driven by wireless disruptors, the full effects of a more competitive wireless industry have not yet been experienced. The Bureau’s research finds that promoting the growth and expansion of wireless disruptors, even to reach only 5.5% market share, has the potential to deliver significant price reductions. The benefits are much higher if regional carriers can attain a market share of 20%.
MVNOs can drive lower prices and greater choice, but they also could threaten the demonstrated progress in enhancing competition in this industry to date. While MVNOs can have positive effects on pricing in the marketplace, they are unlikely to deliver the benefits of sustained and vigorous competition that facilities-based wireless disruptors are capable of providing. The Bureau is concerned that the introduction of MVNOs would disproportionately affect these wireless disruptors, putting at risk the positive effects that they have had on pricing, and may impact long-term incentives to invest in high-quality networks in Canada.
The CRTC should adopt an MVNO policy that is temporary and focused on incentivizing and accelerating facilities-based competition from disruptors. The CRTC should allow wireless disruptors to act as MVNOs as a transitional step to becoming full-fledged facilities-based providers as they continue their expansion. This would ensure that the progress made by these providers to date will continue to pay dividends to Canadians. An investment-based MVNO policy achieves the goal of spurring additional price competition from wireless disruptors in the short term, while avoiding the risk of declining network quality in the long term.
Additional measures can also improve the level of competitive intensity in the Canadian wireless market. Measures aimed at lowering barriers to entry and reducing switching costs would support greater competition in the Canadian wireless marketplace. These measures include mandated seamless handoff, more effective tower sharing and site access rules, and updated roaming rates that better represent the current marketplace.