Freedom Mobile, Videotron, Eastlink and other regional mobile network operators would be weakened if they have to face a new type of virtual rival that only needs to rent network capacity, the Competition Bureau said Tuesday.
The bureau made its assessment at the opening of nine days of public hearings being held in Gatineau, Que., by the Canadian Radio-television and Telecommunications Commission.
The CRTC is proposing to make it easier for mobile virtual network operators, also known as MVNOs, to become viable businesses that can put competitive pressure on Canada’s three national carriers — Rogers, Bell and Telus.
Historically, successive Canadian governments and the CRTC have favoured facilities-based network operators, including the Big Three and the regional carriers, because they build the country’s telecom infrastructure. In contrast, mobile virtual network operators primarily rent their network capacity wholesale and resell service to retail customers.
Last year, the CRTC departed from its usual approach and took the preliminary view that MVNOs should get mandatory access to the networks of the Big Three mobile carriers — which operate under their own names and flanker brands such as Fido, Virgin and Koodo.
However, a Competition Bureau panel told CRTC commissioners on Tuesday that a policy that encourages the broad adoption of MVNOs could actually set back efforts to have at least four facilities-based competitors per market.
“Facilities-based competition from wireless disruptors is creating a marketplace where Canadians can enjoy the benefits of competition, including lower prices and more choice,” Matthew Boswell, Canada’s competition commissioner.
“The evidence we analyzed painted an encouraging picture of the significant progress made since the CRTC’s last wireless review five years ago.”
“Five years ago, Videotron had around 10 per cent of Quebec’s subscribers and Freedom, formerly Wind Mobile, was approaching 800,000 subscribers. Since then, both of those numbers have nearly doubled.
“Further, the evidence demonstrates that the Big Three are clearly responding to competition from facilities-based disruptors.”
Data rates and regional carriers
Research done for the bureau by consultant Tasneem Chipty, who also spoke Tuesday, estimates Canadians spend an average of 10 per cent less per gigabyte of data in areas where regional carriers have 5.5 per cent of the market.
Chipty’s research also found that the benefit increased to a 65 per cent saving when disruptors had 20 per cent of a market.
But, Boswell added, these advances are at risk if the CRTC requires the Big Three to give broad access to virtual network operators that target the same type of price-conscious consumers that chose regional disruptors.
“Dr. Chipty calculated that just for Freedom, if their forecasted growth were to slow by 25 per cent, it could amount to a savings loss of around $234 million annually due to unrealized price reductions for consumers,” Boswell said.
“For these reasons, to adopt a broad MVNO policy at this stage is a risky bet, when the evidence demonstrates that the entry and expansion of wireless disruptors will continue to pay off for Canadians.”
As an alternative, the Competition Bureau is using a time-limited MVNO model in very specific situations — including when a regional disruptor such as Freedom wants to enter a new market before building its own infrastructure.