The government’s actions are “too little and too late,” according to one industry observer who said capping roaming rates at this point will only benefit very few mobile customers of independent providers.

Industry Minister James Moore said on Wednesday that the government will be making legislative changes that will prevent Canada’s big three wireless providers from charging smaller carriers exorbitant mobile roaming fees.

“Currently, high domestic roaming rates hold back many providers, especially new entrants from offering more choice, lower prices and better services to Canadians,” he said in statement. “The roaming rate that Canada’s largest wireless companies are charging domestic providers can be more than 10 times what they charge their own customers.”


He said that in the coming weeks, the government will introduce an amendment to the Telecommunications Act that will put a cap on domestic wireless roaming rate. This will prevent companies like Rogers Communications, Bell Canada and Telus Corp. from charging other providers more than they charge their own customers for mobile voice, data and text services.

The measure will be in place until the Canadian Radio-television and Telecommunications Commission (CRTC) can make a decision on the roaming rates issue.

The CRTC has launched an investigation on wholesale roaming rates in the country with the goal of determining if the country’s big three wireless carriers are charging excessive rates to smaller providers for the use of their networks.

Moore’s announcement signals that Ottawa is serious about competition and is taking realistic actions to combat the excessive domestic roaming charges that the country’s largest wireless companies have been charging competitors and passing along to Canadian consumers, according to Simon Lockie, chief regulatory officer of startup wireless service provider Wind Mobile.

“Today’s announcement will help ensure more competition and more choices for Canadians,” Lockie said. “Wind paid over $440 million for its spectrum licences – where the Big Three got most of theirs for free – and has since invested more than $1 billion building out a network faster than any company in the history of Canada, and we are just getting started.”

At least one industry observer believes the Conservative government’s move fall short of what is needed to foster healthy competition in the telecom space.

“While in theory, such a move should help new entrants, to the detriment of incumbents, especially if Industry Canada says that wholesale rates can be as much as 10x retail rates charged by incumbents, we continue to believe that this is too little too late,” said Dvai Ghose, managing director of investment bank, Canaccord Genuity. “We do not believe that this is a big deal, as all carriers seem to have successfully implemented the Code already.”

Rogers is the main incumbent provider of wholesale new entrant roaming services, but we assume that it only generates $50 million or less in domestic roaming revenue, according to the Toronto-based Canaccord.

The company expects to generate $6.8 billion of network revenue in 2013, implying that domestic wholesale roaming revenues are largely immaterial.

The market has clearly brushed aside this announcement thus far, as shown by the 1 per cent increase in incumbent wireless stocks after the announcement, according to Ghose.

While implementation of the code will lead to some increased costs, ironically, this would seem more of an issue for struggling new entrants than successful incumbents, he said.

Ghose said small mobile service providers are quickly disappearing in Canada. For instance, Public Mobile was recently acquired by Telus, Mobilitcity is currently operating under the protection of the Companies’ Creditors Arrangement Act (CCAA) “and could cease to exist in the near term if Industry Canada continues to block a sale to Telus”

“Wind Mobile is the only surviving independent new entrant, but we wonder if lower domestic roaming rates will really encourage VimpelCom to invest in Wind,” he said.

Ghose said an investment by VimpelCom is unlikely now because:

  • Winds results to date are very disappointing
  • Jo Lunder, VimpleCopm CEO, has announced he wants to exit Canada
  • Any changes to the domestic roaming rates can be done only after the January 2014 700 MHz spectrum auction and will require an amendment of the Telecom Act

“In our view, the only potential beneficiaries may be Videotron and EastLink customers when they roam off-net,” Ghose said. “Videotron charges $0.30/min. and $2/Mb for domestic roaming, but EastLink recently eliminated such fees.”

Moore also announced new enforcement measures meant to increase consumer protection.

The government will amend both theTelecommunications Act and the Radio communication Act to give the CRTC and Industry Canada the option to impose monetary penalties on companies that violate established rules such as the Wireless Code and those related to the deployment of spectrum, services to rural areas and tower sharing.

 

 

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