Expert says CRTC’s data plan proposals for telcos are ‘misguided’

This week, the Canadian Radio and Telecommunication Commission has been holding a review with major Canadian network operators to discuss the affordability and state of competition of the mobile domain in Canada.

Between Feb. 18th to Feb. 28th, executives from Bell, Telus, Shaw Communications, Cogeco, Distributel, and others will discuss significant proposals made by the CRTC to lower mobile costs in Canada.

The hearing is the first step in determining whether the CRTC should implement certain policies across the industry.

In September 2019, Canada’s Prime Minister Justin Trudeau and the Liberal party promised that they would reduce the cost of cellphone bills by 25 per cent for Canadians as a part of their campaign promise.

So far, the hearing has been centred around seamless roaming, a mandated affordable cellular plan for all, and the potential for mobile virtual network operators (MVNO) in Canada to foster competition.

Mandated affordable data plan for all

The telcos were against having the CRTC enforcing a mandatory affordable data plan. Bell cited that its flanker brands such as Lucky mobile already fulfill budget options in the $20 to $30 range, which makes CRTC’s considerations excessive. Also, many Bell subscribers are receiving discounts on their plans.

“I can tell you that almost half of our consumers today on the Bell brand as an example are coming on a share plan,” said Claire Gilles, president of Bell Mobility during the hearing. “[Bell’s] share plans today offer a $10 discount in the market. So if you just take that, it’s easily more than half of all consumers are receiving some form of a promotional discount, just on their service pricing alone, let alone the hardware and various related hardware promotions that go along with that such as gift cards.”

Bell said that it specifically compartmentalizes marketing for each of its brands. Referencing other brands through Bell’s site, while raising more awareness for these cheaper options, obfuscates each brand’s identity.

The CRTC has been exploring various options to lower cellular plan costs in Canada. One proposal is to have carriers provide a 4GB data plan between $20 to $30 a month. But telecom consultant Mark Goldberg believes that this plan is impractical.

“I think they’re [CRTC] misguided,” said Goldberg in an interview with IT World Canada. “One of them calls for a $25 to $30, four-gigabyte plan, which simply doesn’t make any economic sense. First of all, at four gigabytes, it’s double what the average usage is in the market.”

Goldberg said the repricing effects of such an approach would distort the market and result in massive job losses due to the financial hit on the carriers. Moreover, he pointed to the federal government’s role in driving up mobile costs:

“Canada’s spectrum [license] costs are outrageously higher than everywhere else on the planet. So the federal government is contributing 12 per cent. Twelve per cent of your phone bill is not the amount paid for spectrum, but it’s the amount paid for spectrum higher than what the spectrum should be charged. We’re not saying ‘remove the amount that goes to the government for spectrum’; bring those levels down to normal. That would cut bills by 12 per cent.”

According to Opensignal, Canada’s mobile download speed averages to 55.4 Mbps.

Despite its high costs, Canada has one of the fastest networks in the world, second only to South Korea. In Opensignal’s bi-annual network quality report, Canada’s big three network providers all earned top scores in latency, download and upload speeds. Telus was named the best carrier for having the highest quality of service compared to Bell and Rogers.

Does Canada need mobile virtual network operators?

Currently, rivalries in the telecom space have been between facility-based operators. Unlike virtual operators, facility-based operators install their infrastructure and purchase spectrum licenses to provide service. National operators – Bell, Rogers, and Telus – often compete against regional operators like SaskTel in Saskatchewan and Freedom Mobile (formerly Wind) in Ontario for clientele.

If the CRTC were to introduce MVNOs, then facility-based operators would need to rent out a portion of their network to these resellers, who would then rebrand the service as their own. It would also provide a potential opportunity for foreign MVNOs, such as Google Fi, an entry point to Canada.

Shaw-owned Freedom Mobile has been rapidly expanding its coverage across Canada.

One can look towards broadband internet for an example of such a plan in action. Under the CRTC’s rules, Bell and Rogers must loan out a portion of their networks to regional virtual ISPs like TekSavvy, who pay a reduced wholesale price to the infrastructure owners at a rate set by the CRTC.

Bell recently submitted an appeal to the federal court to revert CRTC’s wholesale price reductions set on Aug. 15, 2019.

Throughout the hearing, the telco panels unanimously maintained that regional carriers drive enough competition against the national providers and that MNVO interventions could impede competitive progress.

“We have yet to make a return on wireless,” said Trevor English, chief financial officer of Shaw Communications. “We are growing our subscribers and revenue. We continue to invest more money than we make, given the size and nature of the upfront and ongoing investments required…If the commission abandons its current path and chooses broad resale, our ability to realize a return goes from being challenging to being impossible. ”

In March 2016, Shaw Communications acquired Wind for $1.6 billion and subsequently rebranded it to Freedom. Since then, it has invested about $24 billion into the business and continues to spend $400 million a year to expand Freedom’s network across Canada. Additionally, it has spent about $500 million in last year’s 600Mhz spectrum auction.

Darren Entwistle, Telus chief executive officer, said that it would cost the company about $1 billion and cut 5,000 jobs in yesterday’s hearing.

“[CRTC’s last round of rates] have caused the major carriers to pull back on their investment because it simply isn’t profitable for them to continue to invest under the terms that were laid out by the regulator,” said Goldberg. “The CRTC needs to decide, based on the evidence, whether a failure in the marketplace exists and what would be the appropriate remedy to that failure. And based on the evidence that we’ve seen, it’s not clear that that there’s a failure.”

Ian Fogg, VP analyst of Opensignal, underscored the complexity of MVNOs and its uncertainties.

“MVNOs are an incredibly complex thing to do because they require very careful regulation or you risk unintended consequences. For example, customers being stuck on a legacy generation technologies…or the operators that own the infrastructure not having a good business case to invest in the latest technology because they aren’t making as much money anymore.”

In addition, Fogg said that forcing an MVNO could hurt expanding telcos like Freedom Mobile by restricting its ability to compete.

While the Canadian Competition Bureau believes that there are competitive issues at hand, it also favours facility-based competition. In a press release, the Bureau recommended a facility-focused MVNO model as opposed to a broad approach. It argued that a broad MVNO policy could create unreasonable advantages for virtual operators.

The Bureau also highlighted the progress made by regional carriers. Both Videotron and Freedom Mobile have nearly doubled their tenants in the past five years.

“To conclude, the Bureau recommends a policy focused on encouraging and incentivizing facilities-based competition from the existing wireless disruptors,” said the Bureau’s press release.

The Canadian Competition Bureau also submitted a list of recommendations to the CRTC outlining the cellular competition in Canada.

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Jim Love, Chief Content Officer, IT World Canada

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Tom Li
Tom Li
Telecommunication and consumer hardware are Tom's main beats at IT World Canada. He loves to talk about Canada's network infrastructure, semiconductor products, and of course, anything hot and new in the consumer technology space. You'll also occasionally see his name appended to articles on cloud, security, and SaaS-related news. If you're ever up for a lengthy discussion about the nuances of each of the above sectors or have an upcoming product that people will love, feel free to drop him a line at [email protected].

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