Canada cannot support 4th carrier; Telus

GATINEAU, Que. - Canada should heed the lessons learned in Europe about adopting rules intended to keep wireless prices low, the former head of Austria's telecom regulator has told the CRTC.

European companies are now living with the unintended consequences of stimulating increased competition to keep consumers happy, Georg Serentschy said as hearings continued Tuesday into the health of Canada's wholesale wireless market.

Forcing lower prices in the short term, he said, has resulted in Europe having among the slowest and least reliable wireless networks in the industrialized world.

"Europe's telecoms industry — and its entire digital ecosystem — is suffering because over the last two decades European telecom regulators have created rules intended to keep wireless prices low by stimulating increased competition," said Serentschy.

And if Canadian consumers are not happy with the prices they pay wireless providers now, they would be even more upset with a reduced quality of service, he said.

"I encourage Canada's regulator not to recycle Europe's failed policies, but rather to learn from them," he added.

Serentschy appeared as part of a panel from Telus Corp. (TSX:T), which called on the regulator to maintain its support of the current model.

Telus executives told the hearings there's a reason why Canada enjoys the third-highest rate of smartphone penetration in the world.

"Canada's wireless networks are among the fastest and most reliable in the world,” said Telus president and CEO Joe Natale.

Canadian wireless users experience speeds more than twice the typical speeds in Germany and Italy, three times the average speeds offered in the United States and France, and nine times faster than in the U.K., he said.

"This is no accident. It's the result of a regulatory framework which has stimulated Canadian telecoms to lead the world in private sector wireless investment."

On Monday, the CRTC heard from the Competition Bureau, which called for new wireless regulations designed to entice a new, fourth national wireless carrier into Canada in order to increase competition and reduce prices.

Industry Minister James Moore has said he'd like to see a fourth wireless firm in the market to compete against Telus, Rogers (TSX:RCI.B) and BCE (TSX:BCE).

But Serentschy questions whether Canada, with a population of roughly 35 million people, could support a fourth carrier when Germany and its 81 million people could not.

Adopting new regulations to make allow for a fourth major carrier, he said, would be like "introducing a problem to fix a solution."

The Competition Bureau, however, told the Canadian Radio-television and Telecommunications Commission there is evidence of the big three wireless carriers stifling competition.

"An additional nationwide carrier would increase choice, expand mobile wireless penetration in Canada . . and drive down the incumbents' average retail prices by about two per cent," bureau senior economist Patrick Hughes told the hearings on Monday.

The CRTC is considering adopting regulations aimed at capping the wholesale rates cellphone carriers charge other wireless companies so their customers can roam outside of their home networks.

The Harper government has already passed legislation capping the rates carriers can charge on a wholesale basis at no more than what they charge their customers at the retail level.

However, CRTC chairman Jean-Pierre Blais said Monday the rate cap is an interim measure, pending the outcome of this week's hearings.