The Liberal government is giving Canada's big three national wireless providers two years to cut their basic prices for cellphone services by 25 per cent — and telling them it will step in to cut prices if they don't comply.

Innovation, Science and Industry Minister Navdeep Bains issued the ultimatum today along with new spectrum auction rules that could open up Canada's wireless market to new competition.

"Yes, affordability is a challenge and we need to see lower prices," Bains told CBC news.

Bains said the government expects Bell, Telus and Rogers to reduce the cost of their 2 to 6 gigabyte data plans by 25 per cent within the next two years. That would mean offering a talk, text and data plan costing less than $40 monthly.

The mandated reduction would apply only to post-paid plans where consumers already own their devices or purchase a new one at full price.

The government has set benchmarks for specific plans based on market prices in early 2020. Bell, Telus and Rogers will be expected to lower their prices within the next two years.

The price reductions for the three national carriers could look like this:

2 GB plans that currently cost $50 would drop to $37.50.

4 GB plans that cost $55 would drop to $41.25.

6 GB plans that cost $60 would drop to $45.

The government said it will track and publish trends in mobile plan prices every quarter, using data from Statistics Canada. If, at the end of two years, wireless companies fail to reduce their prices, the government would introduce regulatory measures to bring about those price cuts.

Innovation, Science and Industry Minister Navdeep Bains spoke to the CBC on Mar. 5, 2020, in Toronto about the Liberals' measures to cut Canadian cell phone bills. (Shawn Benjamin/ CBC)

Bains didn't offer many specifics but said those legislated measures could include compelling Canada's national carriers to sell network access at a set price to discount carriers, or reconsidering the way the government deploys wireless spectrum.

"There's accountability measures in place," Bains said. "And if they are unable to meet that 25 per cent reduction commitment, we'll look at additional regulatory measures."

Bains also released a long-awaited price comparison study that shows prices have fallen over the last couple of years — but wireless services in Canada still rank among the most expensive in G7 countries.

That 2019 study also showed that, within Canada, regional brands like Freedom Mobile, SaskTel, Videotron and EastLink offered plans that were on average between 12 and 45 per cent cheaper than those offered by national providers.

The big three firms own budget brands (Bell's Virgin, Rogers' Fido and Telus' Koodo) that also offered data packages consistently cheaper than the major services — except when it came to plans of 10 gigabytes or larger.

Overall, the study cautions these numbers don't account for the "unlimited plans" introduced in late 2019.

The Canadian Wireless Telecommunications Association, the organization that represents the industry, issued a statement saying that prices are declining and have fallen further since carriers introduced unlimited data plans.

"Our members will continue to compete to win the business of Canadian consumers and deliver what has been recognized by a recent U.S. independent study as the highest mobile value among the G7 nations plus Australia," said the statement on behalf of the organization's CEO, Rob Ghiz.

Rogers spokesperson Sarah Schmidt didn't comment directly on today's announcement but said in an email her company will "always evolve [its] services to meet the needs of Canadians."

New spectrum auction rules

In a long-term bid to inject more competition into the market, the government also announced today that it would reserve space for regional providers in the upcoming 3500 MHz spectrum auction. The Liberals have said in the past that reserving space for small and regional companies has opened up the wireless market and led to lower prices for consumers.

Bains' announcement comes after the Canadian Radio-Television and Telecommunications Commission (CRTC) wrapped up nine days of hearings last month into whether Canada's wireless system is serving Canadians well.

At the hearings, Canada's national carriers opposed government intervention in the market to force them to sell network access to small providers known as Mobile Virtual Network Operators, or MVNOs. These MVNOs have been shown, in some cases, to offer cheaper plans, although Canada's large carriers disagree.

While affordability advocates applauded the proposal, the big three firms warned the CRTC that such intervention could come with consequences, such as reduced investment, job cuts and court action.

Bains today said the Liberals would not prejudge the CRTC process.

WATCH | More about the CRTC's 2020 wireless review process