ISPs push to be allowed in to the game, while the large providers say costs have already come down

Prime Minister Justin Trudeau signalled Friday that his government is ready to take aggressive action to force more competition for cellphone service in Canada.

In his mandate letter to Innovation, Science and Economic Development Minister Navdeep Bains, Trudeau said that the government is committed to building more competition through mobile virtual network operators (MVNOs).

Distroscale

An MVNO is the cellphone equivalent of the small internet service providers who buy access to the big telecom networks at wholesale rates and then sell internet service to customers.

In February this year, the Canadian Radio-television and Telecommunications Commission announced a regulatory proceeding to look at the issue of MVNOs.

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“It is the Commission’s preliminary view that it would be appropriate to mandate that the national wireless carriers provide wholesale MVNO access as an outcome of this proceeding,” the CRTC said then.

“The Commission considers that, on balance, it is likely that the benefits that a well-developed MVNO market would deliver to Canadians are now more likely to outweigh any negative impacts that a policy of mandated wholesale MVNO access might have on wireless carriers’ network investments, particularly given the extensive investments that have been made in recent years.”

During the fall election campaign the Liberals promised to lower cell phone bills by 25 per cent, and in the Throne Speech last week, the government doubled down on that promise.

“If within two years this price target is not achieved, you can expand MVNO qualifying rules and the Canadian Radio-television and Telecommunications Commission mandate on affordable pricing,” Trudeau’s letter to Bains said.

Bains would not answer questions from the Financial Post Friday.

Already, independent ISPs are eager to become cellphone service providers, just as soon as the CRTC creates rules that will allow them to get in the game.

That tells me they’re expecting things within two years. I read urgency in this. Matt Stein, CEO, Distributel

“About half of what Canadians spend on their telecommunications services is wireless, and we’d like to continue to bring the competitive services that we offer on the wire-line side to wireless,” said Matt Stein, CEO of Toronto-based Distributel.

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He said the signal the government is sending is optimistic.

“That tells me they’re expecting things within two years,” Stein said. “I read urgency in this.”

Janet Lo, vice-president of privacy and consumer legal affairs at Teksavvy, said that her company will also jump into wireless service, just as soon as there’s a regulatory framework forcing the big telecoms to offer wholesale access to their networks.

“We hear every day our customers asking us if we can be their cellphone provider,” Lo said.

In a note to investors after the election, Scotiabank analyst Jeff Fan suggested that the price target might not be all that significant, because prices have already been dropping even without MVNOs.

“We think the 25 per cent price reduction promise has already been achieved. The 25 per cent proposed reduction in the Liberals’ document is based on outdated ‘current’ prices,” Fan wrote.

Michael Geist, Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, said the most significant thing about the mandate letter might be a signal that the federal government is no longer willing to let the CRTC dictate policy, and if the Liberal government doesn’t like the way things are going, they’ll issue a directive to the regulator to push for more competition.

“I think the debate over whether the Canadian market is sufficiently competitive is over in the government’s mind. It knows it isn’t and wants steps taken to address it,” Geist said in an email to the Financial Post.

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The Canada Wireless Telecommunications Association, which includes Rogers Communications Inc. and BCE Inc. as members, also pointed out that prices are dropping, and said “vigorous competition” among the big three telcos is the reason.

The CWTA said that introducing MVNOs into the market could actually be a bad thing, given that carriers are investing billions in their networks every year.

“Government action mandating MVNOs could put this at risk, put Canada behind on 5G, and harm investment in services to Canadians, especially those in rural communities,” Robert Ghiz, president and chief executive of the CWTA, said in an emailed statement.

In an emailed statement, Rogers didn’t specifically address the MVNO issue, but pointed out that it has already been cutting prices, citing intense competition.

“Over the past five years, the cost of data across Rogers brands has decreased 50 per cent,” the company noted.