Just shy of a couple weeks ago, our contributor Dan released a blog about Telco abusing certain liberties with a specific focus on the Canadian telecom market. This topic has become a subject of much debate as journalists have set sights on Canadian wireless providers. Writers, bloggers and reporters are stirring up consumers by pointing out the harsh facts of pricing schemes mandated by major players Bell, Rogers and Telus. Compared to the rest of the world, Canada has some of the highest prices for communications in the world.
Collectively, these three titans of the northern component of the Americas own a vast majority of the market. By having such a vast customer base, this enables the companies to control pricing on services as a coalition that behaves much like a monopoly from the perspective of the consumer. The existing policy for telecom ownership could be very detrimental to the Canadian telecom market as a whole with other possible negative consequences stemming from the current state of market rules.
A new contender
New prospects are potentially on the rise for the Canadian wireless consumer. Verizon Wireless, the American adaptation of the joint wireless venture between Vodafone and Verizon Communications, is the largest providers (based on the number of subscribers) in the United States. Now the company seemingly has Canada targeted for an invasion.
Verizon has offered to buy start-up communication provider WIND Mobile as well as another provider Mobilicity, which is also in a beginning stage of business. This would give the company leverage by gaining a small customer base from the launch of its Canadian sector. However, there is much more at stake where Verizon could take advantage as it is a foreign business and potentially become the best of the bunch.
Verizon would qualify as potential purchaser for a pre-allocated broadband spectrum. The major three providers are currently forbidden from entering the auction space where this commodity will be sold. In doing so, Verizon could quickly become a major contender against those currently reigning in the wireless communication market.
Movement for change in telecom
The prospect of Verizon moving into Canadian territory has ruffled the feathers of the big players. Obviously, Verizon is a major threat and could mean drastic changes in the telecom sector as a whole. Fortunately for the consumer, either way this is exactly the angle needed to lower prices in the market.
The Communications, Energy and Paperworks Union (CEP) of Canada has issued a formal statement against this action in response to letter sent last week from the Canadian Council of Chief Executives. Both parties have requested the Canadian government to change its policy against foreign ownership rules in the telecom sector. Not surprising, Jon Manley who is the CEO of Telus, signed the letter on behalf of the latter group.
It’s not surprising that Verizon finds the Canadian market appealing, though it is a fraction of the size of the US market. The mere proposal of another contender, one with deep enough pockets to create competition has done just that by showing interest as another participant in the communication service provider sector. Consumers are rallying to reinforce the subtle taunting of Verizon in hopes change will occur in their best interest.
Even if Verizon were not truly interested, this could lead to a reform in the wireless communication market. Now the very companies which previously enjoyed benefits from a mostly unregulated market are crying out for a reform to “protect the consumer.”
The future, with or without Verizon
Should the government choose to ignore the pleas of the anxiety ridden CEOs, Verizon will probably sign the $700 million check to purchase WIND to get their foot in the door with a pre-established customer base. Next, the company will be able to purchase the unused blocks of broadband spectrum at a low premium, allowing for a solid infrastructure to be established for wireless service. This will create the building blocks for a solid service, likely better than the notoriously poor service offered by the existing providers.
Services offered from WIND and Mobilicity are much cheaper than plans offered from the big three wireless providers. Verizon would certainly hit the ground running with acquisitions of both companies. If prices are maintained under Verizon ownership, the other companies would have virtually no choice but to follow suit. Verizon would also be able to eliminate roaming charges for Canadians who visit lower parts of the continent which would be another perk not offered by other companies.
If Verizon is blocked from entering the Canadian market, this will likely be in conjunction with a new formal regulation on wireless service pricing. In this event, these companies would need to adhere to regulatory compliance which should also coincide with lower service pricing. The consumer will come out on top.
Another big deciding factor in the future for Canadian wireless consumers will be the purchase of the 700 MHz spectrum which will soon be for sale. The owner of this frequency will have a major competing edge because of the features this bandwidth will offer which include high range and good penetration of mediums that stop most signals. If Verizon enters the market, it’s a sure bet the company will pursue the rights to this spectrum.