Ottawa cites more competition behind moves to regulate telecom industry

MONTREAL -- There was no mistaking the signal Ottawa sent to Canada's three largest telecommunication companies in 2013 -- provide more competition and choice for consumers, or we will do it for you.

The government's latest move came Dec. 18 when it announced it would make legislative changes to prevent the wireless market, dominated by Rogers, Bell and Telus, from charging smaller companies more than they charge their own customers for domestic roaming.

"Currently, high domestic roaming rates hold back many providers, especially new entrants, from offering more choice, lower prices and better service to Canadians," Industry Minister James Moore said at the time.

But it wasn't the first swing the federal government took at the industry.

During the summer, the prospect of US Verizon Wireless entering the Canadian market became a political hot potato, pitting the consumer-oriented Conservatives against Big Business, which argued that the upcoming spectrum auction process was set up to favour foreign competitors and disadvantage Canadian incumbents.

And there's more to come. Ottawa has said it wants consumers to have more choice in selecting their TV channels - the so-called "pick-and-pay" model - and improvements in high-speed Internet services for rural communities

In addition, the Canadian Radio-television and Telecommunications Commission will, early next year, examine the state of the wireless industry and what regulatory measures may be required if the CRTC was to find the market not "sufficiently competitive."

"The goal of the government's policy is more competition," Moore emphasized in his announcement about roaming charges.

"We think taking this action, and legislating this action, will result in a better environment for consumer choice," Moore said.

Analyst Eamon Hoey said he expects pushback from the telecom industry.

"The argument that they're going to put forward is, if the government steps in and starts mucking around with their business models, it will threaten revenue and profitability and that will be bad for Canada."

Richard Smith of the Centre for Digital Media said more regulations have political implications and noted that Ottawa had some success with its pro-competition campaign.

"Almost every Canadian has a cellphone, almost every Canadian has cable TV, almost every Canadian has Internet," Smith said from Vancouver.

"So there are political implications that swing for the government," said Smith, the centre's director and a professor in the school of communication at Simon Fraser University.

Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T) have declined to comment on the issue of more regulation.

Ottawa has been unwavering about what it expects in the wireless industry. It wants a fourth national player in every region of the country to give consumers more choice as small startups, such as Wind Mobile and indebted Mobilicity, now under creditor protection, struggle to attract cellphone customers.

"We do have fourth players in many markets of this country, but they're regional and not national," Moore said, in a recent interview. "I think more competition can be realized."

Greg O'Brien, editor and publisher of a website based in Hamilton, Ont. that covers the Canadian cable, radio, television and telecom industries, said the government's efforts are too late.

The big three telecoms now have 90 per cent of Canadian wireless customers and there's no opportunity left for large foreign telecom companies to muscle in, said O'Brien, of Cartt.ca.

The government's auction of spectrum -- radio waves needed to operate cellphone networks -- is set for Jan. 14 and there are no foreign telecom companies on the bidders' list. The auction of 700 megahertz spectrum will allow wireless carriers to bring faster networks to rural communities and provide better coverage in dense, urban areas.

"The three companies that we have are the ones we're going to have, and we're going to have some regional players," O'Brien said.

Moore has also delivered a stern warning to telecom companies hoarding airwaves that could be used to provide more high-speed Internet service to rural Canadians: 'Use it or lose it.'

He said the government will reclaim some spectrum licenses up for renewal next year if the telecom companies haven't deployed them.

Canaccord Genuity analyst Dvai Ghose said any changes the industry makes will be in response to the battle over Verizon, which eventually decided to pass on Canada's wireless market.

"I think as far as bad relations with government, they certainly got worse. In the heat of the battle, it all got very silly," Ghose said.

As for more choice when it comes to TV channels, Ghose said that TV providers can't give real a la carte choice because of the so-called "must-carry" channels in television packages.

The Weather Network and its French equivalent MeteoMedia, Aboriginal Peoples Television Network, CBC and Radio-Canada and CPAC are examples of must-carry channels.

This week, however, the CRTC announced that cable and satellite companies will be required to give their consumers the option of subscribing to Sun News Network and every other Canadian news channel, starting next spring.

The announcement set a mid-March deadline for cable and satellite companies to offer all Canadian news services either in bundles or a la carte.

The CRTC previously rejected Sun News Network's bid for a guaranteed spot on basic cable and satellite services -- known as "mandatory carriage", while acknowledging there are significant obstacles facing newly launched news services trying to compete against established networks such as CBC News Network and CTV News Channel.