A Series of Unfortunate Events: Ignoring Meaningful Competition in Telecoms

Opinion by Lindsey Keene. This article is part of Corporations and Competition, a series by Georgia Evans on Canadian telecommunications policy.

If this series has proven anything so far, it’s that the answer to “why do I pay so much for my phone and internet?” is very intricate (and very frustrating). The basic answer is that the oligopoly upheld by the Big Three—Rogers, Bell, and Telus—is killing competition and raising the price of our wireless bills. But there’s also a lot more that we can dive into. What are the solutions to levelling the playing field? And why aren’t we seeing them yet?

Service-Based Competition

The solution we’ll look at today is service-based competition. Service-based competition involves a new entrant leasing the services of another established provider and functions through two main channels: mobile virtual network operators (MVNOs) and wholesale high-speed access (HSAs) [1]. We’ll also talk about why this solution hasn’t worked like some have expected it to.

In the case of cell service, MVNOs would use the physical network infrastructure of Bell, Rogers, or Telus to offer their own cell service; it’s not unlike how Metrolinx runs many GO Train lines on tracks owned by CN Rail instead of building their own. Because they don’t own and maintain their own infrastructure, operating costs are often lower for the renters—and so are service prices for consumers [2]. Wholesale HSAs work in the same way, except with internet infrastructure. Smaller indie service providers can offer more affordable rates for consumers with comparable speeds because they’ve cut the cost of ownership and maintenance of internet lines.

The Stance on Service-Based Competition

Service-based competition is not favoured by everyone in the telecoms sphere, though, namely the Big Three, who are the primary owners of the infrastructure used by MVNOs and HSAs. Unsurprisingly, they have argued against MVNOs time and time again, saying the Canadian cell service market is already competitive enough and doesn’t require manufactured competition to operate [3].

While Rogers, Bell, and Telus argue that providers renting their networks doesn’t foster good competition, they fail to acknowledge how difficult and expensive it is for small providers to gain footing in the industry. This is why groups like the Canadian Radio-television and Telecommunications Commission (CRTC)—Canada’s regulatory body on telecommunications and media—and the Competition Bureau, agree that service-based competition is a necessary implementation. In 2019, the Canada Competition Bureau submitted a series of recommendations to the CRTC to “ensure that Canadians [could] access affordable and high-quality wireless services” [4]. Among the recommendations was the push for service-based competition policies that were temporary and “transitory”; by using the approach as a steppingstone, MVNOs and wholesale HSAs would eventually be able to invest in their own infrastructure and depart from using their competitors’ networks [5].

The rationale behind supporting MVNOs and wholesale HSAs is the creation of facilities-based competition. Facilities-based competition is the practice of each industry competitor owning their own resources, infrastructure, and therefore being more independent in their business ventures. The Competition Bureau, CRTC, and other telecom professionals agree that facilities-based competition is the ideal form of competition; MVNOs and wholesale HSAs would become full-fledged service providers instead of relying on their competitor’s infrastructure to operate [6]. If MVNOs established themselves and made enough money to build their own facilities, the oligopoly maintained by the Big Three could begin to weaken—unfortunately, this is much easier said than done.

Recent Developments (or Lack Thereof)

In Spring 2021, the CRTC released two major decisions regarding the future of MVNOs and HSAs. On April 15, 2021, it mandated that MVNOs could use the networks of Bell, Rogers, Telus, and SaskTel “to serve new areas while they build out their networks” [7]. Although positive on the surface, the mandate was quickly met with criticism—it only allows for MVNOs with pre-existing facilities to use Big Three services while they continue building on their own infrastructure [8]. New entrants without pre-existing facilities would not benefit from the regulation—so, under the guise of promoting competition, the CRTC still majorly restricted it. With new entry being an important facet in the competitive market, facility-less companies (like Ryan Reynolds’ newly acquired Mint Mobile), are still left sitting out of the game. The technicalities and restrictions mean consumers still have relatively few providers to pick from, and the Big Three have no real drive to make their services more affordable.

The “regulatory hesitance” of the CRTC continues to aggravate small telecoms and their supporters, and this frustration was only exacerbated with another announcement in late May. In May 2021, the CRTC overruled a 2019 decision to lower the rates for wholesale HSAs. The 2019 price reduction was promising for indie Internet Service Providers (ISPs) who could offer their services at a more affordable rate, and a good sign overall for the state of Canada’s competitive telecom market [9]. With a change of heart and change of leadership within the CRTC (oh yeah, it should be mentioned that current CRTC CEO is Ian Scott, an ex-Telus executive) [10], the more reasonable service prices have since been reversed. Indie ISPs are now faced with budget cuts to return to these higher prices, and the Big Three still come out on top [11]. And what happens to consumers when these decisions are made? Well, at best, we continue paying whatever prices we were paying before. At worst, we lose out on our internet or cell service; take Indie ISPs like TekSavvy who had been forced to withdraw multiple cell and internet offerings when the CRTC increased their costs of operation [12]. No matter how you slice it, the consumer never benefits from decisions like these.

There is no questioning that service-based competition could be one of the answers to the Canadian network service problem. Easing barriers to entry increases competition, creates better pricing for consumers and drives cell providers to offer better services for the money they’re charging. But, with fumble after fumble by Canada’s regulatory bodies, competition in the telecommunications industry is progressing at an incredibly sluggish pace—if it’s even progressing at all. Small service providers always take the blow from decisions that keep the Big Three on top; when meaningful competition is quashed at every turn, smaller providers and Canadian consumers alike play a losing game that the Big Three continue to win.

When mega-corporations like Rogers, Bell and Telus maintain their oligopolistic reign, we rely on lawmakers and antitrust legislation to intervene. If these recent decisions by the CRTC have demonstrated anything, it’s that regulatory bodies are not only falling short of creating impactful change in the telecom industry—they’re ignoring every opportunity to do so.

[1] Ware, Roger. “Competition Issues in Facilities Based Versus Service Based Competition and Disaggregated Wholesale HSA Transport.” Kingston: Competition Bureau Canada, August 2018. https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/vwapj/CB_Broadband_Market_Study___Ware_Report_for_CNOC_20180831_Final.pdf/$file/CB_Broadband_Market_Study___Ware_Report_for_CNOC_20180831_Final.pdf.

[2] PlanHub. “MVNOs in Canada: A Guide.” PlanHub Blog, February 22, 2021. https://www.planhub.ca/blog/en/mvno-in-canada-a-guide/.

[3] Malik, Aisha. “Big Three reiterate stance against mandated MVNO access in final submissions to CRTC.” MobileSyrup, July 16, 2020. https://mobilesyrup.com/2020/07/16/big-three-reiterate-stance-against-mandated-mvno-access/

[4] Competition Bureau Canada. “Executive Summary of the Bureau’s Submission to the CRTC on Mobile Wireless Services.” Competition Bureau Publications, November 25, 2019. https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/04505.html.

[5] Ibid.

[6] Ghiz, Robert. “Facilities-Based Competition Is Good Policy and a Worthwhile ‘Obsession.’” Canadian Wireless Telecommunications Association, December 1, 2020. https://www.cwta.ca/facilities-based-competition-is-good-policy-and-a-worthwhile-obsession/.

[7] Canadian Radio-television and Telecommunications Commission. “Telecom Regulatory Policy CRTC 2021-130.” Decisions, Notices and Orders, April 15, 2021. https://crtc.gc.ca/eng/archive/2021/2021-130.htm.

[8] Ng, Gary. “CRTC MVNO Ruling Called ‘Toothless’, Only Regional Providers with Spectrum Get ‘Big 3’ Access.” iPhone in Canada, April 15, 2021. https://www.iphoneincanada.ca/carriers/crtc-mvno-ruling-called-toothless-only-regional-providers-with-spectrum-get-big-3-access/.

[9] Burger, George. “Canadians Should Be Outraged at the CRTC for Reversing Its Decision on Wholesale Internet Rates.” Toronto Star. June 5, 2021. https://www.thestar.com/amp/business/opinion/2021/06/05/why-canadians-should-be-in-an-uproar-over-crtc-decision-regarding-internet-rates.html.

[10] Canadian Radio-television and Telecommunications Commission. “Meet Ian.” Our Leadership, September 23, 2020. https://crtc.gc.ca/eng/acrtc/organ.htm#presidentBio.

[11] The Canadian Press. “TekSavvy Won’t Bid in Wireless Auction, May Raise Prices after Rate Decision.” Ottawa Business Journal. May 28, 2021. https://obj.ca/article/canada-world/teksavvy-wont-bid-wireless-auction-may-raise-prices-after-crtc-rate-decision.