One year later, could the wireless wars re-ignite?

Last summer, a conflict between the federal government and Canada’s three biggest wireless carriers, centering over rules around the 700 MHz spectrum auction and the prospect of a large U.S. carrier entering the Canadian market, reached a fever pitch. A year ago, reports that Verizon Communications Inc. was interested in operating in Canada drew an increasingly public response from BCE Inc., Telus Corp. and Rogers Communications Inc. What began with statements about how Verizon would benefit from “unintended consequences” of the auction rules that would allow it to buy twice as much spectrum at a lower price than the big three, led into a public media and PR campaign to change the rules, while the government stood behind the auction structure and its aim to see a fourth national wireless carrier start up in Canada. Tempers have cooled since the summer of wireless discontent, but there are a number of upcoming events and decisions in the wireless market that could serve as catalysts for the conflict to re-emerge, according to some industry experts. It’s “inevitable,” according to Seaboard Group analyst Iain Grant, that “the three incumbents would once again attempt to wrap themselves in the Canadian flag protesting a potential loss of their monopoly to a well capitalized foreign challenger.” If talk starts up again that another foreign company is interested, such as Verizon or AT&T, in the lead up to the AWS-3 auction, “the rhetoric will be dusted off” even though “the results of the last campaign were a 'failure,' it did not convince either Canadians or their Government,” Grant added. Last summer the big three put out TV, radio and newspaper advertisements about what they called an unfair playing field and warning of job losses, a campaign that Industry Minister James Moore called “misleading” and “dishonest,” as he launched a cross-country campaign of his own to counter the carriers’ message. The conflict wound down over Labour Day weekend, as Verizon said it would not expand into Canada. In the end, the carriers’ campaign was called an “unmitigated failure” and the only potential challenger to emerge out of the 700 MHz auction was Quebecor Inc. John Lawford, executive director of the Public Interest Advocacy Centre (PIAC), said in a phone interview the structures of the upcoming 2500 MHz and AWS-3 auctions “are very much a consequence” of last summer’s wireless wars. “They are being designed to ensure the fourth player does appear,” he said. “I like to think that the wars of last summer, if you want to put it that way, led the government to realize that they made a mistake with the 700MHz auction, they should have had a set-aside there, and now they have to play catch-up and fix it.” “It’s an ongoing cold war now between the two sides,” he added. He said he doesn’t think the relationship between the big carriers and Industry Canada is still “very good,” and noted the ongoing challenge by Telus of the government’s spectrum transfer rules, set to be heard this fall, as one of a few areas where the conflict could re-emerge. “It’s not over yet — it’s just people aren’t publicly, directly, shooting each other in the media, but all the communications are still very much with that dichotomy of the government and the big three involved and the issue of the fourth player has been batted about the last year,” he said. “It has a long tail, that fight.” Lawford said he had expected the fight to re-ignite with the government’s announcement of the structure for the AWS-3 spectrum auction, but that perhaps the reason it didn’t touch off a more public reaction has to do with how the big three came out looking after last summer. “The big three certainly realize that the public campaign that they waged, while they might have won the battle, they may have lost of the war, because they looked shrill,” he said. “I think Lacavera said it best. He said they looked out of control.” Lawford noted the industry and government still have to work with each other, so “poisoning the water hole is not a good plan, because everyone has to live with each other forever.” He added the companies are likely “doing more behind the scenes work,” such as lobbying. “I’m sure there’s very low-key discussions with a lot less rhetoric,” he said. A search of the federal lobbying commissioner's online registry shows that since the beginning of last September, Telus met with representatives from Industry Canada 30 times, including twice with Industry Minister James Moore, while Rogers met with Industry Canada seven times (including twice with Moore), and with Prime Minister Stephen Harper one additional time. BCE met with Industry Canada four times, and an additional two times with Moore. None of the three companies responded to a request for comment for this story. Jean-Francois Mezei, a telecom consultant with Vaxination Informatique, said in a phone interview he doesn’t expect the AWS-3 auction to restart the conflict, but that the upcoming CRTC decision on wireless roaming could. “My guess is they’re being quiet because they know that the only new entrant that’s going to make it is Videotron,” he said. “They’re happy with an incumbent — one of them, basically — as opposed someone like Verizon or someone like ,” he said, noting that Videotron already has network-sharing deals with Rogers that could be expanded. “They’re probably not worried about Videotron.” Mezei said there are ongoing efforts open up wireless roaming and competition in the market, with ongoing processes at the CRTC looking into those issues, as well as the government’s move to cap wholesale roaming rates. He said that if the CRTC’s decision in its review of wholesale mobile wireless services “actually opens up competition to , for instance, where Orange signifies its interest in coming to Canada, that would actually bring true new competition to Canada, and that that would scare the incumbents.” If that happens, Mezei said, the carriers could try a different tactic; while there would be some “PR stuff” happening, it wouldn’t be the same as last summer. Mezei noted that there is less coordination between the incumbents in terms of their PR efforts now than there was last year. “Such a war, if it comes, may be from individual carriers, and likely a bit more toned down, I would think, and I would hope,” he said, adding that any such effort would be less public than last summer. “And there might also be a war at the lobbying level, which we don’t get to see, and that’s probably happening now.” He said that when a situation is “serious,” the companies will address it with the government directly and privately instead of launching into “theatrics” as they did a year ago. “That’s why I’m saying last summer wasn’t serious. It was all a big PR stunt for the public, not for their business. And I think that this year is more serious…. It has the potential of either protecting their turf with only four carriers, or expanding it and allowing real competition to come in,” he said. “And I think they’re being very serious about this.” Independent telecom consultant Mark Goldberg said in an interview that the rules for the set-aside spectrum in the AWS-3 auction don’t encourage additional companies to enter the market but instead reward “those new entrants that have been able to survive.” He said that the same concerns from last summer around the government’s tactics to increase competition by adding more carriers still exist. “Are the tactics to discuss those concerns and lay it out in front of the public going to be the same as last year? I don’t think anything is ever the same from year to year,” Goldberg added. “People are always changing their manner of dealing with things.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

One year later, could the wireless wars re-ignite?

News | July 30, 2014

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