Michael Geist published an important post on his blog yesterday, focusing on what is behind the recent price increases the wireless carriers dropped on Canadians without the benefit of an explanation or even a press release.
Geist’s opinion?
“The carriers increased prices because they can.”
Money quote:
Indeed, this is precisely what the Competition Bureau of Canada concluded could and would happen in its analysis of the wireless environment in Canada. In its January 29, 2014 submission to the CRTC, it stated:
In the Bureau’s view, mobile wireless markets in Canada are characterized by high concentration and very high barriers to entry and expansion. Furthermore, Canadian mobile wireless markets are characterized by other factors that, when combined with high concentration and very high barriers to entry and expansion, create a risk of coordinated interaction in these markets. Given these factors, the Bureau’s view is that incumbent service providers have market power in Canadian retail mobile wireless markets.
And what is market power? As the Bureau notes, “market power is the ability of a firm or firms to profitably maintain prices above competitive levels (or similarly restrict non-price dimensions of competition) for a significant period of time.”
Where ISPs like Worldline helped slow down the runaway pricing for home phone and Internet, (although they still charge a ton more), the Big Three don’t have any real competition when it comes to wireless so the only thing that is reigning them in is, “what is the maximum we get away with without starting another revolt?”
With the wireless marketplace seemingly set as is for the next few years, there is another way to generate more competition, and one that is being actively lobbied for by companies like Worldline.
It’s something called a Regulated Mobile Virtual Network Operator market. MVNOs typically do not own spectrum or wireless network infrastructure. Instead, they purchase network access at wholesale rates from existing operators and offer it to consumers with their own retail pricing.
By setting wholesale price, the government could use regulation to create a new batch of MVNO competitors in Canada.
Ting mobile is having some success as an MVNO operating in the States and they are also looking to open up shop here in Canada. In fact they’d love to as they are a Canadian company – however one that’s not allowed to operate here due to outdated regulations.
Elliott Noss from Ting wrote:
If the government took the resources they are spending on television ads telling us about how they want fairness in the mobile phone market and spent it on effectively executing a mandated wholesale regime, then Canadians would have real change. In places where this has been executed well, like the UK or Israel, users have immediately enjoyed lower prices and higher levels of service.
Sounds like a good idea, and then, when all the Worldline customers who are begging us to provide wireless service call, instead of saying to them, “We’d love to, but we can’t.”, we’d get to say, “Sure, what do you need?”
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