TORONTO – There may have been over a dozen topics on the hit list for this year's regulatory blockbuster session at this year’s Canadian Telecom Summit, but the six panelists kept coming back to one: MVNOs, yea or nay.
Moderator Greg O'Brien, editor and publisher of Cartt.ca, set the tone, commenting, "This panel is often fun, always a little prickly, which is part of the fun
“The industry is being transformed from all sides," he went on. "It's being changed from within, from without, and, crucially, from Ottawa."
Key among the events include the broadcast and telecom legislative review panel, a proposed new directive from the CRTC on its way, the CRTC wireless review that may result in mandating wireless resellers (MVNOs), and the overarching theme backing all of this: that Canadians – and their federal government – want lower prices.
"So that can mean the long standing federal government policy bedrock of facilities based competition, which has long been considered the best way to provide that competition, and innovation and jobs, and excellent connectivity far and wide might be history, might be changed to services based," he said.
"So, all of that said, I'm going to now turn to Ted, Dave, and Rob first, and ask, why don't you just nip all this in the bud and just let these MVNOs on your network for a reasonable, low, wholesale fee?"
After the laughter died down, panelist Ted Woodhead, SVP and strategic policy advisor at Telus observed, "It's not like we don't want to let them on the network. We want them to negotiate a commercial rate for it. In fact, that's the way that the small number of MVNOs that exist in the world today had done that." However, he pointed out, in countries where MVNOs have been mandated, they haven't been very successful, and in Canada, when the government forced the creation of competitors back in the 2007-08, all of them became insolvent and were bought by incumbents. The new entrants which survived – Shaw, Videotron, and Eastlink – have delivered on their promise to deploy networks and expand their coverage.
“That's incoherent. It's a failed 1990s policy from Europe that even Europe is backing away from." – Ted Woodhead, Telus
"To me, the government's policy now is… incoherent," he said. "These (regional players) come along and rescue the fourth carrier policy, and before they even have their legs under them, you're trying to cut them down. That's incoherent. It's a failed 1990s policy from Europe that even Europe is backing away from."
David Watt, SVP regulatory at Rogers, added that prices consist of the cost of providing a service plus margin. Canadian carriers, he added, pay the highest cost for spectrum in the world, both at auction and in annual fees, and Canada has a low population density adding to the cost of service "All that being said," he noted, "we built a high-quality network in a high cost environment." Adding to that is the handset subsidy model for devices sold in foreign currencies. Overall, Rogers made a 6.6% on its investments last year, said Watt.
Added Bell's SVP, regulatory affairs and government relations Rob Malcolmson, "Ted uses the word incoherent. I use the word confused. When I look at government policy, what you see the CRTC is doing and how the wireless marketplace is functioning today, I wonder why all of a sudden, MVNO was the answer. We've got 33 million wireless subs in this country. We've got ubiquitous coverage; we've got world leading networks. We, unlike other countries, actually have facilities-based entrants in a country our size – Shaw, Videotron, and Eastlink – who are making real inroads into the marketplace. And they're doing it by investing. So the market is working, the market is highly competitive."
"I think confusion is the word of the day." – Rob Malcolmson, Bell
At the same time, he said, the government is correctly focusing on rural coverage, and those policies are in conflict. "I think confusion is the word of the day."
Samer Bishay, CEO of Iristel and Ice Wireless, argued the root cause of the issue was the need for a free market economy in Canadian telecom. "Not mandating MVNOs in the landscape we have in Canada is almost like letting Bell or any of the incumbents do whatever they want," he said.
He and Woodhead then began a debate about whether MVNOs want a free ride on incumbents' facilities, and exactly what constitutes "facilities", with Bishay pointing out that his company has invested in spectrum and facilities. He argued that "facilities" is not necessarily a radio access network sitting on a pole (something that federal minister of innovation, science and economic development Navdeep Bains confirmed during a media scrum the next day).
“What we're talking about is how to create the competition on top of those facilities you invest in." Andy Kaplan-Myrth, TekSavvy
"I don't take issue with the investments that you're building, that you put into facilities," said Andy Kaplan-Myrth, VP regulatory and carrier affairs at TekSavvy Solutions. "You invest in facilities, you build good networks, you build such good networks that we want our customers to have access to those networks, too. It's the same on the wireline side. We paid half a billion dollars to incumbents over the past five years, that supports those investments. It's a small part of supporting those investments, but it is our share of that market. Nobody has an issue with that. What we're talking about is how to create the competition on top of those facilities you invest in."
However, the facilities-based carriers believe mandating MVNOs is a disincentive to those investments, citing the experience in Israel, where a thriving facilities-based industry cut back on its spending. In the short term, retail prices plummeted, but the long-term effects were disastrous for network quality and tech investments after the government forced them to enable MVNOs who then undercut their prices.
On the other hand, consumer groups and some of those in power just don't believe that Canadian carriers will pull back because of the opportunities afforded by continued investments.
Kaplan-Myrth chimed in that 5G makes it even more important to force competition on mobile, since your mobile phone is an extension of your arm. Being excluded from that market will make it harder to compete elsewhere. "People in a position to build facilities will build facilities," he said. "And you will do that because that's the business you're in. You'll do that and we'll buy the services."
Woodhead disagreed. "I agree that it's a problem that people perceive this as some sort of idle threat," he said. "(But) I can tell you, when you go been to an investor review team meeting, and these things are stacked up, you have a limited bucket of resources, as large as that bucket may sound like it is, you have all of these projects set up in priorities with return on equity and return on investment associated with those."
Added CJ Prudham, chief legal office at Xplornet Communications, "The question would be, in order to allow MVNO reseller types to come in, you'd have to push down the amount that the facility space providers would be able to charge to a point where it doesn't make any economic sense. So the problem is we're trying to play with the markets, we're not sure which problem we're trying to solve, do we do want the innovation, do we want the lower price, and we're trying to manage the market."
From left in photo: Greg O’Brien, CJ Prudham, Dave Watt, Andy Kaplan-Myrth, Ted Woodhead (nice socks!), Samer Bishay and Rob Malcolmson.
