OTTAWA – Competition in both the wireless and fixed-line segments will intensify now that four of Canada's five largest cable companies offer wireless services, and, with telephone companies simultaneously investing in fibre-optic upgrades, according to a new report from Moody’s Investors Service.
According to the Moody’s report "Broadband Communications – Canada: Cross-Platform Efforts Fuel Competition, but Also Risk More Market Concentration”, the degree of cross-delivery platform investment makes the Canadian broadband market unique; none of the major U.S.-based cable companies offer wireless services, for example, and only two major U.S. telephone companies are over-building their fixed-line networks with fibre. However, because the cross-delivery platform investments also increase market concentration, they also raise the regulatory risk.
"Internet protocol standardization has effectively homogenized the Canadian market, with all of the broadband distribution companies offering the same services, using the same hardware and operating with the same business models," said Bill Wolfe, a senior vice-president at Moody’s Canada Inc. "This technology convergence makes it more difficult for companies to develop and sustain technological advantages and increases the likelihood that they will use the same strategies and tactics, which raises the risk of regulatory scrutiny."
Moody's notes that internet-based content and applications companies such as Google (Aa2 stable), Netflix (B1 stable) and Facebook (not rated), have an advantage over Canada's traditional broadband distributors in that they face a different set of regulations and they can reach customers directly without owning or controlling a broadband distribution network.
"We expect that the regulatory framework in Canada will evolve in 2016 and 2017," added Wolfe. "In the meantime, however, Canada's regulatory environment favors internet-based content and applications companies."
