THURSDAY SAW THE continued condemnation of the federal government’s wireless policies by three of the country’s telecom executives as they reported their quarterly results.
Each of Quebecor CEO Robert Dépatie, BCE CEO George Cope and Telus CEO Darren Entwistle used their second quarter 2013 conference calls with financial analysts to take additional public shots at the federal government, whose 700 MHz auction rules coupled with altered AWS spectrum transfer conditions seem poised to give American cellco Verizon an easy, cheap way into the Canadian market. That assumes reports that the American company hopes to purchase Wind Canada are true and Verizon takes the plunge here.
A trio of loopholes, say the executives (which have been documented repeatedly over the past few weeks), are unfair and must be altered prior to September 17th, the deadline for companies to declare themselves bidders in the 700 MHz spectrum auction scheduled for January 2014. The loopholes are: allowing Verizon, or any other company with less than 10% market share in Canada for that matter, to purchase two of the four prime blocks of spectrum being made available in the auction while Canadian incumbents Rogers, Telus and Bell can only purchase a single block; forcing the incumbents to open their networks to roaming by those companies, meaning any newcomer, no matter their resources, will not have to build out its network beyond urban centres and; preventing spectrum purchased in the 2008 AWS auction by wireless newcomers from being transferred to one of the incumbents, even though the AWS rules only called for a five-year moratorium, which limits competition to purchase those companies.
“In our minds, this would radically alter the outcome of the current auction as nothing in the current auction rules would prevent Verizon from acquiring half of the prime spectrum blocks in every region of the country,” said Dépatie. “Nothing prevents Verizon from limiting its deployment to urban areas, leaving a large percentage of the Canadian population behind in regard to service levels and access to the latest technologies.
“The potential consequences could therefore be catastrophic to the regional new entrants such as Vidéotron as four prime spectrum blocks could end up being shared between only three players, resulting in new entrants ending up empty-handed.”
“It’s inappropriate to mingle allowing someone to buy an asset on a near-exclusive basis and then on top of that give them mandatory network access and roaming rights,” said Entwistle, who also used his company’s call to point out (pretty sarcastically) that Canadian wireless companies have built superb networks for their customers and don’t deserve the unfair treatment they are being subjected to by the federal government. “Sadly, Canada does not have the fastest wireless speeds amongst the 34 OECD countries. Indeed, we were only ranked number two. In the spirit of being Canadian, I would like to take this opportunity to apologize to all of my fellow citizens for beating every country in the OECD report, except Denmark, in terms of wireless speeds. Sorry about that and you’ve got my word that we’re working to become number one,” said Entwistle.
“We are open to competition in the market. Any carrier who chooses to come into Canada, we welcome them from a competitive perspective and look forward to competing with them,” explained Cope during the Bell call. “However, we absolutely believe that it should be done on a level playing field,” he added, explaining that the companies do not plan to back off from this battle one bit.
“We will continue to pursue this very aggressively. We believe it is right for our shareholders, right for our customers, profoundly unfair to the Canadian marketplace and quite frankly, a very reasonable request to ask for a level playing field.”
As well, both Entwistle and Cope said Verizon has to be held accountable for its diametrically opposed positions on spectrum auctions while on either side of the border. As we noted in a Cartt.ca story Thursday morning, while Verizon could end up being the beneficiary of special auction rules in Canada, its position in front of the Federal Communications Commission on the upcoming U.S. auction of 600 MHz spectrum demands an open auction with no special rules.
“Verizon’s regulatory position at home is the antithesis of the advantage that they may be seeking to leverage in Canada. We strongly support statements expressed on the record by Verizon in numerous regulatory filings and investor meetings that a level playing field is the correct model for conducting a spectrum auction. Telus believes this is true whether it’s the FCC’s 600 MHz auction or Industry Canada’s 700 MHz auction,” Entwistle told analysts today.
When asked on the Bell call if his company would go to the effort of officially pointing out Verizon’s evidently different position on auctions, depending on what side of the border they are on, Cope added: “Obviously if there are inconsistencies in their positions then we will bring them to the attention of the right regulatory bodies.”
What really sticks in Entwistle’s and Cope’s craw though is the potential that Telus and Bell could be forced to let Verizon, a company four times the size of the total Canadian wireless industry, use their networks to roll out service to Canadians. “Our goal is to cover the rest of the country with LTE, which of course won’t happen via a new entrant who comes in leveraging our network,” said Cope. “Having access to our network sits with us as a very uncomfortable thing because our product is our network. I don’t think someone is going to ask our competitors in the retail world like Canadian Tire to give Wal-Mart access to their stores when they entered Canada. I don’t think anyone asked Tim Horton’s to give Starbucks access to their coffee when they entered into Canada, so why we would ever have to give access to our network to Verizon when they entered Canada, to me, makes no sense.”
But, asked the analysts, what if the federal government won’t budge (as Industry Minister James Moore insists it won’t) and the policies remain unchanged? “Then the government’s considerable efforts aimed at increasing wireless competition for the long term (would) be nullified,” said Dépatie.
