Why the CRTC’s great wireless non-decision is good news for consumers

The Canadian Radio-television and Telecommunications Commission reiterated last week that it would not force large wireless carriers to open their networks to resellers at regulated rates. Resellers are small providers with no network of their own. They instead lease access and resell a cheaper service. Innovation Minister Navdeep Bains had asked the CRTC to reconsider its previous decision to that effect, arguing that this would bring more competition and lower prices.

Despite what some commentators have said, the CRTC’s “non-decision” is good news for Canadian consumers. It will prevent, at least for the time being, the negative effects that such a major policy change could have had on the sector.

There is a lot to criticize when it comes to the CRTC’s policy of forcing telecommunications providers to share their networks at below-market rates. On the wireline side, the CRTC now forces them to share their new fibre-to-the-premises facilities with internet resellers, even though these facilities do not rely on telcos’ legacy copper networks and the latter have no inherent competitive advantage in deploying them.

However, the CRTC has always refrained from applying this logic to the wireless sector, as is done in some countries. Its stated goal has instead been to encourage competition between providers owning their own infrastructure. This is rightly seen as the best way to spur more investment in the sector and more overall network capacity.

Indeed, propping up small players without a profitable business model by giving them privileged access to the resources of other providers reduces the incentives of the owners of infrastructure to invest and innovate, because they would then have to share the resulting benefits with competitors.

It is already possible for resellers to conclude wholesale roaming agreements with wireless providers on a commercial basis, and it can be profitable for carriers to strike agreements with resellers when they have surplus network capacity. If such agreements cannot be reached voluntarily, though, it is because there is no benefit to be had and they should not be mandated by government regulation. This would only sustain artificial competition, without any of the benefits entailed by real competition in a market-based economy.

It is worth noting that resellers account for only a tiny fraction of all infrastructure investments made annually by telecommunications companies, about $30 million as opposed to more than $11.25 billion for companies that have their own networks. That’s 375 times more!

Another important reason justifies the CRTC’s stance. It and the federal government have over the past decade adopted several measures to encourage the emergence of a strong fourth wireless player in every region of the country. Giving privileged access to resellers at this time would work against this policy, since resellers would compete more directly with these new entrants — Eastlink in the Maritimes, Videotron in Quebec and Eastern Ontario and Shaw in Western Canada and Ontario — than with the three established national providers, as the CRTC itself noted in its original decision.

Critics of the decision, and Bains himself, charge that the country needs more competition because Canadians pay some of the highest prices in the world for telecom services. Yet the Nordicity study upon which this premise is based is seriously flawed. As I will detail in the upcoming 2018 edition of The State of Competition in Canada’s Telecommunications Industry, Nordicity’s limited set of data ignores many factors that explain the prices in the country, and also hides the simple reality that Canadians already have many affordable options if they want them.

Moreover, every international metric shows that Canada has some of the best wireless networks in the world and, as such, pay for the fast, reliable, high-quality services they expect. The best way to preserve these benefits is not to encourage artificial competition by giving privileges to resellers who do not invest, but rather to ensure a regulatory environment that encourages investment and relies on market forces to the maximum extent feasible.

The CRTC therefore made the right non-decision for Canadian consumers in this regard by not mandating wholesale roaming access for resellers. Unfortunately, the agency also announced that it will initiate a review of its wholesale mobile wireless framework ahead of schedule, and it might once again reconsider its decision during these proceedings. Let’s hope it sticks to its guns.

Martin Masse is author of The State of Competition in Canada’s Telecommunications Industry, published annually by the Montreal Economic Institute.