The Canadian Radio-Television Telecommunication Commission (CRTC) approved mobile virtual network operators (MVNO) in Canada, but independent operators are not impressed.
The new decision announced on April 15 will enable regional providers — ones that have purchased wireless spectrum licences and deploy network hardware — to provide service over the infrastructures built by national carriers like Bell, Rogers and Telus for a wholesale fee.
The goal, according to the CRTC, is to increase competition and reduce mobile costs for consumers, which the Trudeau government has promised to cut by 25 per cent.
The CRTC has the final say on who can become an MVNO under several criterias, of which the most important being that the regional carrier must have purchased spectrum licenses that cover tier 4 areas or broader.
Additionally, the CRTC’s MVNO policy allows the regional MVNOs to sell their capacity to any operator, including international players.
“The whole idea behind this model which was effectively developed by the competition bureau is to encourage investment in facility [operators],” said telecom consultant Mark Goldberg.
Canada’s mobile prices have been declining. According to the 2019 CRTC Annual Communications Pricing Survey, the average mobile services declined by 13.8 per cent over 2018. The drop was particularly notable in the midrange where the cost of 5GB data plans dropped by 36 per cent between 2016 and 2019.
Still, Canada’s mobile costs currently rank as some of the highest in the world. The Toronto Star reported that the falling costs fail to keep up with the global average.
Matt Stein, chairperson of Competitive Network Operators of Canada (CNOC) and chief executive officer of Distributel, argued that dropping prices doesn’t consider the users’ expanding data needs.
He argued that users today need more data to access the same experience as they did years prior, and they are still overpaying for that experience.
“When people say wireless prices are falling, they’re looking at a plan that used to cost $60 three years ago that now only cost $35. But consumers are no longer buying that plan. Now they’re buying a new plan that’s much larger. And guess what? It still costs $60,” Stein said.
Criticisms from independent operators
Most MVNOs in Canada operate as flanker brands of major carriers. But independent MVNOs do exist. Dotmobile, Canada’s first approved “full” MVNO, is on track to start servicing in Canada.
Many of Canada’s telecommunications players have long been at odds with the idea. Smaller carriers have been calling for more competition, demanding a similar model to wholesale internet, in which regional ISPs like TekSavvy can purchase capacity from national cable carriers and resell them.
Conversely, the major carriers have vehemently advocated against its efficacy, claiming that it would reduce cost beyond what’s sustainable and therefore erode investment.
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Strictly speaking, the CRTC’s version of MVNOs isn’t a “true” MVNO model. By its textbook definition, an MVNO does not own wireless spectrum or infrastructure.
Alex Bauman and Algis Akstinas, founders of Dotmobile, said the CRTC “mislabelled” what an MVNO is.
“Owning spectrum and operating a radio access network (towers) makes you an MNO. There is nothing virtual about it, even if the CRTC decided to use the term MVNO,” wrote Bauman in a separate release.
In an interview, Bauman noted that the recent MVNO announcement only gave the regional providers a way to pre-sell in areas that they own wireless licenses in.
Stein also criticized the decision, saying that it ignores the smaller providers.
“It says it’s an MVNO decision, but if you read it closely, you’ll realize that it only is available to people that have already bought spectrum,” Stein said. “Smaller providers didn’t buy spectrum. Furthermore, it’s only available in the areas where people already bought the spectrum. So if you bought spectrum in Kitchener, you can become an MVNO in Kitchener–not in London, not in Wells. It really is the smallest possible thing they could have done and still calling it MVNO.”
Stein added that he does not see the decision leading to lower prices. Instead, he believes that the commission should have fully opened up MVNO and support service-based competition as opposed to facility-based.
In service-based competition, a regulating organization such as the CRTC would set a wholesale price for the facility-based operators and sell the services to smaller companies. The smaller companies would in turn sell them to consumers, competing for value in the process.
“The big phone and cable companies are…still making a profit,” Stein said. “Competition doesn’t need one more player. Competition needs a vibrant market of many choices.”
“The problem in Canada isn’t whether we have enough wireless providers in Toronto although there is a problem with pricing, it’s that all of Canada never gets access to any of these new players or new types of competition,” he said.
What does this decision mean for Canadians living in large population centres? Not much, Bauman said. Additionally, given the spectrum and infrastructure requirements set out by the CRTC, he doesn’t anticipate rural areas to benefit from this either.
Some operators praised the decision. In a press release, Cogeco said that the change marked as an “important step” towards a balanced market.
Although the CRTC saw MVNOs as necessary, it did not set a wholesale price as it did with internet. Instead, the commission left it up to the regional and the national carriers to negotiate their wholesale rates.
Goldberg explained that the negotiated prices will be cheap enough to allow regional carriers to sell their services sooner, but will also likely be more expensive than owning their own infrastructure. This middle cost and rapid customer acquisition will give regional carriers the incentive and means to invest.
“It can cost $100,000 to put up a tower,” said Goldberg. “When you put up a tower, you don’t instantly have customers. With the MVNO arrangement, it’s easy to start getting customers. So you’re getting revenues from an area that allows you to say ‘hey I’ve got a lot of customers in this area. Let’s put up a new tower there.’”
In addition, with Canada’s diverse geography, population density and other socioeconomic factors, a unified national price is impractical.
The CRTC’s MVNO policy will stand for at least seven years and provides regional carriers a buffer period to build out their own networks. But both Akstinas and Bauman stressed the complexity surrounding infrastructure deployment.
“In a region, you get 10 years to build [services using purchased wireless spectrum],” said Akstinas. “If you take the auction for Wind [now Freedom Mobile] and you look at when the last licenses were built out, some of those areas that were outside of the urban centers got built in the last month of that 10 year period. And that’s the provider that had the backing of a $15 billion company (Shaw).”
Goldberg says there is a possibility that the MVNO will negotiate for a longer term.
When asked, Bell replied that its focus “remains on serving our wireless customers with a full range of affordable pricing options.”
The CRTC’s call for lower prices
In the same announcement, the CRTC also asked SaskTel, Bell, Telus and Rogers to promote a $35 per month low-cost plan, a $15 per month postpaid plan, and a $100 per year prepaid plan. The low-cost and postpaid plan should include 3GB and 250MB of data respectively, while the prepaid plan should include 400 minutes that do not expire in less than a year.
These plans should be promoted in the same way as their other more premium plans, wrote the CRTC. The named carriers must report back to the commission every six months on their deployments.
The CRTC also called for an app from respective carriers that allows their customers to easily change their wireless plans.
But in an email to IT World Canada, the CRTC underscored that these are expectations, not requirements. Carries are currently not obligated to fulfil them.
“The record of the proceeding demonstrated that there are a wide array of plans, including low-cost plans, available to customers,” wrote the CRTC. “However, some options, in particular, more economical options on premium brands, are not always easy to find. In addition, many consumers do not see flanker brands, owned by the national wireless carriers, as a reasonable substitute for a premium brand. The commission determined that mandating the provision of defined plans is unnecessary at this time.”
Canada’s major carriers offer lower-cost plans through their flanker brands such as Koodo, Virgin, and Chatr. These brands typically offer lower speeds and smaller data packages at reduced costs.
Goldberg shared the sentiment that lower-cost plans are already available from major brands but also pointed out its flaws.
“What the commission is saying is they want the main brands to offer those same prices, which I’m questioning the rationale for it,” Goldberg said. “It’s a little bit patronizing for consumers, saying that consumers aren’t smart enough to shop around for the best deal.”
“What they’re doing is putting a Cadillac nameplate on a Chevrolet product. Because they’re putting them in Rogers and Telus nameplate,” he added.
Moreover, Goldberg said that these measures exert pressure on regional carriers to drop their prices. While it can be seen as beneficial to consumers, Goldberg said this runs counter to the CRTC’s objective, which is to incentivize the regional carriers to invest in the long run.