While it’s been a “pretty cozy ride” for the three major providers in Canada’s mobile market – Rogers, Bell and Telus – consumers have consistently got the short end of the stick, according to Globealive Communications Corp. chairman Anthony Lacavera.
Speaking at the Empire Club of Canada, Thursday, Lacavera blasted the Big Three for practices that limit competition and negatively affect consumers, “including long term contracts with unreasonably high rates and silly nonsense fees for fictitious network services.”
He suggested that even collaborative efforts by the incumbents — “entering each other’s territories in friendly ways” – only served to cement their own hegemony.
“Take Ontario and Alberta for example, we have 80 per cent market share held by two companies in those provinces.”
And while the Big Three rule the roost, raking in some of the “highest profit margins in the wireless world”, Canadian consumers feel the sting, he rued.
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The Globalive chairman cited some ways Canada “grossly lags” the developed wireless world:
- The average mobile wireless customer in Canada pays over 2.2 times more per minute than customers in the US.
- Canadians have access to far fewer brands and choices than other nations. He said while the incumbents would argue that there are seven brands, not three, they don’t publicize the fact that they own the flanker brands – Fido, Koodo, Solo, and Virgin.
“Our penetration still sits at 67 per cent compared to about 89 per cent in the U.S. and over 100 per cent in most of Europe.”
Among OECD (Organization for Economic Cooperation and Development) nations, he noted, Canada ranks dead last in penetration – 30th out of 30 countries.
Lacavera lauded the 2006 report of the Telecommunications Policy Review Panel for ultimately leading to a decision to open up the wireless spectrum to new entrants – including his own firm (Globalive) – in 2007.
He spoke at length about the fierce controversy surrounding Globalive’s ownership.
The crucial issue was whether the four-year, US$700 million investment in his firm by Egypt’s Orascom Telecom Holdings effectively placed Globalive under foreign control.
The CRTC believed this was the case and ruled, in October 2009, that Globalive was not Canadian-owned and controlled as required by section 16 of the Telecommunications Act.
A couple of months later the Canadian government overturned the CRTC ruling – opening the door for Globalive to launch its wireless business under the WindMobile brand.
Lacavera said the incumbents – when stoking Globalive ownership controversy – were actually guilty of double standards.
Many Canadian telecom carriers started up their businesses with the help of foreign capital, he pointed out.
“Bell Canada was started by Charles Fleetford Sise, an American. The British Columbia part of TELUS — then BCTel — undertook its major expansion in the 1920s when it was owned by Theodore Gary, an American. AT&T, an American company, was instrumental in the establishment of Unitel, which subsequently became Allstream.
“And in his memoirs, Ted Rogers conceded he had compliance issues with the Canadian ownership rules during the high-debt, high-growth days of his business.”
Lacavera said Globalive had to go abroad to seek capital because it was not available on Canadian soil to the extent required. “The pool is small and Bay Street is entrenched with the incumbents and their business interests.”
He acknowledged other new entrants may not share this view.
“But let’s remember they did not seek financing to invest in enough spectrum to build a national lasting alternative to the incumbents. The $1 billion price tag required us to seek and obtain foreign capital if we wanted to actually compete in a national capacity.”
But even after its entry into the market, he said, Globalive continues to face several barriers, many erected by the incumbents.
“Bell Canada bought out the remaining 50 per cent of Virgin Mobile that it did not already own to shore up their flanker position. Bell and Rogers recently purchased Craig Wireless spectrum for $80 million – more Wi-Max spectrum to add to the incredible amount they already own that they are not using.”
And despite making more than 100 requests, he said, “to date we have not successfully shared a single tower with any of the incumbents despite the Industry Canada policy mandating tower-sharing.”
Another big challenge he said, is Globalive’s inability to secure any material Canadian investment to date “despite offering very attractive terms.”
While emphasizing the need for greater competition, Lacavera reminded his listeners that a pre-requisite for that is more capital.
“Companies such as ours, like the smaller telecoms across Canada and start-ups not yet formed, need capital — lots and lots of capital, if they are to form an effective, lasting competitive alternative to the incumbents.”
He said access to such capital within Canada to the scale required is currently virtually impossible given the business interests of large Canadian investors with the telecom incumbents.
“We can’t have it both ways. If we want full, real, telecom competition in Canada, we have to be able to fund it. If we can’t fund it in our own backyard, then we have to allow for foreign capital. If we’re serious about competition to provide greater benefits for Canadians then we have to allow the free market to work.”
Lacavera debunked the view that telecom infrastructure players accessing global financing would pose a risk to Canadian culture or sovereignty.
He said mobile operators here should be allowed to build modern networks “with a globally competitive cost of capital.”
Canada, he said, would also benefit from the expertise of international operators that have built very large networks in many different countries and bring a fresh perspective on global best practices.
He said blanket restrictions should be replaced with a “more flexible structure” that encourages and facilitates foreign investment where that benefits Canada and Canadians, and restricts it where it doesn’t.