Getting gouged by cellphone providers is such a routine part of life in Canada that it barely seems worth complaining about. Yet we complain all the time. We trade tales of shocking bills and awful customer service at every opportunity. We complain to friends and we complain to strangers. I complain professionally. To be a technology journalist in Canada is to constantly feed the nation’s seething consumer outrage.
Yes, Canadians pay higher monthly wireless bills than citizens of any other country, according to a report by Bank of America Merrill Lynch. Yes, our data roaming fees are higher than those in any other country, according to the Organisation for Economic Co-operation and Development. Yes, a cartel of three carriers—Bell, Rogers and Telus—still controls 95 per cent of our market, despite the emergence of budget providers Wind, Public and Mobilicity. And yes, text message fees in Canada are ridiculously marked up, by as much as 4,900 per cent, according to academic estimates. Each story solidifies our right to kvetch. We truly are the most screwed-over cellphone users in the world.
Is there a way out? It turns out that this is an exceptionally difficult question to answer. Many people who claim expertise in the area (lawyers, consultants, academics) are either directly employed by the cartel or somehow financially connected to it. These analysts will shrug off piles of independent research, denying that we have a problem in the first place.
One exception is Hudson Janisch, a University of Toronto professor emeritus of telecommunications law and a highly respected figure in the Canadian phone industry. Janisch’s research was instrumental in the crafting of our Telecommunications Act, and his name is listed alongside Alexander Graham Bell’s in Canada’s Telecommunications Hall of Fame (yes, this exists). More importantly, semi-retired at 73, he has no links to the telecom providers. Janisch can speak freely, and he does. “Canada is horribly out of step,” he tells me. “The reason is, year after year, government hasn’t been able to make the basic decision to let foreign capital into the wireless industry.”
The costs involved in launching a new wireless brand are massive—frequency licences alone are auctioned off by Ottawa for billions, creating an instant debt load for new entrants, before they spend a penny on infrastructure or marketing. Previous homegrown, independent companies, such as Fido and Clearnet, ran out of money and were quickly gobbled up by the cartel.
With such a robust Canadian cellphone market, you would think that smaller start-ups could easily find additional financing through our banks. But Canadian banks, Janisch explains, do so well by Bell, Rogers and Telus that they see little upside in backing new competitors who stand to drive everyone’s profits down by waging price wars. The big three make more money than any other wireless providers in the world. Why would the banks mess with a good thing?
The only way we will have true competition in our wireless market—and probably lots of it—is with an injection of foreign capital. And Canada would have no shortage of worthy and well-heeled suitors. International wireless companies like Vodafone and Orange have recently partnered with governments in the unlikeliest of places—Africa, the Middle East, South America. With deep pockets, these companies build local networks and then reap the rewards. Wireless bandwidth is a limitless commodity. Unlike oil, there is no set cost per unit below which a provider would lose money. Once the infrastructure is in place, rates are pegged to whatever a population can afford. Profits are built not by hiking prices to the maximum customers will pay, but by dropping prices and improving service to attract as wide a subscriber base as possible. As a result of this business model, there are now more cellphones in India than toilets. Developing nations may not keep the lion’s share of the mobile profits they generate, but they’re left with state-of-the-art communications networks upon which new industries are built. Visit Slovakia and you can enjoy mobile data speeds twice as fast as we have here.
Why won’t Ottawa allow foreign companies to spend their money building up our networks while driving down costs to a point where every Canadian can afford a cellphone? As the Internet moves from desktops to handsets, there is globally recognized value—economic and cultural—in keeping a citizenship wired on the go. Canada’s mobile penetration rate is perhaps our most embarrassing statistic: only 75 per cent of Canadians subscribe to a wireless plan, placing us dead last among comparable nations. High bills are one thing; becoming a communications backwater, eclipsed by developing nations, is quite another.
The original reasoning behind foreign ownership restrictions is almost forgotten. When mobile phones emerged in the ’80s, Ottawa adopted a policy that any company that wanted to provide cellular service on our radio spectrum had to be 80 per cent Canadian controlled. It was a policy grandfathered in from traditional telephone regulations. Canada’s sole wireline phone network was considered critical industrial infrastructure—not the kind of thing you’d want a foreign nation controlling. But that rationale doesn’t apply to wireless today. There’s no reason we shouldn’t have 20 or 30 wireless companies operating in the country. Says Janisch, “You just can’t justify the foreign ownership restriction on ‘critical infrastructure’ grounds.”
And yet this is exactly what the three big mobile companies are arguing—and they’ve found unlikely allies in the Canadian cultural sector. Believe it or not, our nation’s thespians are one of the last major obstacles standing between you and a reasonable cellphone plan. A cultural lobby led by ACTRA, the actors’ union, has been vigorously campaigning Ottawa to preserve the foreign ownership restriction. ACTRA’s leadership declined to defend their position to me in an interview, but according to the union’s website, they believe that if we open up the wireless industry to foreign investment, we will “lose control of our culture” because “you can’t separate telecommunications and broadcasting.”
The issue stems from that ’90s buzzword “convergence.” ACTRA’s position suggests that if people watch TV on their smart phones, and the smart phones are provided by a foreign company, then foreign interests will determine what Canadians watch on TV. That most of what Canadians watch already comes from south of the border is beside the point. Foreigners cannot be trusted to create content that will employ our nation’s actors.
Of course, the idea that cellphones will replace TV sets is itself a wild projection. Smart phones have featured video playback for years now, and I doubt I’ve watched more than an hour of content on mine (if I started, it wouldn’t be with Being Erica, but I digress). ACTRA’s argument is so flimsy that one wonders if the members believe it themselves, or if the union leadership is simply currying favour with Rogers and Bell, two wireless companies that also happen to produce or broadcast a large percentage of Canada’s homemade television programs, which actors rely on.
Flimsy or not, the ACTRA campaign has worked. In the days of Harper’s minority government, the Bloc Québécois parroted the cultural argument, as did Michael Ignatieff when he was leading the Liberals. Meanwhile, the NDP is in an awkward position due to its ties to telecom worker unions. In the governments of the recent past, the issue of foreign capital in wireless has been a parliamentary non-starter.
High cellphone bills are one thing; becoming a communications backwater, eclipsed by developing nations, is quite another
Today, Harper’s majority could easily muscle past the cultural lobby and modernize the Telecommunications Act. But it hasn’t. Ironically, Harper and his party were far more effective in this respect as a minority, when they auctioned off new spectrum specifically to new companies. They went even further, overturning a CRTC ruling against Globalive (Wind’s parent company), the foreign-backed provider that employed creative corporate structuring to placate our existing laws.
Since gaining a majority, the Conservatives have backed away from this early pro-consumer bullishness. Our new Industry minister, Christian Paradis, has held closed-door meetings with the cartel about the foreign financing issue. He has yet to commit to setting aside spectrum for new entrants in the next auction, expected to take place in late 2012. And he has refused to sit down with consumer groups to talk about it. I find this frustrating, but it’s nothing compared to the frustration and uncertainty Wind’s foreign backers must be feeling right now—they’ve dropped more than $1 billion into Canada, and their future here is far from guaranteed.
With Wind, Public and Mobilicity, Torontonians finally have affordable options. These brands don’t offer the same coverage as the incumbents, but if they can expand their market share and their network coverage, they may stand a fighting chance. It’ll have to happen soon. The wireless frequency that was reserved by Ottawa for the new competitors will remain protected turf only until 2014. At that point, the cartel will be allowed to reach into its deep pockets and buy the new entrants. I asked Hudson Janisch how likely this consolidation will be if we don’t open our doors to foreign investment by then. His answer: “100 per cent.”