Media Trade and investment

Canadian telecom Big 3: ‘Sweetheart deals for U.S. giants are a bad call for you’ – but not for us

‘Fair for Canadians’. ‘Cynical’ doesn’t do this ad justice.

For readers who can’t be bothered to watch the video (understandably), Canada’s Big 3 telcos, Bell, Telus and Rogers, are vehemently opposed to the federal government barring them from buying up their smaller competitors, a couple of currently struggling wireless telcos that entered the Canadian market only a few short years ago. They’re equally opposed to the federal government setting aside for smaller start-ups half of the wireless spectrum blocks that will be auctioned shortly. They’re afraid that a large international firm, such as Verizon, may swoop in and at once purchase one (or both) of the small telcos as well as the reserved wireless spectrum – which the government would be more than happy to see. Speculation about potential competition has already shaved billions off the Big 3’s market caps, which speaks to the lack of competition they claim is alive and well in Canada.

Only 6 months ago, Telus was urging the same Canadian government it’s now lobbying to deny foreign ownership of Canadian telecom start-ups to foreign investors, to loosen foreign ownership rules to allow Telus to sell a greater share of itself to U.S. investors. This was after it came to light Telus likely breached federal regulation barring Canadian telco incumbents from having more than a third of their shares held by foreign investors. Readers can check out Telus’ December 2012 Media release trying to spin the news.

In 2008, Bell Canada Enterprises (BCE) was involved in a leveraged buyout scheme that would have given several U.S. firms control of nearly half the company.

Rogers was once Rogers AT&T. AT&T and BT at one point jointly held 31% of Rogers’ Class A and 42% of its Class B voting shares.

And lest Canadians forget, this is a repeat of an earlier episode, that one in the early (n)aughts involving a couple of small competitors then known as Clearnet and Fido. The former was bought and absorbed by Telus, the only remaining vestiges of its existence being the Telus logo / colour scheme. The latter was bought and absorbed by Rogers, with only the name remaining in use as a low-end brand by the company.

Clearnet and Fido were new, innovative start-ups viewed as existential threats to the Big 3 in the 1990’s. They offered Canadians unlimited text messaging, unlimited evening calling, more competitive wireless long-distance rates and more competitive rates in general. Fido even introduced Canadians to the Global System for Mobile Communications (GSM), which would become the international standard for mobile telecom.

The more recent start-ups, WIND and mobilicty, are likewise viewed as existential threats to the same Big 3 today, but for slightly different reasons. Calling and texting have increasingly given way to browsing and streaming.  Given the surge in popularity of portable networked consumer electronics devices (smartphones, tablets), exorbitantly priced data was going to be the Big 3’s future cash cow. And what these new start-ups offer are data plans at a fraction of the rates charged by the Big 3.

Of course, foreign ownership does not necessarily lead to greater competition. A large foreign competitor well-established in its home market would seek to avoid undercutting the rates it offers its own customers back home. Verizon is U.S. based, and U.S. rates are not much more competitively priced than Canada’s. Some claim Verizon’s rates are the highest among national U.S. carriers. Also, Verizon is no small, scrappy start-up; its market cap is nearly double the Big 3’s – combined. And while it’s true that a foreign company will not be terribly concerned about hiring Canadians, increasingly, neither have the Big 3 been (Rogers may be a slight exception, but Rogers also has the worst customer service in Canada).

With regard to providing greater network access in more remote areas, that has a great deal to do with spectrum allocation. WIND and mobilicity currently don’t offer service in more remote, less populated centres because they can’t, not because they choose not to. Ironically, in campaigning against the government’s decision to reserve spectrum for these smaller competitors, the Big 3 are effectively campaigning against greater provision of service to more remote regions, the very thing the ad above tells Canadians the government’s decision would deny them.

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