It looks like it will be status quo for the Canadian wireless industry. After months of speculation, U.S. wireless giant Verizon Communications Inc. has announced it is no longer interested in entering the Canadian market. The “Big Three” can finally breathe a sigh of relief, as a fourth national competitor is no longer on the horizon. Although this comes as welcomed news for Canadian cellphone providers, consumers could be the real losers. With the looming pressure of a major U.S. competitor no longer apparent, our cellphone bills could be on the rise.
Verizon Only Had “Limited Interest” In Canada
Before their current $130-billion deal to buy out Vodapfone, it seemed like a case of when not if Verizon would enter the Canadian wireless market. Most consumers, tired of a lack of choice and higher prices, were keen about the prospects introduced by a new major mobile player. Apparently that excitement was unwarranted – Verizon only had “limited interest” in Canada, according to Chief Executive Lowell McAdam in a recent interview with Bloomberg News. The buyout deal put the kibosh on a possible Canadian expansion. When asked point blank whether Verizon is coming to Canada, McAdam confirmed Verizon is not going to Canada and that the firm’s interest was “way overblown”.
Restrictive Foreign Rules Leading to a Lack of Competition
For months there has been an ongoing war of words between the current main providers – Bell, Rogers, and Telus – and Industry Minister James Moore. Both parties have used the media as their soapbox to tell their side of the story. The Big Three claimed it’s unfair that a major U.S. player like Verizon can swoop up north and bid on new spectrum set aside for smaller players. Meanwhile, Moore plead his case that a fourth national competitor is needed to lower the prices Canadians pay for wireless service.
Why Verizon May Have Passed
The tepid response from Verizon signals a bigger problem with the Canadian wireless market. There’s nothing stopping another major U.S. competitor, like AT&T for example, from submitting a bid in January’s spectrum auction – except the fact that the Canadian market is skewed to favour domestic firms. You don’t see the Big Three harping about the 10 per cent foreign ownership cap, which probably isn’t a coincidence since it benefits them. The wireless industry is already capital-intensive; it’s no surprise major foreign competitors aren’t chomping at the bit to enter the Canadian market with such restrictive rules.
Consumers are the Real Losers
The real losers in this deal (or lack thereof) are the consumers who pay overblown mobile phone bills – they seem to have been thrown under the proverbial bus. While the government and the Big Three haggle over the foreign ownership rules, consumers are still footing their expensive bills. Even with the new wireless code of conduct issued by the CRTC limiting cell phone providers from three to two-year contracts, it remains to be seen how much consumers will benefit. Although you’ll no longer be locked into a three-year agreement, you’ll probably end up paying more for top-of-the-line phones, as wireless providers look to recoup their subsidies sooner.
Industry Pressure Is Positive For Consumers
Even without Verizon setting up shop north of the border, Canadians are already benefiting from the prospects of foreign competition. Just this summer the Big Three started offering new data sharing plans for the first time ever. Consumers who went over their monthly data usage previously had to pay through the nose, but thanks to the new rules you can share with your family with greater ease.
Although one shoe has dropped – greater choice – there’s still no sign of lower prices. With Canadian wireless startups like Mobilicity at the brink of bankruptcy, let’s hope a major foreign provider steps up the plate for the upcoming wireless auction for the sake of the consumer. It could be quite some time until another wireless auction, which won’t do anything to appease consumers already unhappy with high cellphone rates.