Friday, 16 March 2012

Wireless rules could bring down cellphone costs, but not immediately

Wireless rules could bring down cellphone costs, but not immediately

Vanessa Lu Business Reporter
Consumers won’t see immediate savings on their monthly cellphone bills despite Ottawa’s new rules to boost wireless competition that includes allowing some foreign ownership.
“Overnight, nothing is going to change,” said tech analyst Carmi Levy, noting it’s the same players in the market with the same technology. “It’s going to be years before we see any kind of tangible impact on our monthly bill from our carriers.”

Ottawa’s new measures are designed to increase competition, including giving smaller operators access to infrastructure and cellphone towers owned by the big three players — Rogers, Bell and Telus.
Will Mitchell, a visiting professor of strategic management at the Rotman School of Management, believes the changes have the potential to change the landscape.
He hopes it will spur new and existing carriers to come up with more innovations, such as regional-only plans, high-use texting plans for teens or talk-only plans for seniors. Or even new ways of using a cellphone.
For example, in Uganda, consumers can use their cellphones to transfer money or make purchases in a retail store.
“All of these things, consumers in Canada would benefit from,” he said. “If there are more players, there will different types of experimentation.
“There will be different imagination. Some will want to strategically differentiate themselves,” Mitchell said. “With more mindsets, there can be more visions.”
According to Industry Canada, the smaller carriers like upstarts Wind Mobile, Mobilicity and Public Mobile only make up 4 per cent of the market.
Industry Minister Christian Paradis announced this week new measures to permit foreign ownership for companies with less than 10 per cent market share — a long-taboo subject. That move essentially paves the way for companies like Wind Mobile, whose parent company is based in Egypt, to operate in Canada.
As well, Paradis set rules around a 700-MHz spectrum auction, expected in the first half of 2013, to allow at least four companies access to blocks in each of Canada’s 14 licence areas.
That essentially gives the smaller carriers the chance to get a chunk of the spectrum that would allow LTE networks, known as long-term evolution networks.
This spectrum is considered critical for wireless companies to expand their service and coverage, especially in certain locations from basements to elevators as well as rural areas.
But Wind Mobile’s president and CEO Anthony Lacavera has said the amounts available — for smaller players is not enough to build an effective network — and his company would likely sit out the auction.
Stewart Lyons, president and CEO of Mobilicity, said his company didn’t get everything they wanted, but he called it a reasonable compromise.
Unlike his Wind rival, Lyons said Mobilicity will bid on the auction and aggressively.
“We differ over some technical interpretations over the value of 10 MHz of the 700 MHz spectrum,” he said. “If someone doesn’t want to bid, it makes the playing field smaller, so it’s fine for us.”
Bell declined to comment. In a statement, Telus called the government’s move “a thoughtful and balanced decision” to meet its objectives of promoting consumer choice and increasing competition.
But Ken Engelhart, senior vice-president of regulatory at Rogers Communications, said the government’s move was unfair and bad public policy.
Because Bell and Telus build their networks together, they would get a 20 MHz network unlike Rogers would be limited at 10 MHz, he said.
That’s even though new players have said 10 MHz is not enough to build an effective network, Engelhart said, adding new players were given special access during the last auction.
“Canadians are staying away from the new entrants’ services in droves,” he said. “You can’t keep giving them regulatory advantages if customers aren’t buying their services.”
When asked whether the big players are the ones with the unfair advantage, Engelhart countered with an argument framed around Canada’s iconic coffee shop.
“Would you say that Tim Hortons controls the coffee market?” he said. “They sell coffee that people like to drink. If other people’s coffee isn’t as tasty, that doesn’t mean Tim Hortons controls anything.
“They have a good product. They provide good value. They have good customer service. And people buy their coffee,” he said. “People buy our cellphones because they get good value from it.”
Even though these proposed changes are considered sweeping, the share prices of three major wireless companies, BCE, Rogers and Telus were little changed.
Moody’s Investors Service said in a statement that the rule changes are “credit negative” for the big three because they are designed to foster competition, though it said the move likely won’t alter the competitive landscape.
Manitoba Telecom Services Inc., seen as a possible takeover target with the loosening of foreign ownership rules, rose 2.3 per cent to close at $34.26

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