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Competition Bureau urges CRTC to push beyond price control
Watchdog says low-cost data not a substitute for 'true competition'

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Wednesday, June 20, 2018 – Page B1

Canada's competition watchdog says the CRTC's plan to force the biggest companies to offer low-cost data packages is not a substitute for "true competition," arguing in a rare intervention that price controls should be only a temporary measure.

The Competition Bureau has weighed in after the Canadian Radio-television and Telecommunications Commission (CRTC) declined in a March ruling to support a business model popular in parts of Europe and the United States.

In a bid to offer consumers more affordable options, the federal government had asked the CRTC to consider forcing large carriers to lease airtime to new players that do not build networks of their own but instead rely mainly on WiFi to connect subscribers.

Although the CRTC did not back that model (which is known as WiFifirst mobile virtual network operators, or MVNOs), it said that it was still concerned about affordability and ordered national carriers Rogers Communications Inc., BCE Inc.

and Telus Corp. to submit proposals for low-cost plans focused solely on data, rather than calling or texting.

The Competition Bureau filed an intervention in that proceeding last week, saying it does not generally favour price controls.

However, it supports the idea of mandating low-cost, data-only plans - but only until the CRTC can address competition issues on a broader basis.

"[Low-cost, data-only] plans are not a substitute for true competition in this industry," the bureau said in its filing, adding that they should be imposed "on a temporary basis only, until such time that the CRTC can establish longer-term, more robust solutions to competition problems and other public policy issues that may exist in this marketplace."

The Competition Bureau has provided its input in nine CRTC proceedings over the past five years, a spokesman said on Tuesday.

It has previously highlighted its concerns over the "market power" that exists in Canada's wireless industry, saying the incumbent operators earn higher profits and a greater rate of return than they would in a more competitive market.

The watchdog's comments come amid heightened scrutiny of the industry, as Navdeep Bains, the federal Minister of Innovation, Science and Economic Development, has called on the CRTC to hold a public probe into high-pressure sales tactics at the largest telecom companies.

Mr. Bains's department has also announced plans to set aside more than 40 per cent of the airwaves in a forthcoming spectrum auction for regional players, such as Shaw Communications Inc.'s Freedom Mobile and Quebecor Inc.'s Videotron.

And he hinted he will consider a similar approach to two additional auctions announced this month.

The Competition Bureau did suggest there are hopeful signs, noting, "The establishment of fourth carriers in some parts of Canada demonstrates the opportunity for a more competitive future."

Freedom, which operates in Ontario, Alberta and British Columbia, has been improving its network and added a record 93,500 new customers in its latest quarter.

The company also sparked a deal frenzy in December when the Big Three carriers offered limited-time promotions responding to Freedom's low-cost monthly plans with large data buckets.

Videotron, meanwhile, passed the million-subscriber mark for its wireless business in November.

On Tuesday, it announced plans for a promotional "blitz" in Ottawa to win more customers in its only non-Quebec market.

The Competition Bureau said that although forcing the Big Three to "unbundle" data from wireless voice services could increase customer choice, the CRTC should conduct a broader analysis of competition in the industry.

It said the appropriate place for that "conversation" is the commission's planned review of the industry.

When the three incumbents filed their proposed low-cost, data-only plans in April, they faced a backlash over what consumer advocates said were miserly amounts of data.

The plans ranged from 400 to 600 megabytes at a cost of $25 to $30 a month, according to a response from the Public Interest Advocacy Centre, which criticized the carriers for failing to justify the rates "beyond references to the price of coffee."

In its filing, the Competition Bureau emphasized that mandated prices for such plans should be high enough to cover the carriers' costs and still provide an incentive to invest.

However, it also noted that the proposed prices ranged from 326 per cent to 352 per cent higher than what the incumbents charge smaller carriers when their customers travel and roam on the bigger companies' networks.

The Big Three will file responses to the comments on their initial proposals next week.

All declined to comment on Tuesday.

"We suggest investors keep an eye on the proceedings as the stakes have now become a little higher with the Competition Bureau's intervention," Desjardins Securities analyst Maher Yaghi wrote in a research report on Monday.

Ottawa's call for an inquiry on high-pressure sales tactics "further increases scrutiny on telecom players, which could eventually lead to a more restrictive telecom regulatory environment," he added.

Macquarie Capital Markets Canada analyst Greg MacDonald also highlighted Ottawa's call for a public inquiry on sales practices, as well as the government's recent spectrum announcements.

"Given the government's consistent pro-consumer stance, we believe we will see additional spectrum reserved for wireless 'new entrants' in future [spectrum] auctions," he said in a report on Tuesday, adding that this, "in turn, reinforces our bullish stance on Shaw and Videotron's growing wireless operations."

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