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Wholesale wireless would be a positive step for Canada

The Canadian government should mandate a wholesale regime as a first step to addressing the fact that Canadians pay the most expensive mobile phone rates in the world.

I spoke about this at length in a recent interview with Jesse Brown but a post last week by Peter Nowak entitled “Wholesale wireless not the answer for Canada” has spurred me to respond to a couple specific points.

Peter primarily lays out three reasons why “…the Canadian government shouldn’t be – and probably isn’t – thinking of wholesale service as a solution to what ails the country’s wireless market”. They are that MVNOs have “only” achieved 10% of the market in the US, that MVNOs “that do offer data are operating on carriers’ older, slower and even near-obsolete networks” and that mandated wholesale has failed in the fixed Internet access market in Canada with the implication clearly being why try it again.

He also specifically offers these arguments in response to Open Media (and so many more on Twitter) calling for us to be allowed access in order to bring Ting to Canada.

First, “only” 10%. The share of MVNOs actually continues to grow from there, as all the articles about the MVNO renaissance in the US detail. More importantly, while the postpaid market in the US is flat, the prepaid market is showing significant growth (and most MVNOs, Ting included, are considered prepaid even though it really means “no phone subsidy”).

Also, the benefits that MVNOs bring to consumers go way beyond the market share those MVNOs manage to capture themselves. It is important to look at the changes the incumbents are forced to make in response to those MVNOs (and 10% is plenty to force change). In the US, MVNOs like Ting started challenging conventions like subsidized devices and contracts, overpriced unlimited and plans that dictate fixed levels of voice, data and text. T-Mobile took those messages and added several million in advertising spend. Now, Verizon and AT&T (60% of the market) are scrambling to respond with new plans and the average cellphone bill is undoubtedly coming down.

Of course slower networks and worse phone selection makes for lower market share. Except, Ting, and most of the newer MVNOs talked about in the MVNO renaissance, offer the most modern data networks and a great selection of high-end smartphones. LTE? Check. Galaxy S4? Check. Note 3? Check. Nexus 5? Check. iPhone? Only the 4 and 4S (you got us there Peter). In fact there is no doubt that our percentage of smartphone users far exceeds any of the big three in Canada (of course this is because we are newer). The whole argument about networks and smartphones seems like a straw man he builds up to be torn down. It is both factually incorrect and not relevant when talking about either Ting or Open Media’s asks.

Finally, perhaps the most bothersome argument, that mandated wholesale has failed in the fixed access market in Canada. The fact is that what has happened in fixed access is that the government has failed to enforce mandated third party access and that the incumbents have done everything in their power to thwart it. Third-party access to the cable plant was mandated by the CRTC in 1996. The cablecos were able to deny that access until 2012. Sixteen years!

If Peter’s point is that we should not bother with mandated wholesale access because the government will never be able to enforce it and/or the incumbents will always be able to avoid enforcement then I may have to sadly agree. But if Peter’s argument is that it hasn’t worked because it is the wrong strategy then he is simply wrong on the facts. We have seen a terrible failure in execution of an absolutely appropriate strategy (and here my heart goes out to Teksavvy and all the others who have fought and are fighting this good fight).

If the government took the resources they are spending on television ads telling us about how they want fairness in the mobile phone market and spent it on effectively executing a mandated wholesale regime, then Canadians would have real change. In places where this has been executed well, like the UK or Israel, users have immediately enjoyed lower prices and higher levels of service. Then perhaps in a short time “only” 3 million (or 10% of) Canadians would be enjoying the savings and actually dealing with a phone company that cares about them. And shortly thereafter 5 million. And…..

FOOTNOTE: There is one other note. In no way do I allege bias (truly I don’t), but the lack of disclosure of conflict bothers me. From Peter’s bio:

“In November 2010, Peter embarked on a freelance career and to work on his next book. He is a syndicated blogger for Macleans magazine, Canada’s news weekly, and Canadian Business magazine, as well as a regular contributor to The Globe and Mail and the Huffington Post. He also contributes to MSN, CBC and New Scientist magazine.”

Macleans and Canadian Business are owned by Rogers and the Globe and Mail is owned by Bell. There, fixed.

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