UBC Sauder School of Business Prof. Thomas Ross talks about U.S. telecom Verizon’s interest in moving north and what it could mean to the Canadian industry
Why have Canadian telecoms launched a public relations campaign against Verizon’s access to our market?
There are two main reasons as I see it. First, the entry of Verizon – a very large American wireless player – would represent a potentially enormous change in this market’s structure. This is a firm with the resources to match and exceed the current major Canadian players in all aspects of the business.
There is reason to believe that Verizon would not be inclined to start price wars–it is not how they operate in the U.S. It’s not even certain that Verizon could be successful in Canada, so it is not clear that these fears are completely justified.
The second reason is that the telecoms need more spectrum to expand services. Given the government’s rules for the next spectrum auction, if Verizon outbids them in the next round, at least one of the large Canadian firms may not get any of that prime spectrum. This could limit growth opportunities for the firm or firms left out.
Would allowing Verizon into the market lead to better prices or service?
I think it is easy to expect that Verizon’s entry will shake things up. Even the small entrants of the recent past–Wind, Mobilicity and Public Mobile–appear to have had a pro-competitive effect on the market. There is speculation that some of the major carriers’ recent changes to their data plans may have something to do with getting into a more competitive position should Verizon enter.
Verizon may not bring lower prices, at least not for basic wireless services, but it could offer innovative packages or programs, or a wider choice of handsets at better prices. The major Canadian carriers will then either be compelled to match those programs or offer lower prices to compete.
Who is right in terms of what is best for the Canadian economy and consumers – the government or the major Canadian wireless providers?
I think the Canadian wireless companies may be right that we need a more complete discussion about government policy toward the wireless sector. Government policy is hugely important to this industry – for example, there are rules about spectrum allocation and use, facilities sharing, interconnectivity and foreign ownership, among others. Still, I find that some of the arguments made by the major Canadian competitors and those who have taken up their cause are, let me just say, less than persuasive.