Out of the ho-hum budget the government presented earlier this month came a little gem of a change that has the potential to shake up the telecommunications industry in Canada. In the budget, the Conservatives introduced their decision to open up the sector to foreign ownership.
The opening up of telecommunications industry in this country is a welcome change. The big three cell phone companies – Telus, Rogers and Bell – have monopolized the cellphone market for too long. There have even been allegations in the past that the three collude in order to keep the cost of cell phone plans high. The three companies own a staggering 94 per cent of Canada’s wireless market.
The Organization for Economic Co-operation and Development reported in August that Canada has one of the most restrictive telecommunications rules in the world. Canada also ranked third in a study of developed countries with the most expensive wireless rates.
The OECD came to this conclusion based on a comparison of a wireless package made up of 780 calls made, 600 text messages and eight multimedia messages sent per year. Among average cellphone users, Canadians pays about $500 US for their mobile service compared with the $131 US someone who lives in the Netherlands pays.
The same study found Canada had the second most expensive high-speed Internet rates. With the same companies that own the mobile companies running the Internet connections, this is no surprise.
The move to relax foreign ownership rules comes months after the Conservative government overturned the Canadian Radio- television and Telecommunications Commission’s ruling to deny cellphone provider Globalive an operating license because the loan it received from Egyptian company Orascom Telecom S.A.E. came with conditions. As much as government intervention in this case was useful, it highlighted the need for long-term solutions and the budget announcement is the first step to doing this.
Relaxing the rules for foreign ownership will go a long way in helping smaller companies like Globalive attract capital and bring better deals.
Already Globalive’s Wind Mobile is changing the game, offering cheap unlimited cellphone plans in Toronto, Calgary and Edmonton. Ottawa is on the Wind Mobile network and Wind Mobile users travelling to Ottawa from the other cities are able to use their phones in Ottawa. The company plans to launch a store in the city soon.
It will take time to see if consumers are ready to embrace new cellphone companies but the deals should help alleviate any fears they may have about signing with companies that are just starting out.
Some in the telecommunications industry worry that changing the ownership rules will open the door to foreign ownership of broadcast companies because some telecommunications companies also own television and radio stations.
However, academic Brownlee Thomas with Forrester Research Inc., an independent research company, says there will probably be less of a push to loosen regulations for cellphone companies that also own broadcast stations.
Thomas, who wrote a report on Canada’s foreign ownership rules and how they stifle competition and innovation, predicts the changes will most likely occur in local and regional markets. She says the government will only ease foreign ownership restrictions for telecom firms with less than 10 per cent market share to start.
So what are consumers to do before this happens? Thomas proposes that consumers try to avoid contracts whenever possible, especially three-year contracts since she predicts their demise.
She suggests they also buy unlocked iPhones on eBay because they are cheaper then the ones you buy with a plan. Thomas says the abandoning of system access fees, which sometimes can be up to $7 each month, is a step in the right direction.
She predicts there will be more exceptions to come including better texting packages, unlimited local calling and cheaper features including paying half the price for voicemail at $3 a month and maybe even $1 for caller ID.
She says the threat of competition among the big three cellphone companies and the innovations that companies like Globalive’s Wind Mobile, Dave Wireless’ Mobilicity, Quebecor Inc. and Public Mobile Inc. are bringing to cellphone plans will drive these changes.
With the choices these companies are already providing consumers, there should be a greater push to allow foreign ownership and investment so more of these companies can come our way.