What if Canada Threw a Wireless Party and No One Came?

verizon-wireless-logo_thumb.jpgLast week I wrote a piece on why I thought the Federal Government’s strategy to attract more competition in the wireless industry was all wrong. For the record, it’s NOT that I think we don’t want or need, or that I wouldn’t relish more legitimate competition. Far from it – I join the legions who salivate at the thought that maybe, just maybe, one day I will have more freedom, better service and lower costs to my wireless and associated services. (Disclosure: I currently have a 4-fold bundle from Rogers: wireless, home phone, internet and full HD cable TV).

My point was, and remains, that the government is going about this laudable goal in totally the wrong way. What they should be doing is removing the foreign ownership restrictions on the telecommunications industries as opposed to the meddlesome, biased and anti-establishment “policies” they have enacted.

How is that they do not see the total illogic of suppressing competition (by putting huge restrictions and constraints on the incumbent “Big 3”) in the name of creating competition (by creating huge non-competitive advantages and incentives for a huge company like Verizon to enter the Canadian marketplace? Squashing competition to promote competition? It’s like bombing to create peace.

Totally illogical.

My view remains that it will be far too politically unsavoury for the Feds to tackle the real culprit – foreign ownership, since that will get really messy really quickly, no doubt. I reckon that this current war on the Telcos is dictated as much as anything else by pandering to the public’s visceral negative reaction to our Telcos, as in ‘we are the government who will stand up for the consumer and beat back these high prices etc.’

And of course they will want us all to remember this come next election.

Since I wrote that piece the wars are heating up, so this is a bit of an update.

Yesterday Sean Silcoff wrote in the Report on Business in the Globe and Mail that the Wireless incumbents [are] losing war of words with Ottawa. This shows what we all know – we don’t much like our telcos and the very fact that they are now scrambling to win the war of public opinion is not moving too many to their side – quite the opposite. Even though Mr. Silcoff concedes that:

There’s no question that the government has gerrymandered the rules to favour Verizon. The company can bid for two of the four prime blocks of spectrum up for grabs in January, while BCE, Telus and Rogers must fight over two others and buy no more than one each. Verizon can piggyback on their networks, cherrypick the best customers in big cities, and likely handle back office functions in the U.S. This will force the incumbents to cut spending and jobs, which Verizon probably won’t replace in Canada. It is unseemly to give so many advantages to a U.S. giant.

And yet, despite this, he feels that the telcos are fighting a losing battle:

At any rate, the incumbents’ message is D.O.A. . The problem with their public campaign is that it’s all about what’s good for them, but doesn’t address how consumers would be better off if they get their way. Most Canadians couldn’t care less if Verizon hurts the big three wireless providers. [emphasis added]

Letting Verizon in doesn’t guarantee more dynamic competition or lower prices. But Ottawa doesn’t even need it to, given how the telcos have bungled their lobbying. For voters, watching the incumbents squirm is satisfying enough.

Most Canadians couldn’t care less if Verizon hurts the big three wireless providers.

“Watching the incumbents squirm”. We seem to love that. I think he is exactly right and that the telcos are playing right into the government’s hands. And I think Prime Minister Harper and Industry Minister James Moore are themselves slapping each other on the back for being on the “right side” (politically) of this argument even though I believe they are totally on the wrong side of this from a policy perspective.

How else can we explain the need for Mr. Harper and Mr. Moore to be mounting a campaign, at taxpayers expense, to win over the hearts and minds that are already won over? For example we learned that the Harper government lashes out at telcos for ‘dishonest’ lobbying and that Ottawa launches defence of plan to lure foreign telecom firms. According to the second article “Industry Minister James Moore is embarking on a cross-country speaking tour, beginning Friday in Vancouver, that he says will deliver the message that the government is standing by its policy of bringing more competition into the Canadian wireless market.” This will be augmented by a media campaign apparently.

Why are they bothering if a) they have told us over and over that they are not going to back down anyway and b) they already have public sentiment on their side?

This is politicking for votes, nothing else. It’s like those “Action Plan” ads that make me puke over and over when I think of how much public money the Feds spend on partisan propaganda that passes as “information” to get me to vote for them.

And all that got me to thinking a couple of days ago, that I would not be surprised if after all of this Verizon decided to take a pass. After all, can a government be trusted in the long term if it meddles today in clumsy ways to provide disincentives for incumbents and incentives for new entrants? If Verizon comes in, they will now become an incumbent. Goose, meet gander.  Who is to say that the government won’t introduce a new provision next year that now disadvantages Verizon?

This prompted me to write the following letter to the Editor of the Globe and Mail two days ago. It was not published, but it sums up what I felt:

Dear Editors:

Today’s Globe features two articles on the current wireless debates. One was a repudiation of the Big 3’s claims by the government and the other purported to show that the “courtship” of Verizon may have been initiated by that same government some months ago.

In the end, the huge irony in all of this might well be that Verizon decides to take a pass. Should that happen, Verizon will no doubt cite economic and business reasons but I would not be surprised if a major factor will be that they don’t trust a government that sets an ephemeral policy environment. After all, they may be the beneficiary this time around of a biased, meddlesome intervention and a “loophole”, but who is to say that they may not be the victims next time around. A Federal government that can’t be trusted to chart a stable course does not bode well in a business environment.

Lo and behold, the very next day, we learned that Verizon delays potential acquisitions of Wind, Mobilicity.

Verizon Communications Inc. is putting off the potential acquisition of two small wireless companies, a shift that may signal the U.S. carrier is cooling on the idea of entering Canada despite moves by Ottawa to entice foreign players into the market.

What is not clear at this time is whether or not Verizon is rethinking its entry into Canada, or if it is playing a bit of hard-ball and using this cooling off as a bargaining chip. Since the feds have handcuffed the incumbents from bidding on, or acquiring, Wind or Mobilicity, Verizon has nothing but time on its hands to let the prices come down as these companies bleed red ink on their balance sheets.

But as I said, they may be rethinking all of this because of the government’s meddling. Today’s meddling in favour of Verizon could be tomorrow’s meddling to stomp on them. Maybe, in the absence of stable, long-term and sensible foreign ownership policies, Verizon may tell the Feds, no thanks.

Wouldn’t it be ironic if the Feds get hoist on their own petard?

Delicious irony, no?

If you enjoyed this post, please consider sharing it, leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.

Leave a Reply

Your email address will not be published. Required fields are marked *