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Canada to cap domestic wireless roaming rates

People use mobile devices while waiting to enter the Supreme Court of Canada in Ottawa June 17, 2008. REUTERS/Chris Wattie
People use mobile devices while waiting to enter the Supreme Court of Canada in Ottawa June 17, 2008. REUTERS/Chris Wattie

By Alastair Sharp

TORONTO (Reuters) - Canada will introduce legislation to cap roaming rates that big telecom providers charge their smaller rivals, the government said on Wednesday, aiming to breathe life into its sputtering drive to foster competition in the wireless industry.

In announcing the new rules, Industry Minister James Moore said Canada's big wireless companies charge rivals as much as 10 times the rate they charge their own customers for roaming voice, data and text services.

"For too long, Canadian consumers in the wireless sector have been the victims of these high roaming costs," Moore said in a statement announcing Ottawa's plans to submit an amendment to the Telecommunications Act within weeks. The governing Conservatives hold a majority in the House of Commons, assuring passage of the bill.

The legislation would allow the three national carriers - Rogers Communications Inc, BCE Inc and Telus Corp - to charge their competitors no more than the rate they charge their own retail customers. BCE, parent of Bell Canada, shares a coast-to-coast network with Telus.

The government hopes the cap on wholesale rates will encourage smaller carriers to cut consumer prices and improve service outside their own coverage zones, which tend to be confined to major metropolitan areas.

"This move neutralizes the 'reach' dimension of the incumbents' advantage," said Iain Grant, managing director of telecom consultancy Seaboard Group. "A big step forward."

The government also said it would step up enforcement of existing regulations, giving the telecom regulator and the industry department the power to fine companies that break rules on such things as the sharing of cellular towers.

Previously, the bodies could only withdraw a license from an operator, an option that was never used, Grant said.

HARD TO SURVIVE

The high cost of roaming has had a damaging effect on new entrants in the wireless market, which have sought to win customers with low-cost plans and must rely on the established carriers to provide coverage in many areas of the country.

In a 2008 auction of wireless airwaves, the government set aside spectrum for newcomers in a bid to loosen the dominance of the three big providers.

Since then, however, the new entrants have found it hard to survive. One of them, Public Mobile, was recently acquired by Telus, and another, Mobilicity, is under creditor protection as it seeks a buyer. That leaves Globalive's Wind Mobile as the last newcomer standing.

Some analysts and company executives, however, complain that government policies have confused and discouraged companies weighing a move into the country's telecoms industry.

Ottawa has twice blocked Telus, which has no wholesale roaming deals with new entrants, from buying Mobilicity.

Verizon Communications Inc had offered to buy Wind and was in talks to acquire Mobilicity, sources said in June, but the U.S. telecom giant ultimately decided to stay away.

Globalive's main backer, Europe-focused Vimpelcom, has said it is considering exiting the market, and Canada's next crucial auction of airwaves, due to start next month, has failed to draw interest from any major foreign telecoms.

TOO LITTLE, TOO LATE

Canaccord Genuity analyst Dvai Ghose said the move on roaming was likely too little, too late, and that it would have a negligible effect on the bottom lines of the big carriers.

He said Rogers, as the main provider of roaming services for the new entrants, likely brings in around C$50 million from it, compared with C$6.8 billion in network revenue this year.

Supporting that thesis, the share prices of Rogers, BCE and Telus were all up on the Toronto Stock Exchange early on Wednesday afternoon.

Still, Wind's chief legal officer, Simon Lockie, said the new rule shows that the federal government is serious about helping consumers by aiding competition.

"It is now clear that this government is taking the realistic and committed actions necessary to create a level playing field for competition in the wireless space," he said.

The government move preempts a review currently in process at the industry regulator, the Canadian Radio-television and Telecommunications Commission. In August the CRTC sought information from all players in the industry on wireless roaming, and has said it will consider next year whether the large Canadian carriers are unfairly imposing more restrictive terms on domestic rivals than on U.S.-based carriers.

The government said its measure would remain in place until the CRTC makes a decision on whether to limit roaming rates.

It is not the first time the Conservative government has sought to influence policy at the CRTC.

In 2011, the CRTC backed away from its own ruling that would have effectively stopped small Internet providers from offering unlimited downloads after the industry minister threatened to block the decision.

In the same year, the government went to court to argue that Globalive qualified as a Canadian enterprise after the CRTC said it wasn't. Canadian status meant Globalive did not run afoul of limits on foreign involvement in telecoms. Ottawa has since lifted those restrictions for small carriers.

(Additional reporting by Euan Rocha; Editing by Bernadette Baum, Theodore d'Afflisio and Peter Galloway)

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