It’s not hard to understand why the Canadian government would want more companies selling mobile phones in Canada.
Canadians, from coast-to-coast open their bills every month from Rogers, Telus and Bell and wish they were lower. They wish additional competition would drive up choice and drive down bills.
And more competition appears to be on its way. U.S.-based Verizon Communications appears poised to enter the Canadian market.
For any federal politician, it’s an attractive picture: Verizon Communications riding into Canada, like a knight in shining armour, to smite the Canadian wireless companies and save us all some money on our mobile phones.
However, it shouldn’t cost Canadian taxpayers a billion dollars to achieve this.
To be clear, Prime Minister Harper isn’t going to be handing a cheque for a cool billion to the CEO of Verizon on the steps of the New York Stock Exchange. He’s simply going stage an auction for wireless spectrum in January, an auction where Rogers, Telus, and Bell are not allowed to bid.
Analysts expect Verizon to pay roughly $1 billion less than it would need to pay if it were bidding against the Big Three.
Canadian citizens own the airwaves. The federal government, on behalf of taxpayers, makes a lot of money with its bandwidth auctions: the last one brought in $4.3 billion. That’s a lot when you consider the government expects to run an $18.7 billion deficit this year. Unfortunately, this year, at least one of those borrowed billions is headed straight into the corporate treasury of Verizon Communications in New York.
Verizon doesn’t need the money: it already has 100 million customers in the U.S. In July, Verizon reported profits of $2.25 billion US in the previous three months alone, on sales of nearly $30 billion US.
Nobody is going to argue, with a straight face, that Canadian wireless operators couldn’t use some more competition. But do we really need to rig an auction sale and offer Verizon a billion-dollar bonus to get into the game?
And why Verizon? There’s nothing wrong with Verizon, but if we’re going to open up the market to foreign ownership and additional competition, why not just open up the auction to any company, foreign or domestic, to bid on the additional spectrum? It could be T-Mobile, AT&T, or UK companies like one of Verizon’s owners – Vodafone. Or one of the Big Three might outbid all of them.
As taxpayers, isn’t it in our best interest to sell our spectrum to the highest bidder?
And if it turns out that it’s a new company or two new companies that purchase the spectrum, Canadians also benefit from the increased competition.
Sometimes an American operator can move in and turn the Canadian market upside down. Wal-Mart is a good example. Sometimes it’s a different story: Target’s takeover of the Canadian Zellers locations seems to be a work in progress: prices and selection in Canada don’t come close to the U.S. experience.
The important difference between Wal-Mart, Target and Verizon, is that both Wal-Mart and Target had to pay full market-price to build or buy stores in Canada. They weren’t and aren’t protected from their competition.
The wireless business, as the saying goes, ‘ain’t bean-bag.’ Newcomers to the market, such as Mobilicity and Wind Mobile, have brought prices down in Canada, but they’ve taken a beating from the Big Three, and they’re looking for new investors and new capital. Calgary-based cable giant Shaw Communications bought some wireless bandwidth before sizing up the Canadian market and backing out of it.
The Harper government blocked Shaw from flipping its unused wireless bandwidth to Rogers, one of many skirmishes in the ongoing battle between the regulator and the industry to keep competition alive. In Quebec, rather than hesitating as Shaw did, Videotron has waded into wireless, making some unexpected gains. After taking a risk and launching against the Big Three in Quebec, Videotron is livid about the special deal now being cooked up in Ottawa for Verizon.
Industry Minister James Moore has clearly articulated his concern for mobile customers, but there’s apparently little concern about taxpayers and the billion they will be losing out on under this rigged auction. This upcoming auction should be a win for both customers and taxpayers.