Canada to cap domestic wireless roaming rates

Booths for both Fido and Rogers wireless are displayed in a cellphone store in Ottawa. (Chris...

Booths for both Fido and Rogers wireless are displayed in a cellphone store in Ottawa. (Chris Roussakis/QMI Agency files)

Alastair Sharp, Reuters

, Last Updated: 6:15 PM ET

TORONTO - Canada will introduce legislation to cap wholesale roaming rates that big telecommunications providers charge their smaller rivals, aiming to breathe life into the federal government's sputtering drive to foster competition in the wireless industry.

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

The difference ratchets up costs for the small players and their retail customers, while bolstering the competitive position of the three national carriers, Rogers Communications Inc, BCE Inc and Telus Corp.

"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 Big Three 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, adding that it was "a big step forward."

Moore told Reuters in an interview that a cap would send a clear message "that the status quo is not going to continue," encouraging newcomers to enter the market ahead of January's government auction of 700 MHz wireless spectrum.

"This is yet another ingredient that we think will help spur more competition in the marketplace, and that's the ultimate goal of our policy," he said, adding that the increased competition should change the plans of the big telecoms.

Rogers said its domestic roaming agreements with rivals are based on negotiated rates and that new entrants have not used an arbitration process for disputes. Telus declined to comment and BCE said it was awaiting details of the legislation.

STEPPED-UP ENFORCEMENT

In addition to the cap, the government 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 department could only withdraw a license from an operator, an option that was never used, Grant said.

The high cost of roaming has had a damaging effect on wireless newcomers, 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 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. company ultimately decided to stay away.

Globalive's main backer, Europe-focused Vimpelcom Ltd , has said it is considering leaving the market, and the upcoming 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 a cap on roaming rates was likely to be too little, too late, and would have a negligible effect on the bottom lines of the big carriers.

He said Rogers, the main provider of roaming services for newcomers, likely brings in some $50 million from the business, compared with $6.8 billion in network revenue this year.

Supporting that view, the shares of Rogers, BCE and Telus all closed higher on the Toronto Stock Exchange on Wednesday.

Still, Wind's chief legal officer, Simon Lockie, said the new rule shows that Ottawa is serious about creating a level playing field.

"Game-changer," he wrote on his Twitter feed.

The government move preempts a review in progress by the industry regulator, the Canadian Radio-television and Telecommunications Commission.

In August the CRTC sought information from the industry on wireless roaming. It said it would consider next year whether Canada's big carriers are unfairly imposing more restrictive terms on domestic rivals than on U.S.-based carriers.

The government said on Wednesday 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 was not. Canadian status meant Globalive did not run afoul of limits on foreign involvement in telecommunications. Ottawa has since lifted those restrictions for small carriers.


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