Feds call on Canada's Big Three telecoms to slash cellphone costs by 25 per cent over two years

OTTAWA -- The government on Thursday closed the loop on a campaign promise to lower cellphone costs for Canadians.

Minister of Innovation, Science and Economic Development Navdeep Bains said the government will demand that the Big Three -- Bell Canada (which owns CTV News), Rogers Communications Canada and Telus Communications -- lower their prices by 25 per cent in the next two years for cellphone plans that offer two to six gigabytes of data.

He said his government has listened to Canadians’ concerns about high cellphone costs in Canada, when compared internationally.

"If these targets are not met within the two years, the Government will take action with other regulatory tools to further increase competition and help reduce prices," the ministry stated in a press release.

The ministry doesn’t offer specifics on how it would enforce the price decrease but said it will rely on quarterly progress reporting with Statistics Canada data to encourage accountability.

Bains has also pledged to set aside spectrum for small and regional providers in the hopes of boosting competition and ultimately lowering prices.

"These new tools build on a number of initiatives we already set in place to help lower prices, improve access and ensure affordable, high-quality wireless services in every corner of our country," Bains said.

According to the 2019 Price Comparison Study of Telecommunications Services in Canada and Select Foreign Jurisdictions, Canada has the highest or second highest mobile wireless service rates among G7 countries and Australia.

However, according to the same data, Canadian prices have either decreased or stayed neutral in 2019 compared to 2018. The cities of Winnipeg, Montreal, and Regina are among those with the lowest costs.

The Big Three respond

Vanessa Damha, senior manager of media relations at Bell Canada, told CTVNews.ca in a statement that the company will keep a close eye on the developments, but added any policy which discourages investment "including regulating wireless pricing or continuing to deny fair access to spectrum for all competitors, put jobs and innovation at risk in an industry that’s delivering tremendous value to consumers."

Telus' manager of communications shared the same sentiment about the threat of job loss and said it’s "disappointing" to see the 25 per cent decrease apply only to national carriers.

"This is yet another punitive action taken by this government against the companies that have built Canada’s global-leading wireless networks," said Richard Gilhooley, who added that the decision "is giving [Telus] reason to think very carefully about where our next investment dollars should go."

In late February, Telus Corp. CEO Darren Entwistle made waves when he said the company would cut 5,000 jobs and draw back $1 billion in investment over the next five years should the government demand it sell access to its wireless network to smaller companies. He made the comment during a Canadian Radio-television and Telecommunications Commission hearing on wireless service.

For Rogers Communications' part, the company says it operates in a highly competitive market that continues to deliver more affordability and value, and the company is always evolving its services to meet the needs of Canadians.

In a statement to CTVNews.ca, the Canadian Wireless Telecommunications Association said the news today "acknowledges what our members, and Canadians, already know - that wireless prices are declining in a very competitive and active marketplace."

"The spotlight section of this study shows that prices declined between 25 per cent and 30 per cent from May to September of 2019. Our members will continue to compete to win the business of Canadian consumers and deliver what has been recognized by a recent U.S. independent study as the highest mobile value among the G7 nations plus Australia," the statement reads in reference to PwC’s Unlimited Data Plan Index.

Should the government have waited?

Telecommunications consultant Mark Goldberg says in the past two months there’s been a significant dip in pricing, making the government’s drawn-up analysis out of date.

"Why not declare victory, say all of the measures we’ve put in place, they’re finally taking hold? The facilities-based competitors, Videotron and Shaw, they’ve reached that critical mass that it’s causing prices to fall across the country," Goldberg told CTVNews.ca.

He said the government should have held off making an announcement until the CRTC finishes its review of the wireless services market.

"Why is the government doing anything until their arm’s length independent regulator evaluates all of the evidence?" said Goldberg. "You’ve got a regulator that’s trying to decide if anything is needed let alone what is needed."

He also cautions against any drastic moves that would create uncertainty for the Canadian telecom market at a particularly volatile time.

"We’ve got so many pressures on the capital market as a whole worldwide and we’re creating more uncertainty for the Canadian capital market for telecom at a time they need to spend 26 billion to update our network over the next five years," he said referring to the government’s plan to implement a 5G system.

In an interview on CTV’s Power Play on Thursday, Bains was asked whether these two demands – to slash prices and at the same time invest in Canada’s emerging 5G network – will create confusion.

"I think it’s very consistent with our government’s policies. We want to reduce prices, we want lower prices," he said. "More needs to be done"

Telus has already said they would work with controversial Chinese telecom giant Huawei to rollout their 5G capabilities but the government remains undecided about whether they’ll allow the company to be involved.

"Companies will make their own determination, they asses their own risk levels, they have their own operating mandate, they have their own strategic plans, for us we’re still doing our due diligence," said Bains.

Michael Geist, the Canada Research Chair in Internet and E-Commerce Law at the University of Ottawa, said the government is likely responding to concerns from The Big Three about the government’s demands to make pricing concessions.

Geist added that there is a limited amount of policy options available to draw from to make services more affordable, but that competition in the market is the most viable option.

"Prices are dictated almost entirely by competition," he said. "It doesn’t sound like rocket science but if you bring in some new competitors so more possibility of providers offering either more choice or different kinds of plans, you’re going to force incumbents to respond."

The spectrum set-asides are the government’s preliminary approach to this, according to Thursday’s announcement. More aggressive regulatory approaches will be undertaken after two years should the Big Three not follow the recommendations.

With files from The Canadian Press