Wireless competition: easier said than done

When Ottawa first decided to boost competition in the wireless market back in 2008, it seemed like a relatively straightforward process: set aside wireless airwaves for new entrants, and then sit back and watch the free market provide consumers with more choice and lower prices.

It wasn’t nearly so simple. In order to keep its experiment from imploding, Prime Minister Stephen Harper’s government has been forced to constantly intervene in the sector over the past five years—not exactly the sort of laissez-faire approach Conservatives are supposed to favour. The first test came early on. One of the most promising upstarts, Wind Mobile, found itself offside with Canada’s telecom regulator before it had sold a single handset. The Canadian Radio-television Telecommunications Commission, or CRTC, ruled that Wind was in violation of Canada’s foreign ownership rules because its main backer, Egypt’s Orascom Telecom, held too much of its debt. Instead of forcing Wind to change its ownership structure, Harper’s cabinet stepped in and overruled the CRTC’s decision in 2009,  raising questions about whether it had inadvertently set a new precedent for foreign ownership in the process.

Ottawa was forced to resume tinkering again last year as Wind and fellow upstarts Public Mobile and Mobilicity faced tough competition from industry giants Telus, Bell and Rogers (which owns Maclean’s). It changed its foreign investment rules so wireless companies could access more foreign capital, or be even be acquired outright by a foreign firm—but only if they held less than 10 per cent of the market. Not surprisingly, the incumbent players were unhappy with the ruling, which could theoretically one day lead to a situation where two wireless companies of a similar size operate under a different set of foreign ownership restrictions (unless, of course, Ottawa made further changes).

It was against this backdrop that Orascom set about trying to take full control of Wind Mobile. But now that might not happen either amid reports Ottawa is concerned about Orascom’s new owners in an age of cyber-snooping. Orascom merged in 2010 by Amsterdam-based VimpelCom, whose biggest shareholder is a company controlled by a Russian billionaire. There are also reportedly concerns about the fact that Wind’s wireless equipment was purchased from a Chinese company, Huawei.

Orascom this week announced that it was abandoning its bid for Wind, although it didn’t say why (Verizon has also said Wind is among the companies it’s looking at in Canada). Meanwhile, Telus’s attempt to buy Mobilicity was quashed by Industry Canada, while Public Mobile has been purchased by two private equity firms.

Industry Minister Christian Paradis says he’s confident Canada can still have a fourth national wireless player. If recent history is any guide, he will have his work cut out for him.