Canada Pressures Wireless Industry to Lower Prices

(Bloomberg) -- The Canadian government says it will force the country’s three largest telecommunications companies to cut prices on some wireless services by 25% within two years.

The government’s demand applies to plans sold by Rogers Communications Inc., BCE Inc. and Telus Corp. that offer consumers 2 to 6 gigabytes per month. Almost 40% of Canadians with wireless data have plans in that range, Industry Minister Navdeep Bains said in Toronto.

“To be clear, if our targets are not met within two years, we will take additional action with other regulatory tools to further increase competition and ensure that prices come down,” Bains said, according to remarks prepared for a speech.

Successive governments in Ottawa have tried to reduce wireless prices. For more than a decade, the officials have “set aside” wireless spectrum for the use of new entrants in an attempt to create competition for the three big companies.

‘Isn’t Fair’

But some of the new players have struggled under the weight of the capital investments required to cover a geographically large country that has fewer people than California. A government-commissioned report from 2018 found that Canada had among the most expensive bills when compared to developed countries such as the U.S., U.K. and Japan.

The three biggest companies control 90% of the country’s wireless market, according to the government.

Bains said his department would publish quarterly reports to track their progress toward the 25% price-cutting goal. The government will also set aside spectrum for smaller, regional providers in an upcoming auction of 3500 megahertz spectrum.

“It simply isn’t fair to ask Canadians to pay some of the highest prices in the world to stay connected,” said Bains. “Or that almost any plan in Canada is 20% more expensive than a plan in the U.S.”

Prime Minister Justin Trudeau campaigned in 2019 on 25% cheaper mobile phone and Internet plans as part of an election promise to make life more affordable.

Industry Response

The wireless industry responded to the announcement by saying prices are already dropping and any further price cuts would impact jobs.

“This is yet another punitive action taken by this government against the companies that have built Canada’s global-leading wireless networks, and which are being asked to invest billions of dollars to ensure Canadians can benefit from next generation 5G technology,” Richard Gilhooley, communications manager at Telus, said in an email. It’s all in the name of solving a problem that numerous independent studies have repeatedly proven does not exist, he added.

Sarah Schmidt, representative for Rogers, said the company “operates in a highly competitive market that continues to deliver more affordability and value, and we always evolve our services to meet the needs of Canadians.”

Rob Ghiz, chief executive officer of the Canadian Wireless Telecommunications Association, said “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.”

To contact the reporter on this story: Kait Bolongaro in Ottawa at kbolongaro@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Derek Decloet, Chris Fournier

©2020 Bloomberg L.P.