One of the perennial dilemmas for telecoms regulators is whether to encourage new operators, to increase competition in mobile services, or to support greater consolidation so that the main operators are as robust as possible and able to invest in the platforms for those new services.
In 5G, where there is plentiful spectrum coming to market in mid-band and millimeter wave, regulators may be able to get the best of both worlds. They can support mergers of MNOs to create stronger competitors, while insisting they must divest some assets to new entrants or for wholesale use. Better still, they can keep the traditional national licences exclusive, while setting aside some additional spectrum for new players and neutral hosts, especially in industries that are often neglected by MNOs (this is the aim of proposals for the UK’s 3.8 GHz band auctions, for instance).
But while a more flexible, non-binary world may beckon, many regulators still have to make the decision of whether mandating a new entrant will do more harm than good – will it, indeed, encourage more service diversity, or will it just spark price wars, as seen in India, France and Italy, and so weaken all the operators and reduce their ability to invest in 5G?
Canada has a track record of adopting policies that enable new entrants, only to see those newcomers fail, or get snapped up by the larger players.
On the plus side, it has reduced the amount of mobile spectrum held by the big three operators – Telus, Bell and Rogers – from 98% in 2006 to 75% now, by excluding those three from bidding on a certain amount of spectrum in each major auction since 2009. But the big three have held on to over 90% of subscriptions, and many argue that the new players have lacked the scale to compete effectively or change the carrier balance of power significantly. Most of them are regional in scope, while the big three have blocked the entry of MVNOs by keeping hosting and roaming charges high.
There has also been consolidation. For instance, Telus bought Public Mobile in 2013 and cableco Shaw Communications acquired Wind Mobile to get into the cellular market in 2015. Other minor mobile operators are Eastlink, owned by Bragg Communications, and Videotron, part of the Quebec-based integrated provider.
The Canadian government is still trying to enable that elusive disruptive newcomer and boost competition, which remains limited. Its latest telecoms policy directive for regulator CRTC aims to promote new competition and encourage the spread of affordable mobile services.
The document directs the CRTC to “encourage all forms of competition and investment”, while also calling on the regulator to “foster affordability and lower prices, particularly when telecommunications service providers exercise market power”. The addition of the words “and investment” to the first point was added at the eleventh hour to appease the three big MNOs, said reports, and to acknowledge that new competitors must have the resources to invest in new networks and services.
One of the government ideas is to mandate wholesale and MVNO services rather than leaving it to the MNOs to set the conditions. But the big operators are opposing this fiercely.
“In some markets the government backs companies that ride on the networks of other carriers, at a vastly discounted price. Companies who don’t invest in their country’s national infrastructure. This approach suppresses investment, it stifles innovation, and it sabotages network quality. In short, it stalls a nation’s economic prosperity,” Rogers CEO Joe Natale said at the company’s annual general meeting in April.
Robert Ghiz, president of the operator’s representative body, the Canadian Wireless Telecommunications Association (CWTA), focused in a recent speech on the C$50bn invested in networks, and C$17bn spent on spectrum to date, by Canada’s the three ‘facilities-based players’, in addition to licence fees and R&D spend.
“They were able to make these investments because successive governments recognized the importance of having policies that encourage investment in wireless infrastructure,” he said. “Introducing policies that force the national wireless providers to sell access to their networks at discounted rates to companies that do not invest at all will negatively impact all facilities-based providers’ capacity to invest in the expansion and upgrading of Canada’s wireless network infrastructure. How much would you spend to improve your business when you know you will be forced to share the improvements with your competitors?”
Another market in which there has been little shake-up to the established operators is Norway, but there are signs of change here too. Norwegian antitrust authorities recently ruled that incumbent Telenor had engaged in anti-competitive behaviour earlier in the decade, by restricting the entry of a third MNO. It was accused of imposing unreasonable conditions on a wholesale deal with now-defunct Network Norway, preventing it from establishing a profitable business case as the third operator in the market.
Telenor denies the allegation and may appeal. “In Telenor’s opinion the agreement between Telenor and Network Norway neither limited competition nor the development of a third network, and the price model was legal,” the operator said in a statement.
But meanwhile, the recent 5G auction ushered in another would-be third MNO, ICE, and in the wake of the antitrust ruling, it may work in better conditions to break the duopoly of Telenor and Telia.
In last month’s auction, ICE bought 10 MHz of paired 700 MHz spectrum, the same as the two incumbents plus 2 x 15 MHz in the 2.1 GHz band, spending almost half of the total – NOK337.17m of the NOK735m ($86m) raised overall. Telenor and Telia were ineligible to bid for the 2.1 GHz frequencies due to ownership caps, the main way in which the government had sought to facilitate a new entrant.
“The Norwegian government has in recent years repeated its intention to facilitate the build out of the third nationwide mobile phone network in Norway, with the objective of increasing competition and enhancing national infrastructure security,” said ICE Group CEO Eivind Helgaker in a statement. “We would like to give credit to [regulator] Nkom for organizing the auction in a manner that supported the government’s objective.”
ICE actually entered the market in 2014, gaining spectrum in the 4G auction, but it has won well under 10% market share in the mobile market in those five years, and its entry was at the expense of Tele2, the previous weak challenger, which failed to secure LTE spectrum and was forced to sell to Telia and exit the market.
The antitrust case against Telenor does not relate to that development, but to the collapse of Network Norway – however, that company was also backed by Tele2, and acquired by it in 2011.
This time, the government will be hoping that ICE has sufficient spectrum to build networks that will support differentiated services and enable it to win share from the big two – which have more than 50% and 40% share respectively. It would mark a significant change in pattern, in a country where many challengers have failed.
Broadband Mobile, a joint venture between Enitel and Sonera – prior to the latter’s integration into Telia – won a 3G licence in Norway in 2000 but handed it back a year later, while Hutchison’s Hi3G Access later won a 3G licence but never deployed a network.
ICE’s task will be helped by an unprecedented intervention by Nkom to regulate Telenor’s provision of access to MVNOs and of national roaming to ICE – the regulator’s laisser-faire approach in the past has made it easy for the incumbents to remain in control.
And it has new funds, having sold its Swedish business for SEK180m this year in order to focus its efforts and investments on Norway. It also raised NOK700m through a private placement in March and it listed its shares in Oslo in May.
Also this year, ICE acquired 5 MHz of 450 MHz spectrum plus the customer base of Norwegian MVNO Komplett Mobil.
In both Canada and Norway, it will remain tough to disrupt highly entrenched operators in markets which have been resistant to new players. But that should not breed complacency among MNOs, especially with 5G looming – after all, before Iliad unleashed Free Mobile on the French operators, they too seemed immune to anything that would disturb their cosy, uncompetitive existence.