Canada’s biggest telecom companies will be forced to renegotiate roaming rates they charge small rivals for using their networks as the federal government acts to create more competition in the telecom business.
Industry Minister James Moore said Wednesday that Ottawa is making legislative changes to prevent Rogers, Bell and Telus from making it difficult for new wireless players in the market.
“We just think the status quo is not good enough,” Moore said in an interview from Ottawa.
“It’s a nagging irritant to greater competition in the industry and we’re fixing it,” he said.
Ottawa will prevent the big wireless providers from charging small wireless companies more than they charge their own customers for domestic roaming. Moore said the rates “can be more than 10 times what they charge their own customers.”
Moore said the big telecom companies will have to adjust.
“Within the legislation there will be timelines because there’s going to have to be a renegotiation of existing roaming agreements between firms, which will take time to unfold.”
The minister noted the government isn’t regulating the price of roaming agreements, but added that Rogers, Bell and Telus can’t make it impossible for new wireless companies to compete on price or take away their ability to invest in their networks.
Roaming fees are charged when customers use cellphones outside their provider’s coverage area.
Rogers, Bell and Telus have large national networks, but smaller providers such as Wind Mobile, Mobilicity, Maritime-based Eastlink and Quebec’s Videotron have to negotiate agreements with the Big Three to give their customers service across the country when they travel.
Rogers spokeswoman Patricia Trott said roaming agreements with domestic carriers are based on negotiated, mutually agreed upon rates.
“Government policy includes an arbitration process that all carriers are entitled to use, but these carriers have chosen not to go to arbitration,” Trott said. “We await further details with interest.”
Bell also said it wants see more details of the legislation.
Telus refused to comment, but doesn’t have any roaming agreements with the new wireless companies.
Moore also said he still thinks it’s possible to have a fourth wireless player in every region of the country, the government’s aim in the Jan. 14 auction of wireless spectrum — the radio waves needed to operate cellphone networks.
“We do have fourth players in many markets of this country, but they’re regional and not national. I think more competition can be realized.”
He said the legislative changes will be in place until the CRTC, which is already investigating roaming rates, makes a decision on that issue.
Last week, the Canadian Radio-television and Telecommunications Commission said it would look into whether big wireless companies are charging their smaller Canadian competitors too much to use their networks.
Meanwhile, Ottawa also plans changes to give the CRTC and Industry Canada the ability to fine companies that break rules such as the wireless code and agreements on deploying wireless spectrum and cellphone tower sharing.
“The penalties will encourage compliance and allow for more effective remedies should violations occur,” Moore said earlier Wednesday.
Wind Mobile said Moore’s announcement shows the government is serious about more competition in the wireless industry.
“The reality is that it takes a lot of time and a lot of capital to overcome a 30-year head start and achieve comprehensive national coverage,” said Simon Lockie, Wind Mobile’s chief regulatory officer.
“Minister Moore has said this government is going to do something about domestic roaming and he clearly meant it,” Lockie said in a statement.
Canaccord Genuity analyst Dvai Ghose said the move should help the new wireless companies in theory, but added it’s “too little too late.”
Ghose noted that Wind Mobile’s majority owner, Russian telecom VimpelCom, has put its stake up for sale and struggling Mobilicity is operating under creditor protection and is also up for sale. Public Mobile has been sold to Telus.
“In our view, the only potential beneficiaries may be Videotron and Eastlink customers when they roam off network,” he said in a research note.
Ghose said Rogers is the main provider of roaming services to the new wireless companies, but assumes that agreements only generate $50 million or less in domestic roaming revenue.
“We expect Rogers to generate $6.8 billion of network revenue in 2013, implying that domestic wholesale roaming revenues are largely immaterial.”
Rogers (TSX:RCI.B), Bell (TSX:BCE) and Telus (TSX:T) have more than 25 million wireless subscribers among them.