Want Cheaper Phone Bills? Overhaul allocation Of Telecommunications Spectrum
One key change in new federal guidelines for the Canadian Radio-television and Telecommunications Commission intended to help make phone bills cheaper suggests the commission rely on market forces to the maximum extent feasible, write MICHAEL B. MCNALLY and KRIS JOSEPH.
The federal government provided a new set of guidelines in February to the Canadian Radio-television and Telecommunications Commission to introduce more competition and help make phone bills cheaper. It stressed that it was “making every effort” in this regard. One key change is the complete rescinding of an older policy direction, which suggested the CRTC rely on market forces to the maximum extent feasible.
That is good. Market forces work poorly in a sector dominated by a handful of firms. In a 2017 study of rural broadband by the House of Commons industry committee, the final report noted that market forces were “nascent at best or completely non-existent in rural areas where broadband access is still limited.”
However, the government of Canada’s “every effort” has not included a revision of Canada’s spectrum framework – a critical bottleneck on the path to more competition and lower phone bills.
Last revised in 2007, the Spectrum Policy Framework for Canada is the primary document guiding Canada’s other telecom regulator – Innovation, Science and Economic Development. Wireless spectrum is in high demand because it is finite: Without access to spectrum, competitors cannot deploy new services.
Spectrum is often licensed to companies that successfully bid in auctions, and increasingly these licences last for lengthy 20-year periods. Auctions generate billions of dollars in revenue for government. The 2021 auction raised nearly $9-billion, but these sky-high prices limit the ability of smaller firms to get access to spectrum. These licence costs are ultimately passed on to Canadians in the form of wireless subscription fees.
The primary enabling guideline for the Canadian spectrum policy is “market forces should be relied upon to the maximum extent feasible” – the same CRTC doctrine the Canadian government just rescinded. A focus on market forces in a highly concentrated sector inhibits fairer allocation of spectrum.
According to data from the CRTC, Bell, Rogers and Telus capture more than 88 per cent of the revenue from the retail mobile wireless sector, despite attempts to foster competition in the industry. Since 2007, numerous smaller wireless providers (and their spectrum licences) have been acquired by larger incumbents. While the government has made some progress in trying to push down prices, prices remain high even in comparison to countries with similarly low population densities, as noted by telecom expert Ben Klass.
The Spectrum Policy Framework for Canada, with market forces as its primary guideline, creates bad wireless policies. Market forces don’t work well to promote rural and Indigenous access, and fail to keep costs down because dominant firms stifle competition. Crucially, the current framework inhibits more nuanced policy approaches.
With regard to allocating spectrum, while auctions may still be useful in some situations, such as competitive urban environments, Innovation, Science and Economic Development should consider other methods as well. Other options include reverse auctions, fixing prices based on the amount of frequency per population (for rural areas), and awarding spectrum based on an application process where applicants address both economic and social aspects of spectrum use.
The federal department has itself indicated that it wants to consider more than market forces in spectrum policy. In a 2022 consultation on future spectrum uses, it highlighted several key areas including rural connectivity, competition and Indigenous access to spectrum.
These are all important goals, as is ensuring affordability for Canadians who pay among the highest rates in the world. But if the Canadian government really wants to “make every effort,” it is time the Spectrum Policy Framework for Canada is rewritten.
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- B. McNally is an associate professor in the faculty of education at the University of Alberta.
- Joseph is a digital scholarship librarian at York University.