Will There be More Wireless Competition in Canada?

Big news from the Great White North after the federal government carved out some wireless spectrum for new players.

“Our conclusion is that a more competitive wireless market is in the best interests of Canadians,” Industry Minister Jim Prentice proclaimed yesterday at a press conference.

The initial reaction seems to be: Hallelujah, we’ll now have new national players, who will shake up the market so that penetration rates will increase and prices will decline.

Before anyone gets too carried away, my concern is things may return to “normal” after the new player(s) have been in business for awhile.

Why? It may come down to simple economics. To run a viable business, you need to make enough money to cover your costs, make a profit and increase shareholder value. If your prices are too low, you’ll probably attract lots of customers but could end up making little or no profits (see Microcell). If your prices are too high, you won’t attract many customers unless you have fantastic services, great phones and a brand that truly resonates with consumers. (Virgin Canada?)

Granted, the rules set out by Industry Canada such as forcing the incumbents to share towers with new rivals will reduce costs but it’s still going to be an expensive proposition to play.

My prediction is the new players – Quebecor, for one – will come out with guns ablazing before market dynamics bring them back to earth. Don’t get me wrong, four or five national competitors is a lot more attractive than three (Bell, Telus and Rogers) but it doesn’t guarantee things are going to change much. Time will tell, I guess.

For more, check out Startup North, which describes the decision as “wireless competition explodes”, TechVibes, and Telecom Trends, which contends the government’s intention to creation more competiion “appears to be ill conceived” because two existing players – Manitoba Telcom and SaskTel – will be able to bid on spectrum put aside even though they dominate their home markets.

Technorati Tags: Canada, Wireless