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Telus Attacks: The Battle To Keep Verizon Out of Canada

07/19/2013 05:00 EDT | Updated 09/18/2013 05:12 EDT

Telecom giant Telus has had an eventful week as it moves from claiming that Canada "really should be the most expensive country for wireless service in the OECD" to increasing its prices in the shift toward two-year contracts to now declaring war on the government's commitment to injecting greater competition into the Canadian marketplace. While the comments that something less than the highest prices in the developed world are a "great success story we should be celebrating" generated considerable media attention (here, here and here), the bigger long-term issue is the full-court lobbying press to stop the entrance of new competition.

Yesterday, Telus CEO Darren Entwistle was campaigning at the Globe and Mail and National Post, warning of a "bloodbath" if the government sticks with its commitment to allow for a set-aside of spectrum for new entrants such as Verizon. Telus is concerned that a set-aside would allow Verizon to purchase two of the four available blocks, leaving the big three to fight it out over the remaining two blocks. Telus emphasized its prior investments in arguing for a "level playing field" in the auction.

Yet to borrow Telus' phrase - "scratch the surface of their arguments and get to the facts" - and it becomes clear the fight is not about level playing fields since new entrants have been at a huge disadvantage for years in Canada. Indeed, even with a spectrum set-aside, there would not be a level playing field as companies such as Telus would have big advantages that include restrictions on foreign ownership for broadcast distribution (thereby blocking Verizon from offering similar bundled services), millions of subscribers locked into long term contracts, far more spectrum than Verizon would own, and its shared network with Bell that has saved both companies millions of dollars.

While the companies frame their arguments around level playing fields, the real goal is simply to keep competition out of the country. For Verizon (or any major new entrants), a spectrum set-aside will be crucial since it is the only way to obtain sufficient spectrum (when combined with the existing spectrum from Wind Mobile and Mobilicity) to establish a viable fourth wireless network that could compete directly with the big three incumbents. If Telus gets their way, the removal of the set-aside would kill the government's stated goal of a viable fourth carrier since there would be little reason for Verizon to enter the country only to face many of the same disadvantages that has hamstrung the smaller new entrants.

Moreover, if there is a sense of deja vu about the Telus arguments, it is because it made the same "level playing field" and big investment arguments back in 2007 to argue against a set-aside in that spectrum auction. For example, in June 2007 it stated (though notably on the same day it argued for a set-aside to address competition concerns arising from a proposed Bell - Telus merger):

We strongly believe that the competitive playing field should be free from government intervention so that companies can compete fairly for customers. Over the span of a few years, Telus evolved from a regional provider of wireless services in Alberta and B.C. to a leading national carrier. We accomplished this not by seeking regulatory benefits, but by investing more than $7 billion in a national wireless network that delivers advanced wireless services like mobile TV and satellite radio across the country.

In the early days of spectrum allocation, these same companies argued for a regulated approach to assist with their entry into the market. In 1984, the government allocated its first block of spectrum for wireless services, specifically reserving spectrum for Cantel (later Rogers), who benefited from no upfront payments and regulations that mandated that the incumbent providers could not provide service in a given region before Cantel established service there. In 1995, the government again adopted a regulated approach to the allocation of spectrum for PCS services, setting aside spectrum for the two new entrants - Microcell and Clearnet - that are today owned by Rogers and Telus.

Make no mistake: the Telus lobbying campaign will be joined by Bell and Rogers as the three companies spend millions of dollars in advertising and lobbying to keep the Canadian market free from much needed competition (the Wire Report reports that ten board members each from Telus and BCE have registered to lobby the government on spectrum). The government has insisted that it will do whatever is necessary to ensure greater competition and consumer choice in the wireless sector. The potential Verizon entry into Canada - undoubtedly conditioned on a spectrum set-aside - is precisely what is needed. In this case, sticking with its policy by siding with consumers and greater competition has the dual advantage of being both good policy and good politics.