Is a Verizon ‘bloodbath’ really coming?
Bell, Rogers and Telus have launched a high-powered — and all-too-familiar — campaign. It’s not subtle in tone — and Bell, Rogers or Telus clearly don’t intend to be anything other than flat-out combative.
It’s hard not to feel sorry for James Moore. Along with his new portfolio, the recently appointed Minister of Industry has acquired the “file-most –likely-to-make-you-want-to-bash-your-head-against-the-nearest-wall.” Also known as the telecom file.
The clear focus right now shared by everyone from regulators to elected officials to the consumers who elect them is on such issues as the importance of competition, subscriber rights, choice and pricing. In the face of that, you might think the companies involved would wish to differentiate themselves from each other. Instead, they have — again — joined forces to remind us of their shared agenda, which in many ways runs directly counter to such concerns.
To begin, they want us to understand how allowing more domestic competition — especially from a well-heeled foreign contender such as, say, Verizon — is actually a bad idea. Also, we apparently need to know why it is good for us for them to be allowed to bid on unlimited spectrum in the upcoming auction rather than abide by caps set by Ottawa.
More specifically, Bell, Rogers and Telus want Ottawa to close “loopholes” that would allow foreign telecom companies to enter the Canadian market by buying small, cash-strapped telecom players at discounted prices. They argue that allowing Verizon to swoop in and acquire Mobilicity or Wind Mobile to enter the Canadian market would put incumbents at a disadvantage.
Bell threatened that such conditions could cause Canadian carriers to cut jobs in order to remain competitive. Rogers took issue with Ottawa’s plan to foster domestic competition by ensuring there are four national wireless carriers. They both concur that a newcomer like Verizon shouldn’t be able to bid on more spectrum than them in the upcoming auction.
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In fact, with the Sept. 17 application deadline for the spectrum auction approaching, Telus is advising that Ottawa delay it in order to address the dominant players’ concerns.
There is no shortage of dramatic rhetoric. Telus has warned of a “bloodbath” if Verizon is allowed into Canada under the prevailing terms. Bell has taken out full-page newspaper ads and published an open letter to Canadians warning of “unintended advantages for American giants.”
A remarkable aspect of all this is that Verizon has yet to confirm that it’s even coming into Canada.
But from the perspective of The Big Three, it’s easy to understand their concern: by Bell’s reckoning, their market valuations have taken a combined $15 billion hit since Verizon expressed potential interest in setting up shop in Canada. Furthermore, Verizon once owned 20 per cent of Telus, so it has an especially acute understanding of what may lie ahead.
If the harsh language and not-so-veiled threats seem familiar, that’s because they are.
Prior to the 2007 spectrum decision, Rogers denounced new market entrants as "all-time corporate welfare bums in Canadian history." When the government announced a spectrum set-aside that year for newcomers , Bell declared that "basically you've sold an asset of Canada at well under market price."
In fact, the federal government did quite well out of that sale: the auction brought in $4 billion. In the aftermath, all three telecom companies complained that the auction format drove up prices far beyond what had been forecast. Telus warned of the dire impact this would have on the industry. It repeated this message in 2010 — even before Verizon's possible entry to Canada surfaced.
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Dec. 20 (Bloomberg) -- Alix Steel reports on today;s top news headlines on Bloomberg Television's "Bloomberg Surveillance." (Source: Bloomberg)
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