Verizon Isn’t Coming to Canada and that Sucks

Verizon, embodied as a rat, from a union protest in Philadelphia. via WikiCommons.

I don't think anyone can argue that the average cell phone bill in Canada isn't insanely overpriced. We only have to look at the crushingly honest discovery from a July report published by the Organization for Economic Cooperation and Development, to see that Canadians pay some of the highest rates in the industrialized world for the worst cell phone service.

Needless to say, when rumours began surfacing that Verizon may be entering the Canadian wireless market everyone was pretty stoked. In fact, a Forum Research poll.pdf) in July revealed that 71% of Canadians surveyed believed Verizon entering the country would be good for customers and 58% said foreign ownership restrictions should be lifted. Clearly the only people who were not stoked were the Big Three mobile providers—Telus, Bell, and Rogers—who spent the summer freaking out like a bunch of cornered rodents whose big chunk of cheddar was about to be taken away.

But yesterday, those same freaked out little rascals, who collectively control 93% of the Canadian wireless market, were able to relax and return to their regularly scheduled program of charging Canadians up the ass for our cell phone use, as Verizon decided to not enter Canada after all, opting instead to buy out the 45% stake in its wireless division currently held by Vodaphone.

Verizon's $130-billion buyout of Vodaphone's stake will give them full ownership of their US operations, and likely means they'll be keeping their hands out of our spectrum auction in January. While it may sound somewhat futuristic the spectrum auction was set up to allow new entrants to the market to bid on two blocks (there are four “prime blocks” up for sale) of the spectrum while incumbent carriers are limited to just one block. The spectrum auction was set up to allow a bit more competition and it was the average Canadian’s best shot at getting reasonable cell phone rates. Of course Bell, Telus, and Rogers were bummed about their handicap, and spent the summer rolling out a massive advertising campaign to sway public opinion, making the argument that new carriers wouldn’t be as good as providing rural service.

Aside from all this, when it was revealed Verizon was complicit in spying on citizens by the NSA, the Big Three used all of the negative attention as the perfect opportunity to imply that Verizon would spy on Canadians as well, warning that the company should be subject to an Industry Canada security review.

But now that this Vodaphone deal has gone through, most analysts believe Verizon will stay out of the spectrum auction. Others, like Steve Anderson, executive director at Open Media, speculated that even if this deal hadn't gone through, the chances of Verizon expanding north were slim to none considering everything else that stood in their way.

“They can't buy out the big companies because there's restrictions on that. They can only invest in a startup and grow that startup,” said Steve. “Considering the bundled services, the branding, the lobbying capacity of the Big Three providers, they'd have to invest billions and they wouldn't make money for years. I wouldn't be surprised if they took a look at the cozy relationship between the Big Three and the government and decide it's not worth it with the cards stacked as they are now.”

Despite an onslaught of opposition from Canadian carriers, Harper has stood behind the structure of the auction with Industry Minister James Moore by his side, citing lower cell phone rates and better competition.

While Verizon's decision to not come to Canada is a blow to consumers, there is a bigger problem at the heart of all this, as Steve explained to me. The problem is that the Big Three control 85 percent the cellular network infrastructure. Imagine if a car company had control over all the Canadian highways and was able to charge a fee or restrict other kinds of cars from using them. Ridiculous, right? This is essentially what small, independent providers have to face when they attempt to break into the market to reach Canadians over the Big Three’s network. Now that the Verizon threat has been squashed, the big companies can retain the massive amount of control over the infrastructure and can continue charge us whatever they want.

Over the past few months, we’ve seen the lengths to which Rogers, Bell and Telus will go to keep their competition out of Canada, and while the restrictions on foreign ownership are reasonable, the Big Three's ability to block independent providers from accessing our digital infrastructure means if we want decent service, we'll have keep dishing out absurd amounts of cash, while companies like Wind, Mobilicity and Public Mobile struggle to get themselves off the ground. Even though the Harper government has taken steps in the right direction and stuck to their guns, bolder policies are definitely needed to improve access to the spectrum for independent providers. Until a new challenger can enter, however, the Big Three will continue to overcharge us for all of the YouTube videos of kittens and puppies we love stream on our smartphones.

More on the Canadian telecom monopoly:

Bell Media and Astral's Merger Is Going to Make the Canadian Media Even Worse