Canada’s Big 3 Telecoms’ Opposition to Verizon? Unseemly!
The Big 3’s opposition to Verizon’s entry into the Canadian market is unseemly, like a baseball manager kicking dirt at an umpire. It may not literally be against the rules of the game, but it undermines that game’s implicit values.
Canada’s telecom giants are actively opposing the entry of American communications giant Verizon into the Canadian market. In a series of interviews and full-page ads, Bell, Rogers, and Telus have been arguing that regulators should move to prevent Verizon’s entry into the Canadian market, a move the company aims to make via its acquisition of Canadian upstart Wind Mobile. The move will give Verizon access to Canadian spectrum at preferential rates that were established to encourage small companies to enter the field. And the Big 3 don’t like it one bit.
(Interesting timing: coincidental with the announcement that Verizon, an American firm, was seeking to entry to Canada, HBC, a Canadian firm, announced that it had bought American retail icon Saks and thereby gain a foothold in the US retail market. I’m not sure Americans even noticed, let alone did they complain.)
Such opposition is, of course, understandable. Managers at Bell, Rogers, and Telus have turf to protect, and they understand their role as being to maximize return for their respective shareholders. And to be sure, advocacy — including lobbying — is a proper part of that role. But there are limits. Even those of us who understand the essential role of the profit motive in making our markets work will recognize the need to put limits on profit-seeking behaviours. Less obvious is just where to draw the line, ethically.
One important strain of thought on the topic, grounded in the work of University of Toronto philosopher Joseph Heath and others, says that managers should use as their ethical touchstone their implicit commitment to the values that underpin market efficiency. Key among those values is a commitment to encouraging competition. A true capitalist, this line of reasoning goes, wants to make a profit by beating the competition — by providing better service at a better price — rather than by reducing competition.
It’s worth pointing out that the debate here is already being framed in terms of ethics: the Big 3 claim it is unfair to allow Verizon in on what it considers favoured terms. Their critics, of course, will say that the preferential treatment that Verizon will gain at an upcoming auction of spectrum, through its acquisition of Wind, is being offered precisely on fairness grounds: barriers to entry are huge in mobile telecom, and making spectrum more affordable helps level the playing field. There are decent arguments on both sides, both rooted in an appeal to the ethical value of fairness.
The ‘market values’ argument cuts through the apparent ethical impasse, here. Managers at Bell, Rogers, and Telus are not just anyone: they are participants in a socially-important game called “the market.” In the market, we allow a certain amount of rough play, including behaviours what would generally be thought improper in polite society. Corporate managers can (indeed, should) fire under-performing employees, even if that dashes employees’ dreams. And they should innovate and strive for efficiency, even if that puts competitors out of business. But one of the things they can’t do, ethically, is seek to limit market competition.
To be sure, it’s a rule that is more honoured in the breach than in the observance. Much of modern management practice is aimed at finding niches where companies can operate with minimal competition. So it’s not surprising that managers at the Big 3 are desperate to keep Verizon out of the pool. But they need to recognize that, in doing so, they don’t have an ethical leg to stand on.
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Related reading:
- “Moving Beyond Market Failure: When the Failure is Government’s” by Peter Jaworski
- “Market Failure or Government Failure? A Response to Jaworski” by Joseph Heath
The Business Ethics Blog 
Two corporate bullies Rogers and Bell complaining about unfairness. They are a virtual duopoly like the old Air Canada and Canadian Pacific ,or Canadian National and Canadian Pacific. The railways were unfair to shippers. The airlines argued there was no room for a third airline.
Who suffered?Shippers and air travellers. Just as Canadian consumers are being held to ransom by the two big telecoms. Ask any Canadian who ever had a customer service issue with these guys how fairly they have been treated. Is it fair to tell people they will come by sometime in the morning or afternoon for a repair. Is it fair to be charged exorbitantly for roaming charges. Have you ever tried to have an actual conversation with one of their ombudsman?
The only thing unethical about this whole issue is that our own Canadian government is granting special favours and incentives to a US company to help them take business away from Canadian companies. You can spin it anyway you want but an anti-Canadian business policy constructed by our own government is unethical. Do you think for a moment that the US government would grant reciprocal favors to Canadian companies seeking to enter the US? It would never happen.
Our government is also guilty of misleading Canadians into thinking Verizon’s arrival is going to lower their cell phone bills. Considering that Verizon charges more in the US than Canadian carriers charge here, it would be a helluva leap to think Verizon is going to charge their Canadian customers less than their US customers for the same service.
Verizon is a big company with a lot of telecom experience. They know the barriers to entry are steep, but they have the substantial financial resources necessary to pay their own way without requiring Canadian taxpayers to subsidize their entry through spectrum set-asides and discounts.
I agree with the Canadian telcos on this one – let Verizon come into Canada but only on an level playing field. They should pay their own way and have to compete for spectrum allocations just like everyone else.
It is disingenuous for the “Big Three” to be taking out full page and “double truck” ads in Canadian newspapers espousing an “American Invasion” of sorts — and accusing that this American company that will ignore anything outside Toronto and other major metro area. Were Rogers, Bell and Telus invited to Verizon Wireless board meetings? How do they know all this? It is marketing via fear, and nothing more.
Verizon Wireless is a joint venture of US-based Verizon (55%) and UK-based Vodaphone (45%). This is an “invasion” of a multinational competitor, and nothing more — competition of the sort that has never seen the light of day in Canada, although it exists in much of the industrialized world.
America’s T-Mobile operation is owned entirely by a German company; it can be argued that its entrance to the national scene in the US more than a decade ago forced down prices and made the major national and regional incumbents much more value-driven, because they had to.
Verizon, if it embarks on a Canadian venture, will need to carve out its own slice of the pie using limited bandwidth initially. It will need to spend a lot of capital to even get to a position of effective competition. Will it come in with lower prices? Maybe. Maybe not. However, it’s not ethical for the Canadian Big 3 to put words in Verizon’s corporate mouth that are simply designed to scare Canadian consumers and wireless business customers. Meanwhile, if the incumbents want to protect their turf, they will need to become much more competitive, because Verizon will be in the game to come out on top, just as it was announced when I was with the newly-named company at its beginning 13 years ago after it acquired my employer at the time (GTE).
Business ethics must be the same and not depend on what side of the 49th Parallel where one operates. Anti-American scare tactics are beyond reproach.
Jonathan, perhaps you could verify for us whether the US government offered special incentives to Vodaphone and German-owned T-Mobile when they entered the US market. Did they set-aside certain spectrum assets for the exclusive bidding of Vodaphone and T-Mobile? Did they force the other US carriers to share their networks and towers so the new players could reach the entire country more quickly without putting as much capital at risk?
Or did they take a more “hands-off” approach and let the market decide which carriers would be the winners and losers?
You are absolutely right, foreign-owned firms are in the game to make money. I also recall the “old days” when GTE owned a portion of BC Tel and quite literally sucked every single penny of profit out of the province to fund their US expansion objectives. Foreign firms feel no obligation to invest a penny back into the communities they serve.
TMo purchased an existing US wireless company for its foothold.
From Wikipedia: “T-Mobile US, Inc. traces its roots to the 1994 establishment of VoiceStream Wireless PCS as a subsidiary of Western Wireless Corporation. Spun off from parent Western Wireless on May 3, 1999, VoiceStream Wireless Corporation was purchased by DT on May 31, 2001, for US$35 billion and renamed T-Mobile USA, Inc. in July 2002.”
Therefore, deep-pocketed Deutsche Telekom AG entered the US pretty much the same way Verizon might come into Canada — by buying a small regional player.
By the way, comparing Canada to the US on “special incentives” is an apples and oranges argument. Even in the late 1990s, metro markets — in the spirit of American free enterprise — could have 4-8 (or more) competitors all owned by different parties with no foreign ownership restrictions. If Canada had not protected it’s home grown oligopoly for so many years with foreign ownership restrictions, we arguably would not be in the situation we are today, nor be having these discussions. There would already be similar competition as exists elsewhere on the planet.
@Jonathan
Thanks for confirming that the US did not offer special incentives to Vodaphone and Deutche Telekom when they entered the US market.
The US government didn’t restrict the bidding for VoiceStream to just a select group of small US carriers or foreign firms so I think that demonstrates the US has taken a hands-off approach to the evolution of the wireless industry in the US.
There are many people who think that the US is an example that Canada should emulate but I don’t agree. The networks in the US have generally lagged behind Canada’s, especially over the past 4 years, and according to Industry Canada and the CRTC, US prices are significantly higher than Canada’s. A lot of people have forgotten that in 2008 there was only one US company selling the iPhone (AT&T) while there were three companies to choose from in Canada.
When it comes to it “demonstrates the US has taken a hands-off approach to the evolution of the wireless industry in the US,” that is not accurate. Recently, AT&T was barred from acquiring T-Mobile as it was considered unfair to consumers as it would reduce competition. The Canadian wireless industry, until now, has never had that restriction.
Your last paragraph is entirely debatable, but this is not the forum for that.
No doubt, Mike, others would be interested in your full biography. Mine is “out there.” Whenever I see someone making a comment defending a position without full disclosure, credibility suffers. Your comments seem to be too much like the wireless industry’s talking points.
There are several points of contention I keep thinking about on this topic (not with the article). Here are a couple.
First the whole “taking away from Canadian business” argument is nullified with Telus et all hiring thousands of people in call centers around Asia and not in Canada. So when I read this I have to laugh. For example Telus International hires about 15,000 jobs outside of Canada, 9000 employees of which are in the Philippines supporting Canadian customers.
Prices will be competitive with Verizon. Verizon has offered 2 year contracts for a while now a long time before the recent CRTC code of conduct review for Canadian Wireless customers out of which will come 2 year contracts.
Oh by the way, Telus offers 2 year contracts (http://www.engadget.com/2013/07/15/telus-two-year-contract-canada-mobile/) If you were to compare the prices on these 2 year contracts between Telus, Rogers, Bell & Verizon you will see that Verizon is actually cheaper. They have unlimited Data and Voice plans. Telus for example wants $100 for 6GB of data. A US Verizon customer can get Unlimited for $85. So the whole points that Verizon is more expensive just doesn’t fly. Data is Canadian companies new cash cow as prices rise in data and fall in voice. Verizon’s unlimited must be really scary.
In this day and age consumers are more educated than ever before. Having choice between 4 cell providers promotes competition. As expected one day when Verizon sells service the same price as everyone one else there is no problem is playing them all off each other for deals, a trend that happens today and is forecast into earnings calls. For some it’s not about price it is about the way you are treated, and lets be honest the customer service from the Canadian top 3 are weak, as weak as their current desperate publicity stints to limit market competition.
@Truth – Not sure where you got the price for Telus data but it’s incorrect. If you go to their website and look at their Telus Shareplus plans – unlimited talk, text and 6GB of data is $75Cdn while Verizon’s unlimited talk, text and 6GB of data is $80US.
Also, Telus allows data tethering and Verizon doesn’t so it looks like Telus has the better service with a lower price.
@Mike Telus iphone5 $55/month + $75 month 6GB data assuming one device. Verizon same thing is $10/month cheaper ($40 + $80) or for same price I could pick 8GB data.
Telus doesn’t have any options above 6GB data.
Verizon offers more choice up to 16GB data.
According to the Verizon plan page “Share your connection and data with multiple Wi-Fi enabled devices by using capable smartphones and tablets as mobile hotspots at no additional cost.”
With Verizon as a US customer I can share with up to 10 devices and compared to Telus it is only 5 devices.
Not sure where you are looking?
To me if they came to Canada they offer some compelling and competitive offerings as a consumer I would be interested in for sure. Obviously the reason our Canadian cell companies are up in air.