The Telecom Oligopoly and the Advent of 5G Networks in Canada
When on the market for a wireless service provider in Canada, any initial impression of diverse offerings is quickly overshadowed by reality. Among the dozen cellular network brands servicing Canadians from coast to coast, an overwhelming majority belong to and operate under either one of the country’s Big Three. According to a 2019 report from the Canadian Radio-Television and Telecommunications Commission (CRTC), a whopping 90.7% of Canada’s wireless market is held by telecom behemoths BCE (Bell), TELUS Corporation, and Rogers Communications. Unsurprisingly, Canada has been repeatedly ranked as one of, if not the least competitive wireless market in the world.
As we grow increasingly dependent on continuous connectivity in our daily lives, evaluating how the deployment of fifth generation (5G) wireless technology will impact the Canadian telecom landscape should be a priority. Market analyses point to Canada’s oligopolistic market structure for wireless services as a major contributing factor to the disproportionate financial burden laid upon consumers. The current state of the Canadian telecommunications industry is suboptimal, especially in ongoing circumstances where 5G technology is being deployed at considerably high cost from coast to coast. That being the case, what changes can consumers expect as a result of its introduction in such an uncompetitive market?
A 2020 study by the Helsinki-based wireless market analyst firm Rewheel Research ranked the world’s most expensive cellular network providers. Among 168 providers included in Rewheel’s study, the top three most expensive networks were Canada’s Rogers, Bell, and TELUS — ranking third, second and first, respectively. Depending on the data plans being compared, Canadian equivalents to foreign network counterparts remain between 16 and 17 times more expensive. The conclusion of Rewheel’s study is unambiguous; Canadians are overpaying for their cellular networks and have been for years.
While the federal government has made several efforts to change the market’s status quo, notably by introducing new players in the national market (such as the 2013 Verizon attempt), they have all failed. In 2012 and early 2013, the Harper government led an offensive to open up the country’s telecommunications market by auctioning off wireless spectrum bands, where incoming firms had a preferential status compared to the major well-established national players. Not unlike many other cases where the Big Three stiffly opposed various rate-reducing schemes, the venture was quashed by strong lobbying efforts. The reality facing Canadian consumers begs the question — without any changes to the current state of the market, how can we expect the advent of 5G technology to impact our nation’s telecommunications and its costs?
The fifth generation of wireless technology promises to usher in networks capable of handling more devices, faster communication, and higher speeds. What sets this new technology apart from previous generations is that it was designed entirely from the ground up, with the ability to flexibly support future services and devices that remain unknown to this day. In essence, 5G is the cornerstone of tomorrow’s wireless communications ecosystem, and is bound to become an increasingly important part of our national infrastructure.
Upgrading our national networks will require a slew of new telecommunications hardware, which constitutes a major part of the investments required to implement 5G. While most Canadian providers are currently undergoing the deployment of fifth-generation networks across the country, an important factor to consider is how few manufacturers are capable of supplying the hardware critical to their implementation. Indeed, two-thirds of the world’s telecommunications equipment market composes of Sweden’s Ericsson, Finland’s Nokia, and China’s Huawei and ZTE. However, while the Canadian government has yet to announce an official policy on the matter, China’s offerings — particularly Huawei — are unlikely to integrate the development of the country’s 5G infrastructure due to security concerns plaguing the Shenzhen-based company. This leaves Canada’s domestic market with few hardware suppliers, which may potentially raise the costs of rolling out these new networks from coast to coast. Furthermore, according to a McKinsey & Co. study published in 2018, upgrading global networks to fifth-generation wireless technology would require an expenditure increase for network providers of approximately 60% from 2020 through 2025. While the extent to which consumers will be left footing the bill remains to be seen, few see these increased costs as a sign that Canada’s standing as the world’s most expensive wireless market is set to change anytime soon.
As American legal scholar and Columbia University Law Professor Tim Wu argued a few years ago in a New Yorker article, the real problem facing capitalist economies isn’t monopolies - it’s our tolerance for oligopolies. “When companies act in parallel,” he argues, “the consumer is in the same position as if he were dealing with just one big firm. There is, in short, a major blind spot in our nation’s oversight of private power, one that affects both consumers and competition.” At a time where consumers are increasingly wary of Big Tech, with calls to break up their conglomerates arising both left and right of the political spectrum, one might wonder if the time has come to do the same with Canada’s own Big Three.