Canadian households depend on mobile wireless services for important aspects of daily life, from basic communication needs related to work and safety, to more advanced needs related to convenience and entertainment.
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A significant portion of Canadian household income is spent on mobile wireless bills. This is particularly true for low income households who spend a disproportionately large amount on these services. Based on an analysis of information collected during this inquiry, the Competition Bureau Bureau concluded that as a result of coordinated behaviour among Bell, TELUS and Rogers, mobile wireless prices in Canada are higher in regions where Bell, TELUS and Rogers do not face competition from a strong regional competitor. The Bureau concluded that the lower prices are caused by the presence of a strong regional competitor who can disrupt the effects of coordination among Bell, TELUS and Rogers.
The Bureau conducted a thorough pricing analysis using confidential internal company data.
Putting People First
The results of this analysis showed that mobile wireless pricing in Saskatchewan, Thunder Bay, Quebec and Manitoba is substantially lower than in the rest of Canada. These are all areas that have a strong regional competitor. During the course of its review, the Bureau conducted interviews with numerous stakeholders, including customers, mobile wireless carriers, consumer organizations and government and regulatory agencies.
The Bureau obtained records and data from a number of market participants on a voluntary basis and pursuant to court orders obtained under section 11 of the Competition Act the Act.
Your questions answered
The Bureau assessed whether the Proposed Transaction was likely to substantially lessen competition for mobile wireless services in Manitoba and analyzed both the unilateral and coordinated effects that likely would have arisen from the Proposed Transaction. Competition concerns were identified only in mobile wireless services. Unilateral effects occur when a merger eliminates competition between two firms which allows the merged firm to exercise market power.
An exercise of market power refers to the ability to profitably sustain a material price increase, without effective discipline from competitive responses by rivals.
Footnote 1. In essence, firms who repeatedly compete in the same market can develop an unspoken understanding that each firm will respond cooperatively to the behaviour of the other firms. While the coordinating firms may not explicitly communicate with each other, this behavior facilitates higher market prices. For instance, a firm may raise its price if it expects others to follow, even if it would not have been profitable to do so independently. The relevant product market was found to be postpaid Footnote 2 mobile wireless plans sold to consumers. Corporate customers constitute a separate product market as they purchase services through alternate channels and have different requirements.
The relevant geographic market for assessing the Proposed Transaction was found to be no broader than the province of Manitoba. Mobile wireless carriers can, and do, set different prices for mobile wireless plans in different Canadian provinces. MTS is the incumbent mobile wireless carrier in Manitoba and maintains a strong position in the market. The Bureau found that this would lead to a unilateral exercise of market power that would not be constrained by other factors, such as the repositioning of or expansion by remaining competitors or the entry of a new competitor.see
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In addition to the unilateral effects of the Proposed Transaction, the focus of the inquiry centered on whether and how much the Proposed Transaction would impact both the ability and the incentives of Bell, TELUS and Rogers to more effectively coordinate their pricing decisions in Manitoba, to the detriment of competition. The Bureau found that the Proposed Transaction would likely lead to a substantial increase in the price for mobile wireless plans due to the increased ability and incentive for a coordinated exercise of market power between Bell, TELUS and Rogers in Manitoba.
Information collected during the inquiry supported the likelihood that Bell, Rogers and TELUS weigh the advantages from vigorous competition in one area against the danger of retaliation in other areas. Mobile wireless markets are highly concentrated and possess high barriers to entry and expansion, as described further below.
The acquisition sparked leadership changes that came into effect Friday. Bell MTS also plans to invest in continuous wireless coverage along critical highways and improved mobile and broadband networks in mining centres, rural and remote communities including five under-served indigenous communities. Bell MTS has not made any decisions about wireless prices after the month price freeze, but McKeen said it wants to be competitive and meet its goal of having the largest market share.
The employee headcount is expected to change, McKeen said. Postmedia is pleased to bring you a new commenting experience. We are committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles.
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