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by UkrainianJew 1445 days ago
The utterly inefficient and overpriced Canadian telecoms exist only because we allow one specific behavior:

1. A new local player comes to town, builds their own infrastructure (e.g. connects one building to fiber) and starts offering competitive service.

2. Rogers/Shaw/Bell/Telus immediately offer better terms for the residents of that building.

3. The competitor runs out of money and leaves.

4. The telecoms revert to their usual pricing.

This hurts competition, this hurts customers, this hurts long-term infrastructure resilience, but not a single politician ever comes close to even admitting the problem. I understand you cannot do it on the federal level where both major parties are on the telecoms' payroll, but it could be a very low-hanging fruit for someone running for a municipal position to address. But nope, identity politics, words, feelings and fighting climate change with paper straws seem to be what the electorate wants instead. Sad.

18 comments

> 2. Rogers/Shaw/Bell/Telus immediately offer better terms for the residents of that building.

I was about to write a whole comment about how I've never seen this myself and to disagree with you I was going to compare the price of Bell Fibre in my building to Beanfield. The latter of which I have at $50/mo at 1Gbps.

But then I loaded up Bell's availability page and entered my address... it was almost like a sick joke. The spinner was saying "Checking availability" or something like that. However, I could see the page with prices behind it darkened out while it was running. It was $115/mo for 2 years and $125/mo after that for 1Gbps fibre. But when the spinner was done and they "checked my availability"... well what do ya know! It's now magically $50/mo. Pretty disgusting that they can get away with that.

Man those prices, Ill use other currencies to be more precise, but in Paris, the 1Gbps was 30 euros and now that I live in Hong Kong it's 250 HKD. Canadian prices could be explained by the increasing cost with lower density, but damn, high speed dedicated fiber is still a luxury in some place, we forget, us dense cities' people.

Competition is not the only thing, in France we have 4 highly regulated fiber providers who must compete or pay fines, but in HK it's way more shady and we choose building and flats to get the best ones (cable is shit, former public telco is expensive, new kid is fast and cheap). It's still nowhere near your prices: a shit cable is 98HKD and an expensive HK Telecom is 500...

The density argument is utter BS. A vast majority of the population is concentrated in 5 very dense cities, and no one is asking the incumbents to provide FTTH to every house in Nunavut.

It’s cartel behavior at its best. The Canadian telecom landscape is a sick joke.

The rural argument also never made sense because why not just start a nationalized ISP or subsidy that purely serves the rural north? Why sarcrifice the competitiveness of whole countries ISP market for a very small part of the country?

The same argument is used for keeping the postal service public when you could just subsidize the parts of the market that wouldn’t be self-sustaining rather than propping up the entire money-losing crown business. Burning tax dollars at the parcel delivery business in the age of e-commerce is a sad joke.

The whole “rural people are being protected” seems like a cover story for powerful friends of politicians to keep the money train rolling, and regular people eat it up on social media.

Plus Starlink et al has rendered the rural argument moot.

Well in downtown Budapest 1Gbps is like 5 euros a month. There's no wonder why so many people become developers in Eastern Europe. Cheap and fast connectivity is key. The sooner western leadership realizes this the better.
>the 1Gbps was 30 euros

That's still pretty good. In Austria that's 80 euros since telecoms here have the same government protected cartel as in Canada. And it's not even available in every building of the city, but you need to check before you move whether you have fiber or not in the building.

Similar in Germany.

One of the things I miss from Eastern Europe is the fast and cheap internet that's available in any building in the city.

You should check what an actual competitive market looks like, Bucharest for instance.
I use 1Gbps symmetric Bell fiber small business package which includes static IP. Pay $129/month and generally happy. Static IP is important as I host some stuff right in my basement. You got me curious with this Beanfield. It is indeed $50 for 1Gbps symmetric (no static IP of course) but when I looked at their business package it is $300 for the same speed. Static IP is extra. I wonder what does such a big difference include.
You can use a Dynamic DNS service and a dynamic (residential) IP, unless downgrading to a dynamic IP incurs severe tradeoffs like CGNAT and/or blocking port 25.
If i had to guess maybe it is a guaranteed 1Gps slot? It does seem like an excessive markup.
"markup" is one way to price things, but not necessarily the best way.

A better way, and likely the thing in play here, is to price according to a mix of value provided, and the ability of the market to pay.

If you are spread enough this will result in some markets paying effectively a large markup, and done a much smaller markup, and some, potentially, less than cost.

The reason the package costs $300 is because that is what the market will bear, and the utility to the customer exceeds the value of that cash.

Incidentally that value may also be in support etc.

In summary, markup is one of the least effective pricing methodologies, and invariably leaves a lot of money on the table.

Is this not just competition working the way it's supposed to?

ie, another player shows up in the market, offers a more attractive price and forces the other players to reduce their prices or shed customers.

It's not like Bell, in this case, were offering 1Gbps for something absurdly below cost, like $1/mo or something just to drive the new comer out of business.

Matching and lowering prices is good for everyone. The new player running out of money and going out of business is really just a lack of foresight and planning on their part. It's pretty absurd to not expect the incumbents to reduce pricing when they are directly completed against.

I think the current answers to your questions are fairly inadequate - so I'm going to give you a more nuanced answer.

> Is this not just competition working the way it's supposed to?

Yes. This is competition working exactly as you would expect it to in a free market: One company is a dominant supplier, and they are able to match rates for a new entrant. They are able to out compete this new company, and they will do so - more marketing, lobbying, cost matching (or undercutting), etc. They have the ability to beat the competition, and they will.

So everything is going exactly as you'd expect - except the points from the parents comment still apply: the consumers in this market are actually getting fucked - the price drop will be temporary, the competitor will be forced out of business and leave, and the total infrastructure investment in the area will go down.

This is what's termed "Market failure". The free market here operates in a way that doesn't increase the well being of all (or even most) participants.

So yes - this is just competition playing out as we'd expect in a free market, but instead of doing what it normally does in an area (force infrastructure updates, service improvements, cost reductions, and higher efficiency as companies compete - all good things) it's doing bad things. Why?

Well - this case is the literal textbook definition of a "Natural monopoly". It turns out that when competition appears, Bell is able to outcompete them not by actually improving, but by leveraging existing infrastructure and scale in a way that the startup company cannot.

The free market isn't making Bell better - they're not having to work any harder or improve. That's great for Bell, but pretty bad for everybody else.

So (at least in theory) we regulate this case of the free market, because we've seen that "normal competition" doesn't actually work here.

> forces the other players to reduce their prices or shed customers.

Excpet they revert back to old prices once the competition is dead. This is textbook predatory pricing.

> It's not like Bell, in this case, were offering 1Gbps for something absurdly below cost, like $1/mo or something just to drive the new comer out of business.

What's the significance of "absurdly below cost" here? They are doing exactly what you describe except the exact number here is not 1 but 50.

No, its just basic supply and demand...
When you price good below your production costs and have most of the market, then that is considered anticompetitive, monopolist behavior and is illegal in many places.

This is because if a large enough company does this, they can lower their prices locally to below cost whenever a new company enters a local market and subsidize this with their other markets. This creates a stranglehold on the market that can allow a company to charge artificially high prices for sub-par services.

This isn't just theory there is a well established pattern here and that is why laws prohibit it in many places.

> Is this not just competition working the way it's supposed to? > > ie, another player shows up in the market, offers a more attractive price and forces the other players to reduce their prices or shed customers.

No, because any time a company shows up that could pose an actual challenge to their stranglehold, all 3 companies gang up and lobby against them.

E.g.

https://globalnews.ca/news/753408/new-ad-against-verizon-exp...

https://www.iphoneincanada.ca/carriers/rogers-telus-bell-job...

> t's pretty absurd to not expect the incumbents to reduce pricing when they are directly completed against.

But they should be forced to reduce it everywhere where they're offering similar service, not just a limited local area.

> The utterly inefficient and overpriced Canadian telecoms exist only because we allow one specific behavior:

> 1. A new local player comes to town, builds their own infrastructure (e.g. connects one building to fiber) and starts offering competitive service.

You forgot to mention that whoever is the ILEC in an area (Telus, Bell, etc) and/or the incumbent 35+ year early advantage local cable TV operator (Shaw, Rogers) has an immense advantage in owning and controlling existing right-of-way to reach whatever is the last mile service delivery location, whether it's aerial pole to pole or duct routes.

They legally have the right of way to build infrastructure to connect to newly developed, last mile locations? Interesting.
whether in usa or canada, local governments treat the incumbent local phone company and cable tv company as a default essential utility, so if it's not a legally enshrined right, it would certainly be shocking and weird if they didn't build to new places

of course in places where the local phone company or cable tv company shares aerial utility pole based infrastructure with the local power company, they're very close buddies as well

In most of the USA the local telcos are obligated to extend service to new construction as part of government grants they've received in the past. The obligation is usually for something like ~10 years, but the grant cycle is shorter than that.

The recent "RDOF" mega-grant has one of these clauses (at the census block level):

"All support recipients must serve locations newly built after the revised location total but before the end of year eight upon reasonable request"

https://www.fcc.gov/auction/904/factsheet

These mega-grant things happen every 6-8 years. The last was "CAP II", preceded by "CAP I", etc. The telcos are basically treated like municipalities when it comes to federal grantmaking. This is basically the system that was lobbied into place after AT&T was broken up; the FCC just took over AT&T's local-loop capital allocation.

These observations are very true. A friend was living in a Toronto condo building, and I saw them choose to switch from Beanfield to Bell/Rogers for the same monthly price but higher Internet speeds. They took the bait and now everyone pays the price in the long run. And yes, Bell/Rogers gouges with high prices for houses/apartments that don't have an independent ISP like Beanfield, etc.
I recently moved to a newly built condo in Toronto and there was a special resident onboarding email, which happened to include a promotional offer from Rogers, advertising a rock bottom deal on internet that I couldn't refuse. I later asked the Rogers representative on the phone how they managed to score the deal with the building developer, and he basically told me that they have an ongoing relationship. They basically have the deal made as soon as the project gets off the ground.
That's a shame. I recently moved to Toronto and got Beanfield mostly by chance. I'm really pleased with the service, hope to stick with them for a long time.
After seeing how the telecom infrastructure was targeted in Ukraine, No sane government in the world can afford to maintain an oligopoly telecom infrastructure anymore; Ironically often in the name of national security.

I think the best way to address it is to open the industry for disruption by encouraging new players(without Billion dollars in market cap) by removing barriers for entry, With stringent monitoring/punishments for anti-competitive behavior including backroom deals among carriers and mobile ecosystem duopoly.

Last mile connectivity is a bit of a natural monopoly, in Australia they converted that to a government owned monopoly that leases their infrastructure to ISPs. I wonder if Canada should do the same.
Does Canada not have strong antitrust laws? As far as I know, this is explicitly illegal in the USA.
On paper, yes. But over the last few decades our regulatory bodies have been subverted by influence from our telcoms.

Recently our telecom regulator (the CRTC) was considering whether MVNOs should be allowed in Canada. Our Competition Beaureau, which is supposed to be enforcing antitrust laws, provided guidance to the CRTC[1]. Here's an excerpt:

"MVNOs can drive lower prices and greater choice, but they also could threaten the demonstrated progress in enhancing competition in this industry to date."

That's right. "Increased competition and lower prices is bad for competition." "Demonstrated progress" in a country with some of the highest telecom prices in the world.

Let's not even get into how the chairperson of the CRTC is literally a former telecom lobbyist.

Ultimately, MVNOs were "approved", but with practically insurmountable requirements for new entrants, effectively blocking them.

[1] https://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/0...

There really should be a big investment in an anti-regulatory capture organization the way there are anti-trust lawyers and privacy czars.

Which would have the dual purpose of employing researchers and public outreach and have powers to stop hires, limit grants/subsidies, and collaborates with with anti-trust.

But who are we kidding, politicians never bite the hands that feed them.

I'm interested in any and all ideas to mitigate regulatory capture, no matter how crazy.

My only notions so far:

- Add explicit carve outs for customers (of the regulated entity). Where the representatives are chosen by jury duty or sortition or other suitably random method, so they too are resistant to capture.

- The customer's have veto power. Maybe thru an ombudsman structure. Maybe thru majority of the regulatory body.

- Like citizen's assemblies, customers have investigatory powers. They can ask questions, they cannot be denied. They benefit from expert testimony.

- No artificial deadlines for deliberations. Some decisions just take longer.

- All decisions (laws, rules, procedures) have built-in expiration (TTL), and must therefore be regularly reauthorized.

- All artifacts and hearings made public by default.

- Pay board members and their staff. So that normal people can afford to serve.

> a big investment in an anti-regulatory capture organization

I think you're on to something.

I keep thinking of the law practice that makes terrific money suing pharmacy benefit managers (or maybe just the pharmas themselves) for violating pricing rules. Sorry, no cite.

> this is explicitly illegal in the USA

Oh my sweet summer child.

The Canadians learned this scam from us. Centurylink has been doing this for decades. They ran several WISPs out of business in Bellingham, WA.

regardless of the law, canada chooses not to enforce it when it comes to the big telcos. they do what they want, and the politicians obey.
Canada is rife with oligopolies and the government does nothing to make this right. Everything is much more expensive in Canada vs the US because there's simply no competition.
Isn't this a simplified version of what Rockefeller did with the oil market more than a hundred years ago? Drive out competition by financing any extra costs with profits from the markets where there's no competition.

Such behavior spawned lots of laws designed to prevent it from happening again. And, just like the telecoms extort huge subscriptions from their clients using extreme product bundling, politicians engaged in ideology and law bundling to get voters to flock to them attracted by some laws, enabling them to enact (or in this case, repel) the laws preventing them from going back to 19th century capitalist practices.

Sounds like how the free market was designed to work.

Not that I find it a particularly good design, though.

Utilities like telecoms can't be free market due to the natural monopoly effect.

We can't have a hundred different companies burying infrastructure or stringing up lines on poles.

Many places have solved this long ago, both for electricity and for telecom: the network is a separate, neutral entity, co-owned by all the players.

One cable/fiber, rented by all providers. The network only has one goal: distribution. The providers are the ones competing.

Is that a free market solution or has that been mandated by government regulations?
It’s good for the consumers, so government mandated. Free market yields the US or Canadian telco landscape with bought out regulators, no real competition, price gouging, and poor service.
You can, but profitability is limited. You can have 5/6 maybe max in a dense country. With 4 in France, they each slowly fibered the whole country reaching an approximate 25% coverage each and compete in wave: one day they are at 20MBps and suddenly one explodes at 100 and the rest run after to restabilize market share. If they dont they all get fined by the regulator looking at european average speeds.
Yes and: Profitability is predetermined. Converting public goods and services into securities. Ideally. So a public utility issues bonds, instead of stocks.
Not sure what you mean, bonds and stocks are different liabilities and a state utility by definition cannot issue equity or the state would lose ownership. It means they must pay their bond coupons and therefore are very risk adverse and change resistant.

A security-emitting entity doesnt need to pay back the debt too much (it should but doesnt have to, via dividend) and therefore can afford to try things to raise returns for both shareholders and management and absorb failure.

The worst situation is when a state utility tries to innovate and fails: this leads to privatization which actually transforms it in a public companies (the words are weird: state companies are not directly publicly owned by the citizens, private companies on the public market can be). If a public market private company fails to innovate and just produces riskless cashflow forever, it becomes a good candidate for state private ownership.

Municipal bonds.
An extra 2 or 3 might be ok.
Seriously, the world will not end because more than two companies are laying fibre. Especially as the country grows in size.

This weak apologia for monopolies is what keeps them around. Even when the cost created via gov-backed pseudo-private monopolies are obviously worse than their hypotheticals.

> free market

> was designed

Freemium Markets™

aka Pay to play.

It definitely won't happen in Toronto, seeing as John Tory was, and still is, in bed with Rogers.

https://www.theglobeandmail.com/news/national/john-a-tory-a-...

Curious though what the government could do about this pricing scheme here? Seems like the solution is to setup a bureaucracy to watch pricing and then micro-manage the situation whenever its tried?

The ride-hailing services pulled this in various places around the world. Airlines in Canada did it as well. Feels like whack-a-mole.

The most straightforward solution would be to require the telecoms submit pricing tables to the regulator and force them to stick to them. If they want to make a change, they have to do it for the whole region, not just the area where small-time competitors have installed new service.

Price transparency in general is a huge issue with Canadian telecoms, it's well known that it's a "complaint based system" with the big three. They'll hook you with an introductory rate and then start jacking up the prices after a year or two. The usual dance is you go to one of the other big telecoms and get a quote for their introductory rate, and then go back to yours and threaten to leave unless it's matched. It's a pretty awful system that requires people to know how to navigate it. Most don't, so after their intro period expires they just get gouged. My father in law is paying almost $200 a month for internet and TV.

Promote fair competition.

Verizon tried to get in Canadian market in 2019ish but top three telecom formed a mafia and didn't let that happen. Same thing with Delta, would be a much better alternative to Air Canada.

Verizon was already in the Canadian market once before, holding a sizeable stake in Telus. I would say that they, along with AT&T owning a stake in Rogers during the same period, and of course AT&T also establishing Bell Canada earlier, are responsible for the present state of telecom in Canada. There were a number of other players who were trying to compete, but is wasn't easy going up against the offspring of the American behemoths.
Air Canada isn't perfect but Delta is junk. I have flown on both many times.

Many counties have their own airline. Canada shouldn't automatically give up our airline in favor of a US one, because the US one wants in.

the government is the reason there is such a triopoly - Bell/Telus/Rogers is a triopoly set up and supported by the government itself. The CRTC last mile service rule (forcing the triopoly to let other vendors use their physical cabling) is the only thing holding back a complete closed market.
In Canada, the entire public apparatus (federal and provincial at least) is geared toward keeping big businesses alive and happy, no matter the costs, because that means keeping jobs, because people with jobs paying taxes is the only meaningful source of revenue for governments since corporations can evade most taxation.

So, the various Canadian governments will do whatever they can to maintain corporate status quo and keep the money flowing. That's how it works. Just please big players and the rest follows.

Then, don't expect too much. Canada has never been a real country, its people never decided to take over and govern themselves, it's just an ex-British colonial body from a bygone era (one of many), and has always been acting as such.

Because of that, it's also one of the few places in the world where true personal and community freedom can be achieved, probably because it's so harsh and so vast and so highly dysfunctional and so challenging and so unimportant. Whatever it is, it's nice to be a Canadian for the most part. I'm not proud of being one, but I don't have to be, and that works pretty well for me.

One thing some other countries have done is break up the old monopolies into a last mile company that owns all the copper/fiber vs a services company.
Acknowledge that internet / phone service works much better as a utility and nationalize or highly regulate (i.e. fixed pricing schemes) the telecom companies.
The CRTC does dictate a fixed pricing scheme for mobile phones:

https://crtc.gc.ca/eng/phone/mobile/occa.htm

Near the bottom it states that those companies are supposed to promote those plans. They didn't the last time I tried looking them up. Regulation is meaningless if there is a lack of enforcement.

(Note: I'm not saying that the pricing scheme is particularly good since it leaves the needs of many people unaddressed. On the other hand, it does address the needs of those who would have the most trouble affording phone service.)

Also consider the continual battle of third-party ISPs to provide affordable Internet access. The CRTC says the major providers have to lease out their lines and stipulate what those rates are. On the other hand, those third-party ISPs are constantly fighting to keep the rates low and are pretty much tied to providing service levels that match the major providers.

I thought I'd dive in and look for these plans, and as expected they're not at all easy to find.

For Telus, I had to go to four different plan/pricing pages before I found a link mentioning that cheaper plans are only available on Koodo (their lower priced brand). And then, the $35 plan is as lousy as they can make it and still comply with the CRTC - 3GB of data at 3G (only 2 generations ago, awesome) speeds, with overage costs of $13/100MB. Just absurdly bad. Or maybe you want something more reasonable, let's cut out that data access, you just want talk and text? That'll save you a whopping $3, at $32/month.

So that's the telecom situation in Canada; the first 3GB cost you $3, the next 3GB cost you $390.

Maybe re-examine the foreign ownership rules for telecommunications companies...

"As it stands now, foreign ownership of a telecommunications company is limited to no more than 20 per cent of a company’s voting shares and no more than 33.3 per cent of the voting shares of a carrier’s holding company, and an effective total limit of 46.7 per cent (as long as the foreign entity doesn’t have control). On top of that, at least 80 per cent of the board members must be Canadian citizens." [0]

(Although seems not to apply to small actors under 10 percent of the market share anymore)

[0] https://financialpost.com/telecom/tight-reins-leaves-our-tel...

The idea around the foreign ownership laws is to prevent jobs and knowledge from leaving the country hopefully creating entities that can compete at the global level. It has worked with banking but failed with internet providers. It costs regular citizens but not strategically doing this is costly.

The industry is large/stable enough to allow 100% foreign ownership.

Its already illegal if its foreign physical goods that are being imported (https://www.cbsa-asfc.gc.ca/sima-lmsi/brochure-eng.html ). I guess they could extend that.
I also remember Air Canada or WestJet doing the same to some small air company offering cheap flights from Kelowna (?), but I cannot find the news piece. Does anybody here have a better memory than myself?
The airport in Kitchener has a deal where an airline is offered exclusive rights to a new route out of the airport for, I think, two years. Westjet/Swoop was recently throwing up a storm in the media over this when Flair took advantage of the deal, calling it anti-competitive. Never mind that they had, and still have, access to the same deal.

The reality is that they were only interested in running those routes as long as another airline was. YKF has been down this road before.

Are you thinking of Flair or Swoop? Never flown them out of Kelowna when I was living there, but I remember both being a big deal when they finally arrived.
Swoop is owned by WestJet, it's just their discount brand. Flair's actually independent and used to be based in Kelowna but is now based in Edmonton – they're probably who GP is thinking of.
I'm incredibly thankful to Flair as my flight to Montreal now costs 1/3rd what it cost last year.

It's unfortunate that I need to visit a province that discriminates against my mother with its regressive laws, but at least I can pay my respects and get out without contributing to the oligopoly that runs the country.

> a province that discriminates against my mother with its regressive laws

Can you elaborate? I only very vaguely follow Quebec news so I'm curious what you're referring to.

She was a teacher and she wore a hijab (thankfully she had retired long before they decided that was a problem)
They're still around
While I believe that this is a tactic that gets used, it shouldn't work. And therefore it is points to probable regulatory failures. Note that the theory here is that the majors will offer cheap prices if the infra is duplicated.

That means "I" (my building) could build my (our) own fibre connection and then use that as leverage to get cheap internet without having to actually run it. It'd be a bit silly, but sounds long-term profitable.

The focus should be on enabling this sort of competition.

I was really hoping Musk would bring Starlink for cheaper then Rogers et all. I think for now they will mainly focus on rural areas but as time goes on hoping they lower the prices enough that even city folks with clear line of site to satellites can hook up and ditch Rogers.
Canada is rife with monopolies because of this. It's a very unhealthy market.
Why do new local players invest in new offerings if it is apparently so obvious that the big telecoms will come in and undercut them long enough to exhaust their capital?
Why does anyone try to sell books when Amazon exists? It's the nature of the optimist.
But people actually do sell books. It’s not the case that Amazon always comes to new book store locations and undercuts them on price just long enough for them to go out of business.
Amazon undercuts pretty much every bookseller on price. A few local/specialty shops can survive but Barnes & Noble is pretty much the only national competitor left in the US and they are on the ropes. My local B&N is now a pile of rubble, soon to be a fast food place.
What exactly does prevent almost any company in the free market to protect their market share with this way (if they can)?
Deeper pockets because of income from different markets.
why not fix the bigger problem instead. that politician can be « on telecom payroll ».

we can all agree politicians are supposed to represent the population of the country not the company and their board of directors.