Sugar Mobile decision shouldn’t leave a bitter taste in consumers’ mouths

Last Wednesday, THE CRTC ordered Sugar Mobile, a discount wireless services provider, to stop its unauthorized use of Rogers Communications’ wireless network. The telecommunications regulator found that Ice Wireless, Sugar Mobile’s sister company, had “improperly allowed the end-users of [Sugar Mobile] to obtain permanent, rather than incidental, access to [Rogers'] cellular network.”

The CRTC’s decision is welcome news, and reaffirms its commitment to promote facilities-based competition in Canada’s wireless sector.

Ice Wireless is a wireless service provider operating in the Northwest Territories, Yukon and Nunavut. It owns a wireless network in the territories, but has a roaming agreement with Rogers that allows its customers to use the Rogers network when travelling in other parts of the country. Conversely, the agreement allows Rogers’ customers travelling to Northern Canada to access Ice Wireless’ network.

In 2016, Ice Wireless launched Sugar Mobile. Sugar Mobile is a “mobile virtual network operator” (MVNO) – telecom jargon that means that it owns no infrastructure of its own and provides wireless services through third party networks. By virtue of Ice Wireless’ roaming agreement with Rogers, Sugar Mobile’s customers could use Rogers’ network when travelling outside of the territories.

Instead of only targeting customers in Ice Wireless’ home territory, however, Sugar Mobile marketed its services to customers across Canada. Such customers would never use Ice Wireless’ home network, and would permanently rely on Rogers’ network for roaming purposes. This amounted to a breach of the Ice Wireless – Rogers roaming agreement, which was meant to cover “incidental”, rather than “permanent” roaming on Rogers’ network.

Samer Bishay, Sugar Mobile’s CEO, compared the decision to being given “a death sentence without seeing the judge,” while consumer advocacy group Open Media claimed that the decision would “harm innovation, reduce choice, and keep low-income Canadians offline.”

Such reactions, to put it diplomatically, skew a tad melodramatic.

The CRTC’s decision to sanction Ice Wireless is in line with the regulator’s 2015 decision regarding the right of smaller competitors to access the networks of Bell, Telus and Rogers. While the CRTC decided to regulate the roaming rates charged by the Big Three to smaller carriers with less extensive infrastructure, it refused to extend this regulatory privilege to MVNOs. Indeed, the CRTC felt that extending network sharing obligations to MVNOs would discourage investment by wireless carriers in their own network infrastructure.

On this issue, the CRTC’s reasoning is spot-on: in order to satisfy customers’ insatiable appetite for bandwidth, network operators are investing billions of dollars every year in new infrastructure. Allowing product imitators to offer quasi-identical services by piggybacking on these networks at a below-market rate would not only be fundamentally unfair, but also constitute a strong disincentive for future investment in network infrastructure.

In analyzing this decision, Canadians should not confuse the forest for the trees: the vibrancy of Canada’s wireless market is not contingent on the existence of small MVNOs such as Sugar Mobile – whose collective market share is negligible – but rather on carriers who own and invest in their own infrastructure. Although it may be tempting to “root for the little guy,” it is important to realize that this “little guy” contributes little or nothing to Canada’s wireless market.

And contrary to beliefs expressed in certain quarters, Canada’s wireless market is faring well. A study conducted for Facebook by the Economist Intelligence Unit and published earlier this week found that Canada ranked first out of 75 countries with respect to Internet affordability. Canada stood out, “given its strong competitive environment for both wireless and broadband.”

The CRTC deserves credit for sanctioning Ice Wireless for its breach of contract and for refraining to impose mandatory access obligations on the Big Three when it comes to MVNOs. If anything, it should be encouraged to extend the application of its reasoning to the broadband sector.

The regulator has recently imposed on major broadband operators the obligation to share their next-generation fibre networks with smaller competitors that make little or no investment in broadband infrastructure. These small competitors are the broadband equivalents of Sugar Mobile, and in an ideal world, their regulated access to the Big Three’s broadband networks should be phased out. After all, what’s good for the goose is good for the gander.

Paul Beaudry is an Associate Researcher at the Montreal Economic Institute. The views reflected in this op-ed are his own.

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