I Am Canadian, A Reply to Bell’s Open Letter

Dear Mr. Cope,

Amongst your many traits as CEO of Bell Canada Enterprises (BCE), tenacity, enthusiasm for your trade, and perseverance top the list. Conspicuous in its absence from your letter, however, is your sense of irony.

You begin the “unusual step of writing to all Canadians” (Strange, isn’t it, that “Canada’s Top Communication Company” should find it unusual to communicate with its customers?) with a history lesson, ostensibly in the interest of helping us “understand a critical situation” now facing the wireless industry: the potential entrance of an American company into the Canadian market.

You inform us that, since Parliament granted Bell its charter in 1880, Bell has spent 133 years “investing in delivering world-class communications services to Canadians.” An impressive track record!

You must, however, be aware that Bell’s permission to operate in Canada was initially obtained by agents acting in the interest of the (American) National Bell Telephone Company and that, after securing a favourable charter, three top-level executives from National Bell were appointed to Bell Canada’s board of directors (Babe, 1990, pg 68-69). Or how about how American Bell initially owned 50% of your company, only fully divesting its interest 43 years ago, in 1970 (Winseck, 1998, pg 119)?

Bell began its life in Canada as a branch plant of an American company; in a strange twist of fate, it’s now a descendant of National Bell Telephone – Verizon – which is contemplating (re)entering the Canadian market. And they leveraged this relationship to get an early leg up on the competition – using patents owned by its American parent, Bell quickly monopolized the market for Canadian telephone services, a monopoly it used to funnel profits back to the States. (Smythe, 1981, pg 141)

You suggest that “US giants don’t need special help from the Canadian government,” but that’s exactly how Bell got to where it is today!

That’s all ancient history, however, and in the here and now, BCE is a Canadian company who “welcomes any competitor,” so long as they “compete on a level playing field.” Right?

You’re calling on the Federal government to close “loopholes” that are intended to promote competition in your industry – rules that your company has forced the government to create.

Regarding the three “loopholes” you want closed:

1. “Verizon would be able to buy twice as much of Canada’s airwaves as Canadian companies like Bell can in an upcoming auction of wireless spectrum – the airwaves that carry your calls and data.”

According to a recent article in the Financial Post, BCE currently holds license to 19% of Canadian radio frequencies designated for mobile use – that’s if you include the upcoming blocks of 700MHz in the total – or 29% if you don’t. Bell didn’t get most of that spectrum by paying market price, but through a ‘beauty contest’ – the government licensed mobile spectrum to Rogers, Bell, Telus and other regional providers such as MTS and SaskTel for pennies compared to market value.[1] You might call that “existing spectrum holdings previously subsidized by Canadian taxpayers,” something you’ve got in spades but would deny to your competition.

Even in the unlikely event that you don’t win a block of 700MHz in the upcoming auction, you’ll still be in control of 19% of all available mobile spectrum in Canada – more than twice as much as the set-aside provides for new entrants.[2]

The playing field looks pretty tilted from here.

2. “They get to piggyback on the networks of Canadian carriers wherever they don’t want to invest and build their own.”

At least you won’t have to worry about Verizon piggybacking on your network here in rural Manitoba – because you barely have one. Instead you’ve chosen to only cover the most densely populated (and most profitable) areas of the province while ignoring places like Thompson, Churchill and the Whiteshell – a practice that you reserve exclusively for Verizon. Where you do provide service – Ontario, Quebec, Vancouver, etc. (Winnipeg, Brandon, and immediately surrounding areas in MB) – you’re already sharing a network with TELUS. Since 2009, Bell and TELUS have been sharing their national 3G (HSPA) network infrastructure. You’ve needed help providing your services for years, why should we expect Verizon to go it alone?

Rogers also has similar agreements with regional providers such as MTS. In fact, all three national providers are already sharing their networks with their “competitors,” yet you actively campaign to exclude new entrants such as WIND and Verizon from the club. Not my idea of a level playing field.

3. “Verizon can acquire smaller Canadian competitors – but Bell and other Canadian wireless companies can’t even try.”

You note that “With Ottawa’s help, the new companies [WIND, Mobilicity, Public Mobile] have become part of the vigorously competitive Canadian wireless marketplace”. I have to point out that with your help, one of those companies is facing imminent financial insolvency, while the other two are actively courting buyers. Naguib Sawiris, WIND’s original backer, has frequently and publicly lamented his decision to test your waters. The previous contestants, (Clearnet and Microcell) I would add, met a similar fate when they were bought out by TELUS and Rogers in 2000 and 2004, respectively. Are we supposed to believe that TELUS is competing with Koodo, or Rogers with Fido?

After every challenger contesting your dominance of the wireless market has been bought out or squashed, is it any wonder that the government wants to act to promote real competition?

Mr. Cope, I am Canadian. Like virtually every other Canadian I know, I rely on my mobile phone in my personal life and for my livelihood on a daily basis. The “critical situation” I face comes every month, when I open my wireless bill wondering whether I’ll be able to afford to pay it. Your company, along with Canada’s other major wireless providers, have had 30 years to address this situation. But you’ve failed. Posting huge profits and paying dividends year after year might satisfy your shareholders, but individual Canadians and their families are being hung out to dry. It’s time for a change. Faced with a choice between an American company fighting to gain a foothold in a hostile market or a Canadian one who takes my hard earned money for granted, I’ll pick the lesser of two evils. And if you don’t know which that is by now, I’ll happily send you a copy of my monthly phone bill.

~

[1]According to a report Bell submitted to Industry Canada’s invite-only Wireless Roundtable in 2010, total fees paid by spectrum licensees to IC is $132M per year, your share of which (29%) is $38.28M per year by my estimate. Sounds like a lot, until you consider that you paid nearly that much at auction just to secure AWS spectrum for Toronto alone (Per year cost of winning bid for 10 year license.) It’s fair to say that most of the spectrum you’re holding (and have been for up to 30 years) has cost you significantly less than market value. Why should you have access to public subsidies for spectrum but not your competitors?

[2] This estimate excludes spectrum held by Bell et al for radio and television broadcasting, but includes the BRS spectrum – intended for mobile internet but out of use since early 2012 – currently being hoarded by Inukshuk Wireless, a joint venture between Bell and Rogers. Also, it assumes that Verizon will not have completed acquisition of Wind or other new entrants prior to the auction.

Sources Cited:

Babe, Robert E. Telecommunications in Canada. University of Toronto Press, Toronto. 1990.

Smythe, Dallas. Dependency Road: Communications, Capitalism, Consciousness, and Canada. Ablex Publishing, New Jersey. 1982.

Winseck, Dwayne. Reconvergence: A Political Economy of Telecommunications in Canada. Hampton Press, New Jersey. 1998.

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102 comments

  1. […] dangers of having an American company enter the Canadian market. The letter led to a widely-shared response from a Political Economy of Communication grad student Ben […]

  2. […] Klass, who penned a blog post replying to George Cope’s open letter about the Conservative government’s wireless […]

  3. […] didn’t seem prepared for the negative responses from both media and consumers which resulted from both your letter, and a sound bite […]

  4. Reblogged this on The Yonge Street Portage and commented:
    The state of the Canadian Wireless Communications industry is far from ideal for customers. With the possibility of American giant Verizon entering our market, reactions from the incumbents Rogers, Bell and Telus have been rapid, volatile and as Angelus Novus points out in his letter to Bell CEO George Cope, a lot of hypocritical smoke and mirrors. I’ve re-blogged this post because the issue needs more exposure and Novus’s reply features some strong and relatively detailed research that the average Canadian is likely completely unaware of.
    Cheers,
    –M.G.

  5. I may be mistaken but I thought I heard an ad on the radio from bell and the person speaking said it wasn’t fair to ‘small’ companies like bell………..WTH?????

    1. I think most of those ads are designed to confuse people, so that Bell, Rogers and Telus can avoid serious competition and keep charging high prices.

  6. Well written, definitely time for a change up to the game what’s fascinating is that Rogers is still (as of Q1 this year) beating everyone out for market share on pretty 2/3 the available towers as Bell/Telus. Yet, Rogers remains silent… I’m a little curious to see what they have up their sleeve with Verizon…

    What is disturbing is the fascinating trend that Canadians are stumbling upon that all of the sudden, Verizon is going to revolutionize the marketplace prices… This is the general census I’ve gotten from a few American customers, that while up front, Verizon LOOKS cheaper, at the end of the day they’re no different from every other company. The other unfortunate downside to all of it is, is the claim that “The “critical situation” I face comes every month, when I open my wireless bill wondering whether I’ll be able to afford to pay it.” Can be remedied by simple monitoring of usage, and taking proactive steps to making sure that your plan matches your needs. I’ve never had a problem knowing what’s in my bill every month even before I got into the industry because I understand what I need.

    In my opinion, bring Verizon in, it will definitely shake things up in the beginning, but in the end, it’s going to be up to guys like me to calm people down and help them choose what is STILL going to be “the shiniest turd in the pile of phone companies available.”

    1. Rogers is attempting to buy Wind through a back-door deal.

      I’m not as confident in the idea of “consumer sovereignty” as you are, at least when it comes to cell phone plans. I don’t think most people are in a position to be really informed about what’s out there, the terms of their plan, etc. You practically have to be a rocket scientist to navigate some of these things.

      I’m no big fan of Verizon; it appears that south of the border they act just the same as our carriers do up here. (I’ve written about this before.)

      Anyway thanks for the comment, I’ll be addressing some of your points in more detail in an upcoming post.

  7. […] I Am Canadian: A Reply to Bell’s Open Letter […]

  8. Kudos to you sir. You really lay it out masterfully, and it’s nice to see that not all Canadians are foolishly being duped into this crock. And as a former employee at Bell, this is extra sweet to me. Keep exposing that truth!

  9. Wind mobile comes to Canada. You guys compete with Chat.r, Virgin, Koodo. Isn’t that predatory pricing?

    You BIG 3 know that Wind won’t survive. So you all started cracking down on retention plan.

    You BIG 3 stay silent until you know Verizon is entering. The silence is coz you knew Wind is too small and won’t survive. Then you start making noise when Verizon comes into the equation.

    BIG BULLIES!!

  10. Canada has to revisit the rules on the cell phone being regulated as a utility. Years ago the industry convinced the CRTC that cell phones should be excluded from being a utility because their more then just a phone, thier called a smartphone, and most people were on a landline, CRTC agreed and the Telcos won out for an unregulated cell phone industry. They didn’t want the government to regulate prices like the landlines. Now that the Industry admits most people are giving up their landlines and convincing people through marketing and slowly raising the price of the landlines without value, and getting people into the unregulated cell phone business, its time to look into having cell phones being classed as a necessity and regulated as a utility, same as the old line lines were and still is.

  11. Great article!!!!!

  12. Canada is one of the only countries in the world you cannot get a Skype number. I am also wondering how much of Bells’ employment is outsourced to other countries. Give customer service a call and you will understand what I mean. Bell is just greedy.

  13. kirashi · ·

    I think that the First Honest Cable Company video is relevant here. You can’t have competition when you meet behind closed doors with all your competitors to essentially price fix the market.

  14. In response to the recent propaganda by Robelus, check out this Fair for Canada Parody:

  15. I would gladly send copies of my monthly BELL bills, I couldn’t even afford to get out of the contract. bullshit.

  16. […] I am Canadian, a reply to Bell’s Open Letter by Ben […]

  17. Bell suck sent lots of there jobs to India its bell india that call me and stalk me wanting me back and I say no they write letters to me and want me back call me at different times usually dinner time wanting me back they cant take no for an answer I will have to send them a invoice for consultation fees each time they call and demand they pay me 60,000 dollars for service rendered saying no I do not want bell India or canada phoning me writing me please send me 60,000 dollars for my inconvenice thank you

  18. As a Bell customer, i pay $40 a month for a simple Basic phone line. $40!!! For tech thats what. at least 100 years old? And Bell cry ‘Unfair’? Screw’em…when Verizon sets up shop, i’ll e dropping my landline, and going with Verizon. I could do it now and just choose one of the present companies, But i’ll Be spiteful, and wait for Verizon. Screw Bell.

  19. I love it when greedy control freaks have to compete with each other …. I hope Verizon wins, but who knows what the Canadian twits will do to stop them.

  20. Good work — you might be interested in another source of information about the early days of Bell Telephone, the biography of Charles Fleetwood Sise, the company’s first CEO, is quite illuminating!
    “Charles Fleetford Sise 1834-1918″, Fetherstonhaugh, R. C., Published by Gazette, Montreal, 1944.
    Cheers – Iain Grant, Montreal.

    1. Thanks Iain, it’s now on my list.

      Cheers!

  21. not much more to say other than to personally thank you for this wonderful response.

  22. […] Ben Klass puts to rest the notion that there is really any advantage for a foreign company that the Canadian ones didn’t […]

  23. Excellent reply. If, as the CWTC implies, Canadians enjoy cheaper mobile rates then our American cousins why the need for the commercials and the hand wringing? Verizon won’t succeed by being more expensive and providing lousy service right? Of course they won’t. The big 3 already know Verizon will have better service, and better rates and it scares the hell out of them to have to actually compete.

  24. Outstanding!!! I was wondering if Mr. Cope had the decency to reply to your letter. I would sign any petition, or form to stand up against these government supported, organised crime corporations and stop the outsourcing of Canadian jobs. Especially when the Canadian people are struggling and actually paying for the existence of these companies. I spoke with the CRTC, who said they have been stopped by our government regulating these Companies. The only thing they are right about in their huge campaign, is that the Canadian people have to stand up and say enough. However, it should be against these 3 companies. I appreciate the time and research you clearly put in to your letter, providing us with so much information.

  25. […] of criticism the Big Three will be facing this fall. In fact, the Verizon withdrawal will give critics of Bell, Rogers and Telus even more motivation to pressure the companies to reinvent themselves as customer-centric behemoths as well as pressure […]

  26. The big three Canadian Telcos need to be honest about the cell phone industry in this country – something like … this maybe? http://goo.gl/J8cC9T

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