I was happy to read about the likelihood that Videotron plans to evolve from reseller to facilities-based provider of wireless services.
Regular readers will recall that I tend to believe in letting market forces work, especially when there is so much choice available. We have 3 real, facilities based carriers and a host of resellers who are keeping the marketplace pretty competitive for consumers.
People often neglect to mention the MVNOs and resellers – companies like Amp’d, PC, Virgin and others. I know that Virgin has some real differentiators for customers – my daughter has been using their service this past year. No system access fees, real live customer service reps, aggressive price plans – easy, no-charge number changes (for when she is back in Toronto for the summer).
I think additional competitors would be great, but I get concerned with calls for government subsidies and intervention into the marketplace. A set-aside of the spectrum to be reserved for new entrants is a subsidy. I don’t like the implications for distorting market economics if one industry participant pays less than market value for its infrastructure – it ends up with an artificially subsidized cost structure. The need to guard against speculators that might use the subsidy to inventory spectrum waiting for foreign investment restrictions to be lifted.
I don’t believe lower wireless pricing leads to increased market penetration. If it did, then the US should be leading the world.
There are a lot more complicated forces at work. I’ll be speaking about some of these issues on Monday at the CWTA AWS Forum in Ottawa.
I wonder if the proper correlation, if any, may be that a decline in the rate of change in market penetration leads to more aggressive pricing. In other words, as the market becomes saturated, service providers drop prices to try to grab each others’ customers.
Any economists want to do a study?