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| Goldman Sachs on Wireless Carveouts |
| Written by Dave Burstein |
| Thursday, 10 June 2010 16:46 |
"We expect to see some level of regulatory involvement benefitting new entrants in upcoming auction policy," Goldman's top analyst Jason Armstrong writes about the coming 700MHz/2.5GHz auctions in Canada. While that notion horrifies incumbents, France, Mexico, India and the U.S. in earlier days effectively used spectrum to reduce market power.
Two new companies, Wind and Public Mobile, are offering service in major cities and soon going nationwide, while cable company Videotron is preparing a strong campaign."New companies are driving prices down" (Globe and Mail). Industry Minister Tony Clement noted that "new entrants lead to more competition and better results for consumers," (Total Telecom). Canadians have been furious for years their wireless rates have been much higher than the U.S., which I ascribe to cartel-like pricing by the three carriers. The high prices have resulted in Canada's having one of the lowest penetration rates among developed nations (70%).
Especially since George Cope took over at Bell, I've watched obvious signalling between Bell and the cablecos and increased broadband prices. Canada for years was a third cheaper than the U.S. in broadband and far ahead in take rates; they've lost the edge since the Bell and the cablecos reached (implicit) agreements. Armstrong notes that incumbent EBITDA margins in Canada Q1 were a high 47% and suggests the regulator will encourage competition to bring rates further down.
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