Battle lines drawn over possible entry of Verizon into market

Opposition to U.S. telecom giant Verizon possibly entering Canada's wireless market continues to grow with the union representing works at Telus (TSX:T) and Shaw (TSX:SJR.B) saying its a "mirage" that consumer cellphone bills will be lower.

The Telecommunications Workers Union said Wednesday that Verizon's arrival wouldn't necessarily mean lower cellphone bills, Instead, it would likely want to operate in lucrative urban markets and ignore rural communities, the union said.

"Tempting voters with the lure of cheaper cellphone bills seems to be Mr. Harper's plan, but it's a mirage," national union president Lee Riggs said in a release.

"There is no guarantee of lower prices. It is a complete manipulation of the Canadian public. Instead, Verizon will be able to easily swing into the lucrative urban markets, ignore rural communities and Canadian consumers and workers will be no further ahead."

Telecom expert Richard Smith said unions whose members work for large corporations usually have interests that are closely aligned.

The federal government, on the other hand, thinks the issue will win it votes and it does hold the cards, said Smith, director at the Centre for Digital Media in Vancouver.

"It's not so much a story about truth or fact or anything like that," Smith said. "It's a story about politics, sort of little "p" politics."

"There's a perception by voters that is this protecting the little guy and helping individuals and small business and the government thinks it's a vote-getter. It's sort of old style populism."

But Smith said there is some evidence that a fourth wireless player would lower prices, noting that was the case in France and United Kingdom and that it appears to be happening in the United States.

There have been reports that Verizon is considering buying small player Wind Mobile -- and possibly, struggling Mobilicity -- as a way to enter the Canadian market. Foreign investment rules have been eased for telecom companies with less than a 10 per cent share of the marketplace, paving the way for the entry of Verizon and possibly other foreign telecom companies.

However, a report late Wednesday suggests Verizon will delay its plans to pursue Wind Mobility and Mobilicity.

The Globe and Mail reports Verizon has decided to put off the deals until after a government auction of wireless licences in January, according to two people familiar with the situation.

Previously, the Canadian Chamber of Commerce, the Canadian Council of Chief Executives and the Communications, Energy and Paperworkers Union of Canada have also called on Ottawa to level the playing field.

However, the Consumers' Association of Canada has said it's pleased with the government's decision to promote more competition. The non-profit group says consumers have been telling it they welcome the new choices that Verizon's entry could bring to the market.

Bell (TSX:BCE), Rogers (TSX:RCI.B) and Telus have launched a media blitz. They say Verizon would gain an upper hand in Canada's wireless market through existing rules for new players that would give it an unfair advantage in the upcoming wireless spectrum auction.

Under the current rules, Verizon would be able to buy two of the four prime blocks of spectrum -- radio waves that operate cellphone networks -- that are up for auction while Bell, Rogers and Telus can buy only one each.

Not all analysts see eye-to-eye on Verizon either.

Telecom analyst Iain Grant said the government's position is in the best interests of Canadians.

"To talk of loopholes, as some do, is to not understand that the same companies who complain most loudly about loopholes in 2013 were the recipients of even greater public largesse in 1985 when the government gifted their initial spectrum as an incentive to build a wireless business in Canada," said Grant, managing director of the SeaBoard Group.

"With Verizon we are not proposing to gift anything, but we are offering the right to bid to buy more than a single block. Given that the incumbents hold over 90 per cent of the available spectrum already, that only seems fair, and appropriate if, in fact, a little stingy in terms of a welcome."

However, Cannacord Genuity analyst Dvai Ghose recently called the government's spectrum policy "narrow minded" and said it's based on "populist slogans over facts."