TORONTO - Verizon (
NYSE:VZ,
Stock Forum) would need to invest more than $3 billion just to get started in Canada's wireless industry, says a new study.
Much of the costs would be weighted in building a network and establishing a mobile phone service infrastructure, especially in underserved markets, like rural areas, said the report by Moody's Investment Service.
But the battle would be more about the user experience than an all-out price war, because Verizon would need to develop a top-quality network, which would be costly and time consuming, Moody's said.
“Although competitive threats tend to cause uncertainty and can lead to performance pressure, we see limited downside for Bell Canada, Rogers Communications Inc. and Telus Corp. from a foreign company entering the market,” analyst Bill Wolfe said in the report, released Thursday.
Bell (
TSX:T.BCE,
Stock Forum), Telus (
TSX:T.T,
Stock Forum) and Rogers (
TSX:T.RCI.B,
Stock Forum) have launched a media blitz against the possibility of Verizon entering the Canadian wireless market, saying there would be a level playing field.
The report said it would likely take at least three years for Verizon's network coverage and capabilities to reach critical mass, giving the established carriers time to better position their own networks and service. The Globe and Mail has reported that Verizon was putting off a potential acquisition of Wind Mobile and Mobilicity and contemplating participation in the next auction for wireless spectrum - the radio waves needed to operate cellphone networks.
Bell, Telus and Rogers have launched a publicity campaign calling for the Harper government to drop policies that they say give Verizon an unfair advantage over them. The big three carriers say that Verizon would be treated as a new player entering Canada's wireless market and would be able to buy more prime spectrum than they would be allowed. They've also said they are better positioned to serve Canada's rural markets than Verizon.
Industry Minister James Moore has responded with a cross-country tour to explain why the government wants to increase competition in wireless services.
Also on Thursday, a prominent American consumer-rights advocate says the Harper government should be wary about allowing Verizon into the Canadian wireless market.
In an open letter to Prime Minister Stephen Harper published by the Toronto Star, Ralph Nader says Verizon has made extensive use of U.S. tax subsidies even though the wireless communications giant was profitable at the same time.
The letter, published Thursday in the Toronto Star's opinion pages, says that it would be a “bad idea” for Harper's government to allow Verizon to operate in Canada with unique rights to acquire certain wireless spectrum.
Citing a report by the Center for Tax Justice and Good Jobs First, Nader says Verizon received $14 billion in U.S. federal and state income tax subsidies in the 2008-2012 period, even though it earned US$33.4 billion in pre-tax income.
“Question: Why would you allow one of our country's most aggressive tax dodgers, a company with a track record of overtly ripping off our government, into your country,” Nader writes.
“What's bad for the United States will be bad for Canada.”
Nader, who has been an unsuccessful independent candidate for the U.S. presidency in several campaigns, is a frequent commentator on issues that he considers of national or international public interest.
He first rose to prominence in the 1960s by campaigning for improved safety and performance standards in the U.S. auto industry.