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TextNow Wants to Fix Canada’s Broken Wireless Industry – But the Big Three Won’t Let Them

TextNow is a Canadian company, but its low-cost cellphone plans are only available in the United States.

That’s not because TextNow doesn’t want to offer them here, but because it can’t.

“We have a team of almost 80 people here in Waterloo, Ontario,” says Derek Ting, TextNow’s CEO. “One of the biggest conversations, that comes up every day, is ‘when are we going to bring our service to Canada so we all can use it’ and, so far, it has not been encouraging news.”

TextNow is a mobile virtual network operator. It buys access to wireless networks at wholesale prices, and then re-sells that access to its customers. In the U.S., TextNow buys access from Sprint, the country’s fourth-largest wireless carrier, but in Canada, it can’t find a wireless carrier willing to sell it access.

“We’ve kind of hit a brick wall with that,” says Ting. “We tried diligently. We went through a 12-month process with Rogers and at the end they said no.”

Ting says he thinks that Canada’s big three wireless carriers are “kind of in a pact to keep the market sealed from guys like us.”

It’s a different story in the U.S., where every major cell phone provider sells mobile network access on the wholesale market.

“The reason they do it is because of the competition, they truly compete with each other. They’re not in some pact to close the market off,” Ting says.

And that means incumbents win and consumers lose, he says.

“The Canadian consumer is the one who gets screwed in the end,” Ting says.

TextNow uses software to switch everything a phone sends and receives – including calls and texts – to WiFi whenever it’s available, allowing it to cut down on the amount of network time it uses and charge lower prices than incumbent providers.

While Ting says he’d like there to a market-based solution to the problem, he thinks any changes in the market will have to come from the federal government.

“Other countries either have perfect competition, like in the U.S., or when they don’t have perfect competition, the regulators mandate some sort of allocation of spectrum to smaller players,” he says. “We don’t, and as a result, we have the most unaffordable market.”

There is a precedent in Canada, incumbent cable and phone companies are already required to sell wholesale access to their wired networks.

But last month, the CRTC, rejected an appeal by a group of MNVOs to expand that regulation to cover wireless networks on the grounds that it would disincentivize incumbent carriers from making investments in their networks.

Ting doesn’t buy it, he says similar regulations have been implemented in countries like Germany with no impact on network quality.

“Long-term, the ideal situation, is the CRTC stops siding with Telus, Bell and Rogers and starts thinking about regulation that benefits Canadians as a whole, not just the interests of the big three,” he says.

That change, though, will likely have to come from politicians, instead of regulators and there’s no sign that will be coming any time soon.