Canadian telecom giants are feeling the heat like never before.
A titanic struggle to divvy the spoils of the nation's wireless riches has begun, pitting an increasingly savvy and demanding customer against finely tuned telecom incumbents.
Customers, showing an almost insatiable appetite for all things wireless, are adopting the technology in all its forms. They're also quickly taking for granted that instantaneous voice and data communications should be the norm.
At the same time, phone giants are working with device manufacturers and software developers to raise wireless communications to a new level with smart phones and speedier networks.
Round 1 between the two forces began this week, as Rogers Communications Inc. got blindsided by customer wrath and backpedalled on its pricing for the iPhone launch. The government pounced on Bell Canada and Telus Corp. for levying new text messaging charges, and the industry kept bidding up the prices of new wireless licences under auction — a sale that promises to inject fresh competition into the telecom industry.
Apple Inc.'s iPhone, which Rogers debuted Friday, is more than a sleek, fashionable device. It showcases a new category of handsets now available on each of the carriers' networks. These smart phones tap an enhanced level of wireless technology, sometimes called 3G for third generation, and can deliver Web pages, multimedia and e-mail at speeds close to home broadband rates.
As new capabilities blossom, three incumbents remain in control of the national wireless networks and consume the lion's share of profits from the $12.7-billion industry, awash in new spending.
Last year, 1.6 million subscribers joined the wireless ranks, bringing the total number of customers in Canada to 20.1 million and making wireless — untethered from the regulations that defined the previous generation of phone services — one of the economy's fastest growing segments.
"It's very competitive and every one of us moves pretty quickly, and when we think we have an advantage we will try to utilize it to attract as many clients as we can in the market," said George Cope on the first day of his job as president and chief executive officer of BCE Inc. and Bell Canada.
Bell wants to steal some of Rogers' thunder from the iPhone by introducing next month a similar-looking smart phone, Samsung's Instinct, at a lower price.
"There is a greater awareness on the part of the consumer about what they should be paying for telecom service," says Niraj Dawar, a marketing communications professor at the Richard Ivey School of Business.
There is some irony to the fact that as the phone companies roll out new services that allow people to communicate instantly in new ways, their customers are using the technology to express their criticism of how those services are offered and priced.
In the case of Rogers this week, the company bowed to market pressure and slashed its data fees for the iPhone two days ahead of the launch, after receiving a deluge of calls and watching an online petition against its pricing add more than 60,000 names.
"I hesitate to say there is a revolution under way," says Michael Janigan, executive director and general counsel for the Public Interest Advocacy Centre. "But I am intrigued by the depth of the public response. There is new resonance, and there is a degree of latent animosity to the whole of the wireless industry."
In most industries with high fixed costs, such as airlines, competition tends to produce dramatic price wars because the marginal cost of adding a customer is tiny and the revenue generated flows straight to the bottom line.
Canada's telecom carriers run high fixed-cost operations but don't follow that model, Mr. Dawar says. "Price is not where they want to compete."
Instead, the phone companies try to differentiate their products from each other, with things such as unified billing, bundled services and trendy handsets like the iPhone.
They also have a habit of making public statements that signal to one another that they are not about to engage in price wars, a process called "price signalling," Mr. Dawar says. That's most likely why when one carrier moves from per-second charges to per-minute charges, the others shortly follow suit, he said.
