Put the Ouija board back in the attic, kids. Globe Tech HQ has the low-down on the future of Canada’s telecom industry
1. Fragmentation of the market
This one’s tricky. Talk of nation-wide carriers – like Rogers, Bell, Telus and Wind (which doesn’t operate in Quebec and hasn’t launched out east yet) – misses a pretty fundamental truth: These companies have regional strengths.
Rogers is really strong in Toronto and Ontario. Telus is stronger out west, especially in Alberta. Montreal-based Bell is up front in Quebec. And so on. With cable companies – such as Calgary-based Shaw, Montreal-based Videotron and Halifax-based EastLink – launching wireless service over the next couple of years only in their respective markets, many expect the industry to fragment further.
Already, Rogers is hinting that it will only launch Chatr, its unlimited talk-and-text discount flanker brand, in certain urban markets where they face new competitors; this means Rogers customers outside of urban centres will have no access to new, lower pricing. And since Shaw and Videotron are likely to have very different pricing schemes (Videotron is expected to undercut Bell’s wireless pricing by upwards of 40 per cent, which is what Videotron did when it launched home phone service), it only makes sense to respond in-region. Why would Bell adjust prices in British Columbia to compete with Videotron? It doesn’t make sense.
So far, newcomers have focused on the Toronto market, which means consumers here have much more choice than those elsewhere. Combine that with a new consumer protection law in Quebec – which limits the amount of termination fees that carriers can charge consumers who break contracts and is likely to result in big carriers making handsets in la belle province more expensive – and you’ve got yourself one finely fragmented market.
2. Wireless substitution
Traditional providers like Bell, Telus and Rogers have yet to slash wireless prices and introduce unlimited plans across the board for one very good reason: If they did, all of their home phone subscribers would cut the cord on their landline and go completely wireless. Think of all the revenue the Big Three would lose if all those people across the country, who still pay for home phone service, cut their service and went completely wireless with a new provider. So they haven’t done it. It’s that simple.
But things are changing. Market newcomers – like Mobilicity, Wind Mobile and Public Mobile – have no such qualms about pricing, since they have no landline customers. This is why their pricing is so low (they also have smaller, less reliable networks, so they have to differentiate on price) and why they’re offering unlimited voice plans that mimic the talk-‘til-you-drop attitude of the landline.
Liza Mendonca, WIND Mobile store manager, speaks with her employees Alex Singh and Lutful Sanju at the WIND Mobile store on Queen Street in Toronto on February 9, 2010. WIND Mobility has grown from one person to 700 employees in a little over a year.
Due in large part to this assault on price norms, wireless substitution – when people cut the cord to go wireless – is bound to increase. In the United States, the current number of wireless-only households is about 23 per cent. In Canada, it’s about 10 per cent. And the U.S. number shot up gradually after a couple of new entrants (MetroPCS and Leap Wireless) launched cheaper unlimited plans, which is where Canada’s new entrants got the idea.
Get ready for some serious cord-cutting over the next year.
3. The decline of voice revenue
I used to hold off talking on my cellphone until after 6 p.m. It would annoy my friends. I wouldn't answer calls from my parents. I would text. I would watch the clock and wait. Anything but talk before my unlimited evenings started.
That’s so yesterday. Now, I have a company phone and can rant until I’m hoarse.
