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(Photograph by Lindsay Page for Report on Business Magazine)
(Photograph by Lindsay Page for Report on Business Magazine)

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Why the wireless war is good for you Add to ...

"Welcome...to the new age of Canadian wireless."

With those dramatic words-as though we were witnessing man's first steps on the moon-Dave Dobbin, chief executive officer of Mobilicity, officially opened his new wireless provider's flagship retail store. It was an odd place for such a grand proclamation: a converted Mr. Sub restaurant just off Highway 401, in the suburban reaches of Scarborough, Ontario.

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But this is the new normal for the $16-billion Canadian wireless sector. Ambitious new mobile carriers are popping up in any hole-in-the-wall retail space they can find-abandoned fast-food outlets, corner stores, laundromats. It's already happened in the Toronto area, and is now unfolding in major cities across the country.

Wind Mobile, backed by Egyptian giant Orascom Telecom, launched its service in Toronto and Calgary last December, and has been branching out to other large cities over the past few months. Mobilicity (formerly known as DAVE Wireless) followed in early May with its Toronto launch; it too will soon spread to other cities. Then came Public Mobile, which lists the Ontario Municipal Employees Retirement System, Peter Munk and U.S. private equity firms among its investors.

Mobilicity chairman John Bitove-best known as the head of Priszm LP, which owns more than 400 KFC, Taco Bell and Pizza Hut restaurants, and as the guy who launched XM Canada satellite radio-is expecting to do a brisk business slinging smart phones from Mobilicity's new store. It is the first of 37 across Toronto, all painted in the company's pink and green motif. "My real estate guy found it for me," Bitove says, as his guests dive into buckets of KFC. "It's perfect." Over Bitove's shoulder is a boarded-up drive-through window. Even that has marketing potential for a company desperate to make a splash. "Drive-thru bill payments!" Bitove exclaims. "We'll be the first in Canada."

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Presumably he's joking, but maybe not. The new crop of wireless carriers trying to chip away at Canada's mobile oligopoly-ruled since the dawn of cellphones themselves by Bell, Rogers and, later, Telus-are doing almost anything they can to get noticed. There are gimmicks galore: unlimited texting plans, cut-rate international long distance, no contracts, no credit checks. All of these offers are aimed squarely at wireless customers in search of discounted monthly plans, and new Canadians who might not yet own a mobile phone. And if the upstarts can snatch frustrated customers away from the Big Three, all the better.

The incumbents have had three years to prepare for this, ever since Industry Canada announced in 2007 that it would be auctioning off a new block of wireless spectrum licences. The message was clear: Three major mobile phone providers-which dominate 96 per cent of the market-does not make for vibrant competition. So keen was Ottawa to increase competition that it overruled the CRTC's interpretation of Canadian foreign ownership limits, allowing Wind Mobile chairman Anthony Lacavera to tap the deep pockets of Orascom.

To compete with the new cut-rate players, the Big Three have dressed up their own discount brands-Fido (which is owned by Rogers), Koodo (a newish offering from Telus) and Solo (Bell)-to look like fresh players themselves, with splashy ad campaigns and cheaper plans. The rates have been so low, in fact, that Lacavera accuses the so-called flanker brands of intentionally underpricing the market to grind down the upstarts. "That's not real pricing," he says. "That's not sustainable."

"If you're an incumbent," Lacavera adds, "you're watching the new guys duke it out with no market share today, and you're saying: 'Beautiful-let them fight each other. I think the incumbents love this."

But this is only the undercard. For Bell, Telus and Rogers, the main event is the imminent launch of wireless services operated by Vidéotron, the massive cable arm of Quebecor Media, in Quebec, and, in late 2011, Shaw Communications in the West. Those heavyweights are far more likely to make off with large numbers of customers than Mobilicity, Public or Wind, thanks to a combination of size, cash, access to video content and, most importantly, existing customers who subscribe to their cable and Internet services.

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