The price of entry is still steep – it takes hundreds of millions, even billions, to buy wireless spectrum, build towers and lease retail space – but the conditions are no longer as favourable. When the new companies launched in late 2009 and early 2010, about 70 per cent of Canadians were estimated to have cellphones. But in urban areas, where new wireless competitors focused their efforts to gain scale, that number was likely around 85 per cent or higher, especially in major cities such as Toronto, where it is likely closer to 95 per cent.
Michael Hennessy, senior vice-president for government and regulatory affairs at Telus, says new wireless companies were forced to attack on price because they overestimated the number of Canadians without mobile phones.
“It was the belief that things were worse than they were, leading to an assumption that there was low hanging fruit that really wasn’t there,” Mr. Hennessy says. “The only thing left they had to differentiate on was price. And that just puts you into a spiral of a startup company, where you’re always trying to rely on price to grow market share in order to ultimately flip or consolidate.”
For Anthony Lacavera, chairman of Globalive Wireless Management Corp., which operates Wind Mobile, the story of facing new entrants is not so simple.
“The government doesn’t have policies in place, or teeth to enforce policies that are in place, to make sure we are able to compete, and it is on every front,” Mr. Lacavera says. “We’ve faced unprecedented legal challenges, we’ve faced unprecedented regulatory challenges.”
In 2009, the Canadian Radio-television and Telecommunications Commission ruled that Globalive had too much foreign control, and violated ownership laws. The Harper cabinet overruled that, allowing the company to begin service, but the issue is now before the Supreme Court, which has yet to decide whether it will hear the case.
But that has hardly been the only hurdle. While the federal government has forced incumbents to share their towers with new entrants and allow the upstarts’ customers to roam on their larger networks, those policies have failed, Mr. Lacavera says.
The Big Three drag out cellular site-sharing feasibility studies, he and others claim, while filling up towers with non-functional equipment. Executives at the new competitors also accuse incumbents of enforcing a roaming policy called a “hard handoff.” It means that when a customer of a new entrant roams onto the network of one of the big players, the call is dropped.
Some of the incumbents have also reacted aggressively in their marketing to the new competitors. Rogers launched a new wireless brand, Chatr, with a pricing structure practically identical to Wind’s. (Such smaller brands owned by bigger companies are known as “flanker brands.”)
“There are, I would say, dubious competitive actions taken by the incumbents, whether it is the launching of flanker brands that directly mirror the offerings of the new entrants – and they offer those plans probably at a loss,” says Stewart Lyons, president and chief operating officer of Mobilicity. “Or their actions with retailers, where they buy shelf space away from retailers to keep us out. Or they don’t share towers or they mess around with roaming.”
Ken Engelhart, senior vice-president of regulatory affairs at Rogers, says any suggestions that Rogers does not share its towers is categorically false.
“To say that we’re not offering them towers is very, very irritating. We’re offering them lots of towers,” he says. “In many cases, they request a tower, we offer them the tower, and then they cancel their request, which is also very irritating. And under Industry Canada rules, we’re not allowed to charge them for all that work.”
As to mandated seamless roaming, Mr. Engelhart says it does not exist in any country. “It is just simply not done.”
While there is agreement among new entrants that Canada needs a fourth national carrier to ensure sustainable competition, the path is unclear.
There is frequent speculation that Globalive and Mobilicity will be the first to merge, but perhaps not until there is more certainty about Ottawa’s auction policy and changes to foreign investment rules. Current law restricts direct and indirect foreign investment in telecom companies to a combined total of 46.7 per cent.
Among its options, the Conservative government is considering whether to allow full foreign ownership of telecom firms with a market share of 10 per cent or less. That would give providers like Wind and Mobilicity more options for raising the money they need to build their networks and weather the early years of operating losses. Without some sort of regulatory change, the past two years will amount to a “blip” where wireless prices came down temporarily before competition fizzled, says Mr. Krstajic of Public Mobile.