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Report On Business Beyond price: Wireless carriers competing on service, network quality

A woman uses a mobile device while walking past a Telus store in Ottawa February 19, 2014.

Chris Wattie/Reuters

Canada's biggest cellphone companies say they compete vigorously for your business, but success in that game often has little to do with offering the best price.

Industry experts say the country's three national carriers routinely match one another's prices in the market and strive to stand out based on other elements such as customer service and claims about network quality.

The most recent quarterly results show this strategy is working for customer-service obsessed Telus Corp. which attracted 113,000 net new postpaid subscribers in the period, it said Thursday.

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BCE Inc., which also reported third-quarter earnings Thursday, was not far behind, with 92,000 new contract customers during the period, while Rogers Communications Inc. said two weeks ago it added just 17,000 in the quarter.

During an industry conference in Toronto on Wednesday, Leonard Katz, a former acting chair and commissioner of the Canadian Radio-television and Telecommunications Commission, said he sees little difference on price in the wireless sector, with the major carriers marketing their services based more on brand.

Michael Geist, a law professor at the University of Ottawa, later debated the point with Jonathan Daniels, vice-president of regulatory law at BCE. (BCE owns 15 per cent of The Globe and Mail.)

"Whether it's perception or reality, this is a marketplace that offers very little choice, or at least very little differentiation other than on things like customer service. Some may well choose on that basis, but I do think … consumers would like to see more choice in terms of price," Mr. Geist said.

Mr. Daniels argued that there are cheaper alternatives such as Wind Mobile and Mobilicity (which operate in Ontario, British Columbia and Alberta) but said consumers are attracted to better networks. "There are price options out there, there are alternatives, and people are choosing quality over the lowest price."

Mobilicity is under creditor protection and has less than 160,000 customers and while the recently re-financed Wind is closing in on 800,000 subscribers, the new entrants have not posed a major threat to the Big Three incumbents' stronghold.

Telus CEO Joe Natale insists he faces a "ruthless battle for every customer," and said the company regularly reviews its competitors' promotions and decides how to respond.

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"The view that we have at Telus is that the most important strategic advantage is putting customers first," he said in an interview Thursday, referencing the company's move to make customer service a cornerstone of its corporate culture in 2008.

"Price alone will not get you success in the marketplace. Price is a fleeting advantage," Mr. Natale said. "We see that in so many other consumer categories. You may jump to a particular product because of price, but if the experience is horrible, if the interaction is lacklustre, you won't stick around for long."

BCE and Telus, both of which now have close to eight-million cellular customers, have been making steady gains on Canada's biggest wireless carrier Rogers, which has 9.5-million customers. Rogers CEO Guy Laurence has identified customer service as a problem the company must fix and this spring he created a business unit solely focused on subscriber experience.

The Toronto-based company previously tried to stave off market share losses through offers that undercut its competitors but it pulled back on that promotional activity late last year and now says it is focused on winning high-value customers.

"When that happened, the other two incumbents didn't try to take [Rogers'] place by being on the aggressive side," said Maher Yaghi, telecom analyst with Desjardins Capital Markets. "In general, they don't try to compete on price per se, because they all understand that wireless right now is the driver of profit for the sector."

He said there is greater competition on price on the "wireline" side of the business, which includes Internet and television customers. "But on wireless, it seems like they can try to win market share based on the product itself, the image, network coverage, customer service, trying to protect their own clients from going somewhere else – but not on price."

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The strategy does vary by province, Mr. Yaghi said, pointing to Quebec where Vidéotron Ltd., unlike other new entrants Wind and Mobilicity, recently launched a fourth-generation network (it has a network sharing deal with Rogers)and offers a line of advanced handsets including the iPhone. Mr. Yaghi noted that to compete with Vidéotron's lower prices, the three national players offer prices about $10 to $15 less than they do in Ontario, for example.

Prices also tend to be lower in Manitoba and Saskatchewan, where long-time telecom players MTS Inc. and SaskTel offer an alternative to the Big Three.

Quebecor Inc.-owned Vidéotron, which now has 589,000 wireless customers, added a total of 39,000 new subscribers in the third quarter, it said Thursday (that figure includes both postpaid and prepaid clients).

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