Canada's Big Three wireless carriers created a customer frenzy over the weekend as they rolled out deeply discounted plans with large data caps in what experts say is a direct response to the threat posed by Freedom Mobile.
The startup carrier owned by Calgary-based Shaw Communications Inc. has made several moves to be more competitive in recent weeks, including launching "Big Gig" plans with 10 gigabytes of data for $50 a month, directly selling the iPhone to customers with the option of putting $0 down up front and making technical changes to support a wider range of devices on its LTE network.
The moves appear to have spurred the incumbent providers – Rogers Communications Inc., BCE Inc. and Telus Corp. – to offer a limited-time promotion of 10 GB of data for $60 a month just ahead of the Christmas holiday in three of the country's biggest provinces, which happen to be where Freedom Mobile operates.
"It's being driven by Shaw's Big Gig plan and the success Shaw has had on it," Macquarie Capital analyst Greg MacDonald said on Monday. "It's the first time [the incumbents] have ever offered a $6 per GB plan, because their standard plans are more like $20 per GB."
The deals also come as more Canadians are hanging on to older smartphones, creating a bigger market for "bring your own device" plans that don't include an upfront subsidy on an expensive handset and give data-savvy customers more freedom to shop around for deals that let them surf without worries of blowing past a data cap.
And as unlimited data plans become common in the United States, Canadian consumers increasingly complain about not having similar options here, where the big players have instead promoted data management tools. Research from Canada's telecom regulator shows that in 2016, 6 per cent of retail wireless service revenue came from charges for subscribers who exceeded monthly data limits.
"We are estimating that seven million smartphone users exceeded their data plans in the past six months," said Kaan Yigit, president of Solutions Research Group Consultants Inc., noting that is 29 per cent of the total. "That's a big number and it doesn't include the number of people who live off of WiFi with a small plan or don't even bother to add a data plan for fear of extra charges."
Beginning late last week, Rogers and its discount brand Fido began offering BYOD customers in Alberta and British Columbia service plans with 10 gigabytes of data included for just $60 per month, a steep discount over regular prices for that amount of bandwidth.
Telus and Bell soon responded with similar offers from their main brands as well as their own discount labels (Koodo and Virgin Mobile, respectively) and over the weekend the Big Three began expanding the offers to Ontario as well.
Wireless technology website Mobile Syrup tracked the deals as they evolved over the weekend and demand spiked in response, even though the carriers did not launch widespread advertising campaigns. Set to end by Tuesday, the promotions led to long wait times on customer support lines and a stream of comments on message boards and social media. The deals also sparked complaints as existing subscribers tied to two-year contracts voiced frustration at not being able to take advantage of the discounts.
Mr. MacDonald notes that the Big Three have used a similar strategy in the past to respond to pressure in the Quebec market, where regional cable company Quebecor Inc.'s Videotron Ltd. now has a thriving wireless business that undercuts the incumbents' prices.
"They've responded in Quebec in the past," he said, pointing to an example in the back-to-school season in August when the Big Three responded to Videotron with 6-GB promotional plans for $49 per month from their discount brands.
"Then they pull them out. The reason they don't want to leave these plans in the market is that they don't want to transition their entire subscriber base to the lower price per gigabyte. They know this is going to happen over time, but they don't want to do it in short order."
"They don't want to make this permanent, but they do want to make sure they're responding in a quarter where there is an alternative in the market," Mr. MacDonald said.
BCE spokesman Mark Langton said on Monday that the company is "responding in a competitive marketplace," adding, "There is traditionally heightened wireless promotional activity in the busy holiday season and Bell has a number of offers in our stores now." He said the company will "always be competitive in all segments" and pointed to its recent launch of a new wireless brand, Lucky Mobile, which is aimed at the budget-conscious prepaid market.
Rogers spokeswoman Sarah Schmidt similarly pointed to the holiday season and said the company regularly offers regional and limited-time promotions. "We've seen tremendous response from Canadians and thank everyone for their patience and apologize for any wait. These offers expire for new Rogers and new Fido customers today [Monday] ... Because of overwhelming demand and longer wait times we will honour the offers for our existing customers for [Tuesday] only. Our Fido Bring Your Own Phone offer goes until [Tuesday] end of day in Ontario only."
Telus said it expected strong interest in its promotion but that "demand far exceeded our expectations, on one of the busiest weekends of the year." Spokeswoman Sacha Gudmundsson added: "We are very sorry for the longer wait times that customers experienced over the weekend and are grateful for their patience. We are continuing to make real-time adjustments to minimize wait times before these great offers expire at the end of the day [on Tuesday]."
Freedom Mobile's network still lags the Big Three in quality and coverage, and it is a "zone-based" service that is not unlimited if you leave your home network area. But when the company launched its Big Gig plans in October, the carrier's chief operating officer Paul McAleese called it a "total game changer for the Canadian wireless industry."
"Offering our customers access to this much data on our new LTE network resets the marketplace and redefines what Canadians should be paying for data," he said.