Telus Corp. is preparing to shut down Public Mobile's wireless network, a move that forces the discount carrier's roughly 280,000 customers to buy new cellphones in order to maintain service.
Although Telus is planning to migrate Public Mobile's customers onto its faster 4G (fourth-generation) national network, its decision is sparking a firestorm of criticism from consumer advocates and is raising the eyebrows of federal officials, including Industry Minister James Moore. That's because Public Mobile largely caters to low-income Canadians who can least afford the cost of purchasing new cellphones.
Since those consumers often opt for ultra-cheap talk-and-text plans, broader questions are being raised about the state of competition in the $20-billion wireless market at a time when the two remaining independent carriers, Mobilicity and Wind Mobile, appear to be on weaker footing.
Telus, which purchasedthe upstart carrier at the end of 2013, will begin the network migration of Public Mobile customers in May, expecting to complete it in August. As a result, the carrier is informing those newly acquired customers that they need to buy new cellphones since their current handsets are not compatible with Telus's network.
"For a large majority of the customers, this is actually an incredibly beneficial move," said Kevin Banderk, general manager of Public Mobile and the head of Telus's Koodo brand. "To move from where they are today and, generally speaking, keep the price points where they are today onto a network that is of the latest and greatest technology – much more reliable, much faster data speeds and national in scope – is actually a good thing. We understand that the transition is a bit tricky and we're doing everything we can to make that as easy as possible."
Telus is offering affected customers "significant discounts" on new cellphones purchased at Public Mobile. They also have the option to bring in their own devices, such as second-hand phones acquired from family or friends, provided they work on the Telus network.
Migrating customers will also receive one month of free service, which is worth between $19 and $60, depending on one's wireless plan. The company is also exploring "different options" for customers in "special circumstances," said Mr. Banderk. He did not provide specifics.
"Public Mobile was in financial distress when we purchased it. They were losing a significant amount of money every month in large part [due] to the technology decisions they had made early on and the network they chose," he added. "So, as part of the plan to sort of rectify this, we are moving customers from that old, very small regional legacy network to our new national 4G network."
Industry Minister James Moore questioned the wisdom of Telus's move.
"Seems like an odd business decision to alienate thousands of Public Mobile users as you absorb Public Mobile itself," Mr. Moore told The Globe and Mail, while on a trade mission in Germany. "Ultimately it's a business decision I'll leave for Telus to explain."
Some Public Mobile customers are lodging grievances with Canada's Commissioner for Complaints for Telecommunications Services, an Ottawa-based ombuds office that resolves complaints about telecom companies. Due to privacy rules, however, Commissioner Howard Maker cannot discuss specific complaints or providers.
"If they incur any costs, it's unfortunate especially since they're cost-conscious customers," said John Lawford, executive director of the Public Interest Advocacy Centre, an Ottawa-based consumer group. "We're concerned about it."
Since technical differences made a network migration a "foreseeable" outcome, the federal Competition Bureau should have required Telus to provide Public Mobile's customers with free cellphones in such a situation, Mr. Lawford said.
For low-income Canadians, the burden of buying new cellphones, even those priced under $50, is substantial, he said. "It is hard on these folks."
The Competition Bureau issued a "no-action letter" on Telus's purchase of Public Mobile in late November. In doing so, however, it said Telus would maintain Public Mobile's low-cost $19 a month "unlimited talk" plan until at least the end of 2014.
"The Bureau conducts its reviews confidentially; therefore I can't comment of the specifics of the discussions that may have occurred with Telus over the course of our review," a spokesperson said in an e-mail.
It added: "As the vast majority of Canadian wireless subscribers are served by three national incumbent providers, the Bureau will continue to closely monitor the evolution of competition in Canada's wireless telecommunications industry, and will take action where appropriate."
In addition to Public Mobile being sold to Telus, another independent carrier, Mobilicity, has been operating under creditor protection since last fall. Wind, meanwhile, dropped out of the recent 700 MHz spectrum auction after its foreign investor, VimpelCom Ltd., yanked financing for more spectrum purchases. Amsterdam-based VimpelCom has since revealed that it wrote off its entire Canadian investment during the fourth quarter of 2013.
Wind Mobile CEO Anthony Lacavera said his company would be offering "promotions" to Public Mobile customers "to ease the pain" of the transition. He also urged the federal government to push ahead with its "competition agenda" for the wireless market by making more spectrum available to startup carriers, such as Wind, and by capping the wholesale rates that small carriers must pay incumbents for domestic roaming.
"Incumbents have shown their true colours," Mr. Lacavera said, adding recent industry developments illustrate "the strength of the oligopoly."