In the first part of my series about the mobile industry in Canada, I shed some light on where things lie right now in terms of our networks, our rate plans and most importantly, our carriers. A great deal of the article was pertaining to Fido Solutions, a pioneer carrier of sorts that in the end couldn’t compete with the 3 bigger carriers that dominate the Canadian market now. Since Fido was acquired by Rogers in 2004, there hasn’t been anything resembling competition until very recently.

In November 2009, Bell & Telus launched an HSPA network so that they could hop on the iPhone bandwagon with Rogers as well as rake in some of the ever so lucrative roaming charges from all of the people who would flock to Vancouver in a few months for the 2010 Winter Olympics. A month later saw the launch of Wind Mobile, the first new carrier to launch following the wireless spectrum auction held in Spring 2008. Due to the controversy surrounding their launch (which we will get to shortly), Wind Mobile launched in the Toronto area at first, followed by the Calgary area 3 days later. Wind Mobile was followed by Public Mobile, a simple CDMA-based carrier that offers unlimited talk & text but no data, and Mobilicity, which is pretty much a carbon copy of Wind Mobile right down to the devices. Finally, Videotron just launched their wireless service in Quebec (and Quebec only as this is the only province where they purchased spectrum) but they’ve taken a strikingly different approach than the other newcomers. Now while I’ll be the first to agree with anyone who says that wireless customers in this country have been starved for new carriers to disrupt the status quo that is the “Big 3”, I’ll tell that same person why these new carriers are not the white knights that we’ve been waiting for and at 2 of them (at least) are not long for this world so let’s get into it.

Starting up a wireless carrier from scratch is certainly no easy task but it seems that in Canada it is so much harder. Although they had gotten the A-OK from Industry Canada, Globalive (Wind Mobile’s parent company) still faced a ruling by the Canadian Radio-television and Telecommunications Commission or the CRTC (also known as the ruling body responsible for keeping Canadian TV and Radio generally awful). In October 2009, the CRTC ruled that Globalive’s ownership structure did not meet Canadian standards and they would not be allowed to launch Wind Mobile. The specific issue which they found fault with was Globalive’s primary source of funding, Egyptian telecom company Orascom and their level of ownership and influence that they hold over Globalive and Wind Mobile (a brand name which Orascom owns as well). According to the CRTC, a Canadian carrier is eligible to operate in this country as long as it is a Canadian-owned and controlled corporation. To meet these restrictions, at least 80% of the members of the board of directors must be Canadian, at least 80% of the voting shares must be owned by Canadians, and the company can’t be indirectly controlled by non-Canadians through other methods such as holding companies. No wonder there hadn’t been any new carriers in Canada in over 10 years huh? The CRTC’s ruling created a short period of confusion for consumers, Globalive, Wind Mobile employees alike (Wind Mobile stores & mall kiosks were already under construction and CSRs had already been hired and trained). After a couple of months in limbo (Literally. Wind Mobile seems to have forgot about their ‘Power of Conversation’ tagline and didn’t communicate much except for a blog post expressing their disappointment), the federal government unprecedentedly overturned the CRTC’s decision and Wind Mobile was given a green light to launch their network.

Quite the hurdles to clear just to open up shop but even before this circus act with the government (y’know…jumping through hoops), Wind Mobile (along with Mobilicity and Public Mobile) were well on their way to tripping themselves up. Let’s flashback to the wireless spectrum auction for a moment, shall we? When all was said and done, the 3 incumbent carriers purchased most of the available spectrum for the cool sum of $2.62 billion. This was anticipated well in advance and 40% of the wireless licenses available were reserved to “new entrants” to the cellphone market, which Industry Canada defined as any company that earned less than 10% of the nation’s total cellphone revenue. This 40% ended up being split up among SEVEN different companies for a total of $1.55 billion and raised my first major problem with how new competition was introduced to our country. In a country that was home to 4 national carriers (although Microcell was owned by Rogers at this point, they were and still are, required to operate as separate entities), a 3 national MVNOs (Bell was partnered with TWO OF THEM) and a handful of regional carriers, the last thing we needed was multiple new carriers. All we asked for was something to happen that would shake up the scene a bit because up to now, our industry is still dominated by “follow fashion monkeys”. Not all of these auction winners were going to launch new carriers mind you, some of them already operated regional carriers/MVNOs and in the case of one winner, we’re still not entirely sure why they purchased any spectrum in the first place.

My problem with this is this: Going into the auction, all of the consortiums hoping to buy enough spectrum and all of the regional carriers trying to go national knew that only 40% of the available licenses were guaranteed to be available for them while the other 60% was fair game to anyone. They also knew that Rogers, Bell and Telus had very deep pockets and could easily outbid them on any spectrum outside of their reserved 40%. With knowledge of these things, I don’t quite understand why the three biggest spenders among the newcomers – Globalive ($442 million on licenses across the country), Data & Audio-Visual Enterprises ($243 million in Ontario, Vancouver, Edmonton, Calgary & Victoria) and Quebecor ($555 million in Quebec only) – didn’t pool their money and create a carrier from coast to coast. You see because one of the major disadvantages facing Wind Mobile, Mobilicity and Videotron’s recently launched HSPA network is that they have all limited their own reach (Videotron only operates in the province of Quebec while Wind & Mobilicity only have presence in 5 or 6 major urban centres across the country) and in the case of Wind and Mobilicity, they suffer from small footprints and unreliable networks in the few parts of the country that they offer service due to their infancy but also because of their lack of resources. Had they joined forces, they would have spent significantly less for their wireless licenses as they no long would have been bidding against each other, they would have owned enough licenses to create a true national wireless carrier instead of regional coverage across the nation.

Wind Mobile went from limbo to launch in less than a week and we soon learned of the phones and plans that they were prepared to offer. Besides an unlimited data plan (and by unlimited, they mean if you surpass 5GB in a single month, they’ll throttle your speeds but it’s better than anything offered by the other carriers) for $35/month there was nothing impressive. There were only 3 voice plans offered, costing $15, $35 and $45/month and the plans including 100 minutes, unlimited province-wide calling and unlimited nationwide calling, along with a couple of other extras like text message bundles, caller ID and voicemail. However, you had to be within what Wind calls their ‘Home Zone’ to use your phone without incurring extra charges (the existing carriers had to provide the newcomers with affordable roaming agreements so when you find yourself in a location where Wind does not have coverage, your device would switch over to Rogers’ EDGE network and roam) and to call Wind’s footprint small would be an understatement and because of the immaturity of their network, to call their coverage spotty would be a compliment. For example, according to the coverage map above, this writer lives within the ‘WIND Zone’ but bring a Wind device into my house and it will spend more time with ‘WIND AWAY’ on the screen than ‘WIND HOME’ and that’s only if it’s getting signal at all (the devices don’t handle the handoffs very well). Mobilicity suffers from these same issues even though they launched over half a year after Wind with an even smaller footprint, clearly not learning from their competitors mistakes. Wind promised to do away with confusing wireless plans but they simply replaced them with confusing service.

The other main advantage that the incumbent carriers have is the fact that all 3 of them are able to offer their customers bundles. All of the landline telephone lines in the country are owned by Bell except in the West where Telus rules the land and Rogers just entered the fray by offering their own VoIP home phone service, Rogers also owns the majority of the cable that provides television to most of the homes in the country and Bell also a monopoly on pretty much the only satellite TV that Canadians are offered, all three companies offer broadband internet service and most importantly, all three offer their wireless subscribers a discount on their wireless service if they also subscribe to one of their other services. There are countless numbers of Canadians who are customers of a particular carrier simple because of this discount. Until Globalive buys Toronto Hydro or something, they have nothing to answer this. 5-15% seems like a miniscule amount of money saved but a discount is a discount is a discount. Even if this discount is a miniscule amount (which for some customers it is considering what they spend on their cellphone, home phone, internet and TV), these companies put just the right amount of spin on the offer that makes people think that they’re saving heaps of money by consolidating all of their services with a single entity (these companies also charge outrageous prices for TV, home phone and internet as well but that’s a whole other series of articles). The new carriers won’t be able to touch an overwhelming majority of these customers and it leaves them at a severe disadvantage when trying to compete.

These new carriers set out to provide customers with new options and to strike terror into the hearts of the Big 3 but they certainly went about it all wrong. The whole part around calling zones couldn’t have been avoided (unless they had followed my earlier suggestion and worked together) but that doesn’t mean that the rest of their moves have to be so misdirected. Wind came out swinging and trumped up the fact that don’t offer contracts to tie up customers for years but unfortunately, this also means that they don’t offer subsidies on devices so you were left with 2 choices: Pick up a feature phone for around $100 or drop $450 on a Blackberry Bold 9700 which is the closest thing to a high end device as you could get at launch (and still was until the Motorola XT720 was released a week ago). The logic being, consumers don’t mind paying more for their hardware because they hate contracts that much. Now while that strategy may work just fine in Europe and Asia, things are quite different on this side of the pond. As shown with the Google Nexus One and Nokia’s continued struggle to sell devices unsubsidized through their website, people in the US and Canada are not willing to pay upwards of $400 for a cell phone no matter how good it is or how it’s marketed. Take a look at when new devices are announced in the US, ever noticed that you have to go looking for the ‘No Commitment’ price of the device? All that is ever advertised is the price on a 2 year agreement and whether that price is before or after rebate. This is because the carriers know that there isn’t a lineup around the block of people ready to plunk down $500 for an unlocked Blackberry Torch 9800. Let’s be clear, there is nothing wrong with cellphone contracts, there is only a problem with what Rogers, Telus and Bell have done to cellphone contracts.

“Robellus” have priced all of their devices in a way that almost force you into signing a 3 year agreement unless you want to come away feeling like you wasted hundreds of dollars on a device that you could have had for less than $100, if not free. Let me give you an example of this if you can forget for a moment that 3 years is ENTIRELY too long for a cellphone contract, the just released Blackberry Torch costs $199.99 on select 3 year plans (ie. voice & data plans) from Rogers Wireless. The price jumps to $499.99 on a 2 year agreement and $559.99 on 1 year contract, while the no commitment price of the device is $609.99. Simply put, this is ludicrous. If I am agreeing to pay you a minimum amount (the cheapest possible “select” plan a customer can select to get a subsidy on the Torch is $45/month) for a year, I deserve more than a $50 discount on a device. Furthermore, if I sign a contract that says I’m paying that amount over 3 years, I am definitely entitled to more than $410 off. If the new carriers really wanted to draw people away from the incumbents, they would have offered fair pricing on 1- and 2-year terms and as a real kick in the sprouts, offered customers who signed 3-year contracts any device from their lineup for free, they could even make it only applicable to customers who agree to “select 3-year plans” and still clean up. Right now, Wind Mobile and Mobilicity are nothing more than glorified prepaid carriers whose primary customers are broke college students and people with bad credit (before your panties get in a bunch, I said the primary customers, not all of the customers). They could make a significant mark by being the first North American carrier to take a very non-North American stance. Head overseas and you’ll see that even the newest high-end devices are available for free from carriers such as Vodafone as long as the customer’s rate plan is equal or greater than a certain amount each month and the only reason this hasn’t been tried in North America is because the carriers know they don’t have to but disrupt the status quo and they’ll follow suit. Instead of creating Chat-r Wireless as a carbon copy of Wind Mobile and Mobilicity (limited calling zones and everything), Rogers would have instead started offering all of their devices for free on a 3-year contract with the exception of the iPhone. Telus & Bell would follow suit and then there would truly be competition in the Canadian market.

At this rate, Wind and Mobilicity will end up cannibalizing each other and since Wind had the head start, it will hold on a little longer. If either of these carriers want to survive in this market that is already home to no less than a dozen different carriers and MVNOs they need to change their gameplan. Videotron recently launched their own wireless service in Quebec and they seem to understand what it takes to compete. Like Wind and Mobilicity, Videotron operates on an AWS network but went out and made sure they offered a wider range of handsets including the Google Nexus One, any Android fans’ wet dream, and they also were smart enough to realize that if they were going to make any kind of impact, they would have to offer subsidies on hardware. Unfortunately, Videotron is limited just to the province of Quebec so they aren’t faced with the same challenges as the other carriers but they at least got off to a good start on the right foot. We’re definitely going to see some contraction in the Canadian market over the next year or two, like I said we have at least 12 carriers and MVNOs, and some of these new carriers may be the first to go. Public Mobile certainly will not survive as they are a talk and text-only carrier in an era when everyone is clamouring for cheaper data rates, not more daytime minutes. Wind Mobile rode the wave of hype that comes when you launch a new wireless carrier in Canada and quickly snatched up over 100,000 subscribers, that alone will keep them alive for at least 3 or 4 years but Mobilicity didn’t offer customers anything different except more confusion and will probably see themselves swallowed up by Globalive before the end of 2013 then we’ll be back to where we started…3 big carriers and no real competition.

Kyron John has written 13 articles for The Mobile Fanatics.

Your favorite blogger's favorite blogger coming at you live from Toronto, Canada. One of the original BMEs and a cell phone fanatic. Find Kyron on Twitter @EverythingBlaxx. Email him at kyron.john@themobilefanatics.com.

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