This is a question that I’ve received in my inbox a few times in the last few days. To explain this, let me go into a fair amount of detail.
The Canadian government has been concerned for some time about the high prices that Canadians pay for their telco services. In particular, for mobile phone service as the OECD has highlighted that Canadians pay some of the highest prices for mobile phone service in the world. To try and fix that, the Canadian Government had what is called a spectrum auction in 2008 to encourage new players to enter the market. The net result was the entry of Wind Mobile, Public Mobile, and Mobilicity. However they have not been thus far been able to really affect the market in any appreciable way due to their lack of size (each of these carriers only have a few hundred thousand customers at most) and coverage (these carriers have very limited coverage compared to Bell, Rogers, and Telus who cover almost all of populated Canada). A second spectrum auction has been planned for January 2014. This is where the debate begins.
This spectrum auction is for the 700 MHz wireless band which is prime real estate for any wireless carrier. For the purposes of this auction, this band is divided up into four blocks that are up for sale. Assuming Verizon enters the auction, they could in theory bid on two blocks of this spectrum under the logic that they’re a new entrant. However, Bell, Rogers and Telus are capped at one block each. That means that when the music stops, someone could be without a chair so to speak. And that would likely be Bell, Rogers, or Telus. The big three feel that because Verizon who is orders of magnitude bigger than the big three combined with far deeper pockets than they do, should not be treated as a new entrant into the market. Not to mention that because they have much deeper pockets than any of them, Verizon would win the two blocks easily. Thus the big three have asked for the rules to be changed to accommodate that. They’ve also suggested delaying the auction so that all these issues can be properly sorted.
Another issue is that the big three aren’t allowed to buy Wind Mobile, Public Mobile, and Mobilicity if they wanted to. Example: Telus did try to buy Mobilicity and the deal got promptly shot out of the sky by the Canadian government earlier this year. However Verizon could buy Wind Mobile, Public Mobile, and Mobilicity and nobody would likely look twice. Bell, Rogers, and Telus find that to be unfair.
One thing to keep in mind is that Verizon has not confirmed that it is entering the Canadian mobile phone marketplace. Though they have not exactly gone out of their way to deny it either.
So, do the big three have a point? In my opinion, no. Here’s why I believe that:
- The big three have had ample time to try and create a competitive landscape for mobile phone service in Canada. They haven’t done so as they are perceived by consumers to be more interested in providing sub-standard service and charging as much as the market will bear. Thus it’s not a shock to me that the Canadian government woke up one morning and said that this has to change.
- In terms of the big three wanting to have the ability to buy Wind Mobile, Public Mobile, and Mobilicity if they wanted to, why would any government who recognizes that there’s already a major problem with the competitive landscape in the mobile phone marketplace allow that to happen? The Canadian government limiting what three players who dominate the marketplace can do seems completely reasonable to me. Thus I really do not understand why the big three would think that this is something that would change. Ever.
- Regardless of what the the big three think, Verizon is a new entrant. So letting them bid on two blocks of spectrum seems reasonable to me as that was clearly designed to keep the big three who already dominate the marketplace from dominating any further.
But I believe that the core issue is this: Bell, Rogers and Telus who have had things their way for so long are for the first time faced with the prospect of a real competitor. Someone who can actually compete with them straight up. Someone that they can’t buy or extinguish. Someone who would cut into their massive profits. Someone who will force them to do things they’ve never had to do before: Provide a service at a reasonable price and provide it with good customer service. That is why they are so up in arms about the mere thought that Verizon MIGHT enter Canada. They know that the gravy train would quickly end if that were the case because Canadian mobile phone users would defect to them in huge numbers unless they actually started competing straight up. Which for them would be a bad thing.
If you’ve been having it your way for years and you saw this coming, you’d freak out too.
Bell, Rogers, and Telus can complain about this all they want. But Canadians want more affordable mobile phone service with better customer service. Thus if the big three are looking for a sympathetic ear from the Canadian public, they’re not going to find it. So if I could give advice to the big three it would be as follows:
- Bring your pricing in line with the rest of the planet. Because at this point it doesn’t matter what the OECD says or how the numbers are sliced or diced, Canadians perceive that they pay too much for mobile phone service relative to the rest of the planet, and perception is reality. Thus they’ve already lost that argument and they need to address it by addressing what Canadians pay for mobile phone service.
- Improve customer service has to be next on the list because Canadians hate dealing with Bell, Rogers, or Telus. To be fair, I know they are trying to do so, but they need to try harder and change quicker.
- Next on the list is to actually compete with each other. I say that because the perception is that the big three walk in lockstep with each other. That creates the perception that there’s an oligopoly in the mobile phone market. Again, to most Canadians, perception is reality. So they need to change that.
- Go into the spectrum auction with the rules as is. Because they’re not making friends and influencing people by complaining about the rules as they presently stand. Thus they should just drop it and move on.
- Assume Verizon is going to come in and do their best to beat them. I say that because maybe Verizon will come in and not set the world on fire. Perhaps the big three can compete against them. If they did it straight up without complaining about how unfair the world is and how big Verizon is, it would earn them a lot of goodwill.
In other words, they should adapt to the situation rather than complain about it. The big three have an opportunity to do just that. I say they should seize that opportunity before the opportunity is gone.
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This entry was posted on July 26, 2013 at 11:20 am and is filed under Commentary with tags Bell, Canada, Rogers, Telus. You can follow any responses to this entry through the RSS 2.0 feed.
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Hey IT Nerd! Why Are Bell, Rogers, & Telus So Upset About Verizon And Do They Have A Point?
This is a question that I’ve received in my inbox a few times in the last few days. To explain this, let me go into a fair amount of detail.
The Canadian government has been concerned for some time about the high prices that Canadians pay for their telco services. In particular, for mobile phone service as the OECD has highlighted that Canadians pay some of the highest prices for mobile phone service in the world. To try and fix that, the Canadian Government had what is called a spectrum auction in 2008 to encourage new players to enter the market. The net result was the entry of Wind Mobile, Public Mobile, and Mobilicity. However they have not been thus far been able to really affect the market in any appreciable way due to their lack of size (each of these carriers only have a few hundred thousand customers at most) and coverage (these carriers have very limited coverage compared to Bell, Rogers, and Telus who cover almost all of populated Canada). A second spectrum auction has been planned for January 2014. This is where the debate begins.
This spectrum auction is for the 700 MHz wireless band which is prime real estate for any wireless carrier. For the purposes of this auction, this band is divided up into four blocks that are up for sale. Assuming Verizon enters the auction, they could in theory bid on two blocks of this spectrum under the logic that they’re a new entrant. However, Bell, Rogers and Telus are capped at one block each. That means that when the music stops, someone could be without a chair so to speak. And that would likely be Bell, Rogers, or Telus. The big three feel that because Verizon who is orders of magnitude bigger than the big three combined with far deeper pockets than they do, should not be treated as a new entrant into the market. Not to mention that because they have much deeper pockets than any of them, Verizon would win the two blocks easily. Thus the big three have asked for the rules to be changed to accommodate that. They’ve also suggested delaying the auction so that all these issues can be properly sorted.
Another issue is that the big three aren’t allowed to buy Wind Mobile, Public Mobile, and Mobilicity if they wanted to. Example: Telus did try to buy Mobilicity and the deal got promptly shot out of the sky by the Canadian government earlier this year. However Verizon could buy Wind Mobile, Public Mobile, and Mobilicity and nobody would likely look twice. Bell, Rogers, and Telus find that to be unfair.
One thing to keep in mind is that Verizon has not confirmed that it is entering the Canadian mobile phone marketplace. Though they have not exactly gone out of their way to deny it either.
So, do the big three have a point? In my opinion, no. Here’s why I believe that:
But I believe that the core issue is this: Bell, Rogers and Telus who have had things their way for so long are for the first time faced with the prospect of a real competitor. Someone who can actually compete with them straight up. Someone that they can’t buy or extinguish. Someone who would cut into their massive profits. Someone who will force them to do things they’ve never had to do before: Provide a service at a reasonable price and provide it with good customer service. That is why they are so up in arms about the mere thought that Verizon MIGHT enter Canada. They know that the gravy train would quickly end if that were the case because Canadian mobile phone users would defect to them in huge numbers unless they actually started competing straight up. Which for them would be a bad thing.
If you’ve been having it your way for years and you saw this coming, you’d freak out too.
Bell, Rogers, and Telus can complain about this all they want. But Canadians want more affordable mobile phone service with better customer service. Thus if the big three are looking for a sympathetic ear from the Canadian public, they’re not going to find it. So if I could give advice to the big three it would be as follows:
In other words, they should adapt to the situation rather than complain about it. The big three have an opportunity to do just that. I say they should seize that opportunity before the opportunity is gone.
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This entry was posted on July 26, 2013 at 11:20 am and is filed under Commentary with tags Bell, Canada, Rogers, Telus. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.