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Is a wireless price war coming to Toronto?

Posted by Erin Bury / July 23, 2010

wireless torontoIt seems like ever since the wireless license auction in 2008 new carriers have been popping up left, right and centre. First it was WIND Mobile in December, backed by powerhouse entrepreneur Anthony Lacavera. Then it was Public Mobile, with their cheeky commercials highlighting everyday Joes and their wireless needs. Recently we saw DAVE Wireless launch their consumer brand name Mobilicity, backed by John Bitove.

So many companies, so many unlimited plans - in fact these simple unlimited talk-and-text plans are the cornerstone of their offerings, all roughly targeting the same demographic: the working class talk-and-texters who don't need add-ons like data. They're also targeting the people frustrated by the contracts and arbitrary charges involved with the Big Three - they don't require contracts and promise no hidden fees.

At first it seemed like consumers were jumping on the 'wireless warriors' bandwagon - people were happy to finally break free from the incumbents and support the little guy in this David vs. Goliath battle. Then we started to hear grumblings about the coverage areas. And people complained that even the lowest priced packages weren't comparable to similar plans in the United States. And then the media began to question how successful these companies actually were at attracting customers, and how viable they would be down the line (WIND just took on a $700 million loan to expand its service nationwide).

So it was like the icing on a bittersweet cake when Rogers announced on June 30 that they would be launching a new unlimited talk and text brand called Chatr, apparently in a move to compete with brands like WIND Mobile. They already operate so-called discount brand Fido but Chatr will offer unlimited talk-and-text plans.

MobilicityThe news wasn't received well by companies like Mobilicity - in fact Chairman John Bitove brought reporters to his office on July 9, calling Chatr an "abuse of power" and threatening to launch legal action against Rogers.

I spoke with Bitove on Monday and he didn't tiptoe around his feelings for Rogers. "Introducing 'fighting' brands to eliminate the competition is in direct breach of Section 78 of the Competition Act," he said. "And the intent of the Chatr brand seems clear, considering the timing of its launch, the markets Rogers has chosen (and not chosen) and the hit it's willing to take on its revenues. There is absolutely no question in my mind that it's leveraging the other parts of its business to try and destroy the competition."

Rogers has said the Chatr brand will be urban-focused, which is where the discount brands primarily operate. "If Rogers likes our plans and pricing so much then why doesn't it offer unlimited pricing in all markets, not just where it competes with us?" Bitove asked. "The answer is simple, it can't compete with our cost base and will need to subsidize the Chatr brand from its other businesses to compete with us."

This isn't the first time Rogers has played in the unlimited plans space. When they acquired Fido in 2004 the brand had unlimited plans, but they were removed from their offerings, leading Bitove to question their motives. "It's clear that what Rogers did with Canada's first unlimited talk offering, City Fido, which it bought and closed down, that it doesn't want Canadians to have simple unlimited affordable rate plans," he says. "It wants to try to kill us and then play the same old game with Canadian consumers."

So what are the major players saying about Chatr, and about their plans to compete with the low-cost carriers? Last week I stopped by TELUS' back-to-school preview, where they spent more time talking about their new partnership with the CFL and upcoming device launches than about the wireless wars.

I spoke to Anne-Julie Gratton, Senior Communications Manager, about their reaction to the new entrants in the wireless scene. "It's not just a question of the price, but nobody has the same needs for their phones," she says. She says they're focusing on the diverse needs of their customers, and didn't indicate any new launches - they already operate lower-priced Koodo.

One of the other big guys, BELL, already has two discount brands - Solo Mobile and Virgin Mobile Canada. So far they've been mum about whether they'll drop prices at their existing brands or launch a new one to compete.

The company at the heart of this media firestorm, Rogers, declined to respond to the questions I sent them about Bitove's comments, and sent a canned statement about Chatr's impending launch. They have commented on the issue before though - John Boynton, Rogers' executive vice-president and chief of marketing, told The Globe and Mail that Mobilicity "seems to be all about this company and not about customers," adding that all this competition should be good for the consumer.

I asked Public Mobile and WIND Mobile to comment on this story but they didn't respond by my publication deadline.

The bottom line is what's best for us - the consumers. While we may have our grievances against the new entrants, we can also rattle off a list of complaints about the Big Three - bad customer service, hidden fees, inflated rates...the list goes on. Add to that a recent report by Bank of America Merrill Lynch stating that Canadian wireless companies have the highest profit levels (46.7% in the first quarter) among 21 developed nations and it's easy to see that talk, text and data prices could still go a lot lower and the carriers could still be plenty profitable.

The new entrants can kick and scream all they want, but it seems inevitable that the Big Three will launch competitors or drop the prices of their discount brands, and sooner than later. And that's a good thing. Companies like WIND, Public Mobile and Mobilicity were supposed to finally bring decent mobile phone service to Canada but with limited handsets and pricing that's still steep compared to other countries they deserve the competition they're about to get.

Discussion

21 Comments

KL / July 23, 2010 at 10:02 am
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A price war is kind of useless when the only phones anyone sells to you are smartphones now. What if you want a crappy beater to use only a couple times a month, but want the flexibility of having a monthly plan?
Rajio / July 23, 2010 at 10:04 am
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If you think the consumers are going to win in the end, you're clearly not from around here.
Pat Anderson / July 23, 2010 at 10:16 am
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Seems that telephony is taking a page from Air Canada's history book. Squash or buy out the competition... Next step: when you can't do any more buy outs, layoffs, reduction of unprofitable routes, or union squashing, go into bankruptcy protection!
Sam / July 23, 2010 at 10:25 am
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These boutique wireless companies will never win. The Big Three have dominated the wireless market in Canada too long and have acquired too much money, power, and control. They will squash the competition by offering the same plans with their superior coverage.....the government has allowed wireless dominance and it's going to be tough to take down.

I actually have a cell-phone contract expiring in about 4 weeks and am seeking the best option going forward...
M / July 23, 2010 at 10:25 am
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There is no 'wireless license auction' and Wind mobile is not "backed by powerhouse entrepreneur Anthony Lacavera".


Tricia / July 23, 2010 at 10:28 am
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Yeah we're getting screwed on cell plans up here. My American friends were shocked and appalled when I told them that we get charged for caller ID.
mike / July 23, 2010 at 10:36 am
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Well i agree with the little guys here! there is no way that rogers can turn a profit by launching Chatr, as i am still a city fido member(one of the few lucky ones that insisted on never changing my contract) they call me 2-3 times a month for the last 5 years trying to get me to change my plan as obviously they are not making money off me. i canceled my home phone the minute i got the city fido contract and now use over 5000 minutes a month as it is my home business number, house and mobile number.. on any other contract they would be making hundreds of $$ off me but they are stuck only getting $45+tax a moth out of me....and do to that fact i take advantage of there rule you can resign your contract 14 months prior to the end of it contract date. so i will never have to give up this plan. if i didnt have this plan i sure would be canceling my fido/rogers phone and going with these small guys!!!
Mike W replying to a comment from Sam / July 23, 2010 at 10:57 am
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Let me know when the offer the same plans. Right now the only way to get a comparable deal is retentions.

I don't like negotiating for what the other guy offers at the door.
Dave / July 23, 2010 at 11:03 am
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"The new entrants can kick and scream all they want, but it seems inevitable that the Big Three will launch competitors or drop the prices of their discount brands, and sooner than later. And that's a good thing."

Nonsense. If the new entrants are killed off, we'll be right back where we started. The big three should have to compete fairly, by offering the same plans to all their customers, not by having some customers subsidize their predatory behaviour in select markets.
Erin Bury replying to a comment from M / July 23, 2010 at 11:05 am
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Hey,

Yes, there was a wireless license auction: http://www.wired.com/politics/law/news/2000/06/37295

And yes, WIND is backed by Anthony Lacavera - he's Chairman & CEO of Globalive, the company behind WIND. More on his website: http://www.anthonylacavera.com/

Erin
M replying to a comment from Erin Bury / July 23, 2010 at 11:16 am
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- it was a spectrum auction. not a license auction.
- Orascom bought the spectrum.

Ryan L. / July 23, 2010 at 12:15 pm
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Erin, you should be careful with your words.

Did Wind and Mobilicity <b>refuse</b> to answer your questions, or simply have potentially not yet responded to your emails by the time of writing this article?
Alain / July 23, 2010 at 12:30 pm
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Canadiand are getting what they wanted: protection from US and other foreign carriers. If these were allowed to open up shop in Canada, consumers here would benefit a lot faster. A nationalist, closed market or an open one: we can't have one with the benefits of the other
Alex / July 23, 2010 at 12:42 pm
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Hear hear, Alain. Fido used to be great, but only with grandfathering, negotiations, and _someone actually dying_ was I able to keep my unlimited texts to the US and International when Rogers finally decided to shoot the pooch.
Ben Lucier / July 23, 2010 at 12:43 pm
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Hey Erin,

I think the issue that M had in the previous comments is that while Tony is Chair and CEO of Globalive, the majority of the funding came from elsewhere. Saying that Wind is 'backed by' Tony implies that he's the major finder, which isn't the case.
APACHE / July 23, 2010 at 12:44 pm
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UNLIMITED TALK is nothing new to me, I've had unlimited talk with Fido Prepaid for the past 2 years ... the trick ... i buy a $30 fido voucher and select unlimited incoming calls, and i also buy a $10 phone card called "Unimited Smart Outgoing" from a company called " BABATEL", which converts my incoming calls into outgoing calls.

I dial a phone #, wait 2 seconds (no one answers), hang up and the server calls me back and asks me to enter the phone i wanna call#..so to Fido, i appears that i'm just receiving a phone call while i'm actually dialing out as i please. And it works GREAT !
g / July 23, 2010 at 03:51 pm
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apache: genius! where can i find babatel cards?
asad / July 23, 2010 at 08:23 pm
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a Mobilicity, and a Public Mobile, . just opened in my neighborhood and there a wind mobile kiosk not to far from me. they all have better plans then the big 3 , but excluding wind have very basic phones .Once they get a better selection i will join one of them
preston / July 25, 2010 at 11:06 pm
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apache...thats nice work
truthseeker replying to a comment from Tricia / July 26, 2010 at 10:48 am
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LOL and did you ask your American friends what they pay for health insurance? Do you know the cost of taxes to pay for "free" health care goes into the cost of your mobile phone?
Rubin Goldstein / August 21, 2010 at 09:24 pm
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Mobilicity had threatened to sue Rogers over Chatr. They rolled back the Pakistan plan, and have now shut down 5 or 6 of their best stores. Who will believe what they have to say? They have never kept their word on any of the BS that has been coming out from them

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