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Verizon on the Horizon: Could the U.S. Giant Shake Up More than Just Canadian Wireless?

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Thursday June 27, 2013
Reports in the Globe yesterday that U.S. telecom giant Verizon has offered $700 million for Wind Mobile as part of an entry into the Canadian wireless market (which could also include buying Mobilicity and bidding in the upcoming spectrum auction) caused significant reverberations throughout the industry. The news sent the stock price of the Canadian incumbents plummeting and analysts - who only days ago were assuring clients such a move would not happen ("highly unlikely" said Scotiabank's Jeff Fan; "what a joke" a telecom executive told Cartt.ca) - scurrying to assess the potential impact of a Verizon entry. Some have argued Verizon would have little interest in a smaller market like Canada, yet the company has actively promoted the elimination of foreign investment restrictions including in a 2008 submission to the Competition Policy Review Panel that detailed how "it had a long-standing presence in the Canadian telecommunications market". 

There remain many questions about a Verizon entry into the market via Wind Mobile, particularly with respect to the use of different wireless technologies and spectrum, but there is little doubt that the company could use its buying power to offer better deals on devices and North America-wide plans that leverage its U.S. network to offer significantly better roaming services. Moreover, the U.S. footprint could appeal to the corporate sector, offering the chance to steal customers from the current incumbents. 

Less discussed would be the potential impact on broadcast rights and distribution.

On the broadcast rights issue, Verizon holds exclusive rights to both the NFL and NHL in the U.S., with the NFL deal signed a few weeks ago valued at $1 billion for four years (making Verizon one of the NFL's most important corporate partners).  Those rights are currently held by BCE in Canada, but a Verizon entry into Canada could shake things up. Verizon could presumably complicate the BCE rights by offering free access to NFL and NHL games to Canadian customers when they travel to the U.S.  More interestingly, Verizon could make a play for joint U.S. - Canada rights in the future, moving closer to an elimination of the geographic divide on content rights.

The broadcast distribution issue could have even bigger repercussions. Of all the challenges faced by a foreign entrant such as Verizon, the biggest may well be restrictions on foreign broadcast distribution. The inability to offer television services as part of a bundled offering is a clear disadvantage for a foreign competitor, who is left chasing the low-end wireless-only consumer market and the high-end corporate market, but without the big consumer mid-to-high end market that often purchases bundled services.

Verizon could use their potential entry to blow this open by seeking government support for changes to the restrictions on broadcast distribution. Recommendations for changes to the BDU restrictions date back many years (e.g., 2003 Industry Committee report) but this would be a particularly opportune time to raise it. The Canadian wireless market is a mess and a Verizon entry would be viewed by the government as the best chance to meet its goal of a fourth carrier and rescue the failing new entrants. With billions at stake and with the CRTC re-examining Canadian television later this year, opening up the BDU market would be in line with a pro-consumer approach and bring greater consistency to foreign investment rules in the communications sector. There are still many questions about a Verizon entry into Canada as a fourth national player, but those questions should not be limited to telecom as there is the potential to similarly shake up the Canadian broadcast world.
Comments (13)add comment

John Doe said:

Happy to see more competition, but....
I'd like to see more competition, but not at the cost of major competitors being owned by US companies.
June 27, 2013

Dave said:

Verizon is the worst.
They make Bell and Rogers look consumer-friendly by comparison.

I've been with WIND for the last 18 months. The day Verizon buys WIND is the day I become a PC Mobile customer.
June 27, 2013

Jean-Francois Mezei said:

...
I think people are greatly overestimating Verizon's imapct in Canada. Initially, thee will be 0 synergy between its own CDMA/LTE network and that of Wind/Mobilicity which are HSPA only.

Verizon might be able to add LTE by repurposing Mobilicity's 1700 spectrum and moving HSPA customers to Wind's spectrum (and by bidding on 700), but this will still not make it compatible with Verizon's custom phones designed for CDMA/LTE environment.


Verizon's customers visiting Canada will continue to have to roam on Bell/Telus for as long as Verizon runs a primarily CDMA network.

In the long term, when voice on LTE becomes widely deployed, then Verizon's customers might be able to roam on Verizon's canadian network.

It should be noted that since Bell/Telus migrated to GSM in 2010, they have not given Verizon roaming business because Verizon cannot support GSM phones. And Wind/Mobility customers cannot roam on Verizon's CDMA network either.

So, as there are no synergies for roaming between the 2 networks, the only reason Verizon would be interested in investing in Canada is it it sees an opportunity to make money locally. And that means salivating at high ARPU in Canada and not providingthe type of competition that would lower pricing.

In the long term, when Verizon is able to ditch its CDMA, then there may be synergies between the 2 LTE only networks.

the bigger question is what would happen to the "new entrant" scene if Verizon decides to come into Canada. Will Verizon be happy with just Ontario/Alberta/BC it gets from Wind (and even more limited coverage from Mobilicity) or will it want national coverage ? If so, what happens to MTS, SASKTEL, Vidéotron and Eastlink who will now have to bid against a giant bigger than Bell/Telus/Rogers inside the "new entrant" part of the bidding.
June 27, 2013

Kilnton said:

McNadbe
If possible, I would like to keep out as much NSA supporters as possible. Not that our own CSEC is much better...
June 27, 2013

maebnoom said:

...
Verizon is worse than the big three here, so it's hardly a welcome choice IMO. Never mind the NSA surveillance...
June 27, 2013

Ronnie said:

...
I spend a fair bit of time in the US so I have a Verizon phone and a Telus phone. Based on my personal experience I have found Verizon is a bit better than AT&T but far, far worse than Telus. Verizon's prices are no better and customer support is absolutely abysmal, their data network speeds make dial-up internet look good.
June 28, 2013

Johnnie Canuck said:

...
This week's rumour that Verizon might be thinking of coming to Canada wiped almost 10% off of the market capitalization of Bell, Rogers and Telus. That works out to $6-8 billion worth of Canadian's hard earned savings - poof, gone!

When our government starts working against the well-being of Canadians it's time to get a new government - the NDP has better business sense than these inept conservatives.

Like it or not, the shares of big telecoms are owned by hundreds of pension plans across the country, including or Canada Pension Plan and are contributing to the pensions of our treasured seniors.
June 28, 2013

VerizonIsNSA said:

Really MG? Not 1 word aboot the scandal?
Come on MG....be real.
Verizon coughs up any metadata on their US customers to the NSA and u don't even mention it as a threat to Canadian customers?
June 29, 2013

Devil's Advocate said:

The threat may already be a reality...
@VerizonIsNSA:
I don't believe for one moment that Bell, Telus, and Rogers don't already have a similar "relationship" (or one in the making) with our own CSEC, RCMP and other police/security entities.
June 30, 2013

Alex said:

Long Awaited Competition!
We should willingly accept healthy foreign competition, and teach ourselves how to keep our private communications safe using industrial strength encryption.
June 30, 2013

JeffW said:

Canada can do better
There are many Canadian companies that operate in the global world, that is, with global reach and competing on their merits. And there are sectors where Canadian industry, if not quite dominant, is at least globally disproportionate - banks and mining comes to mind.

Nova Scotia Power, when privatized, restructured into Emera, which has successfully grown into the NE US, Bahamas and other areas.

Canadian telecommunication companies are entirely content to stay at home, and well, to put a point on things, screw the locals. The same can be said of airlines, too.

In short, the Canadian telcoms are not trying to compete globally, and they are not trying to provide world class service locally. Maybe Verizon can make things better, maybe not. But the home team is not deserving of protection
July 02, 2013

Johnnie Canuck said:

...
@JeffW

I agree with you that our Canadian telecoms do not deserve protection but that's where it ends. The thought that our government would grant special favours and discounts to foreign companies so that they can take business away from Canadian companies makes me want to vomit. I don't care if it is telecom, banking, mining, airlines, or technology, it is fundamentally wrong.

Verizon, with its 100 million subscribers is 4 times the size of all the Canadian carriers combined - they do not need special favours and discounts to compete in Canada. Vimpelcom, which owns Wind, has 200 million subscribers and they are struggling to make a go if it in Canada even with the huge discount they got on Canadian spectrum in the 2008 auction.

I just got back from Paris and couldn't help but notice that there was still no sign of LTE. Most of the time it was 2G and occasionally 3G. Same goes for London. Vodaphone isn't planning to launch LTE in London till next year. That puts Paris and London at least three years behind Canadian network technology. Even Minister Paradis recently described Canadian wireless prices as "middle average".

Putting Canadian companies at a competitive disadvantage to foreign firms is reprehensible.
July 02, 2013

anshika patel said:

ecommarce
Electronic commerce, commonly known as e-commerce, is a type of industry where buying and selling of product or service is conducted over electronic systems such as the Internet and other computer networks. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer.
ecommerce
July 17, 2013

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