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The Telecom Union Rally Against Competition

Throughout the battle this summer over the potential of a Verizon entry into Canada, the incumbent telecom companies have tried to paint their position as supporting more competition, but rejecting the rules the government believes are needed to facilitate that same competition. Wind Mobile CEO Tony Lacavera recently called out the incumbents and their association – the Canadian Wireless Telecommunications Association – for opposing more competition:

The Canadian Wireless Telecommunications – which we joined being assured it would equally represent all wireless companies in Canada – is a mere puppet of the Big Three.  Far from supporting the new entrants like WIND Mobile, CWTA has been advocating against bringing more competition to the marketplace.

Today in Toronto, two of Canada’s largest unions will hold a rally not over the wireless spectrum rules but rather over the very prospect of more competition. The release from the Communications, Energy and Paperworkers Union and the Canadian Auto Workers states that the rally is planned:

to protest the Harper government’s decision to allow U.S. telco giant Verizon to compete in Canada’s telecommunications market.

Notwithstanding persistent claims that the wireless fight is about “fairness”, this rally lays bare the real motivation of many – stopping new competitors from entering the Canadian market.

15 Comments

  1. Anthony Reimer says:

    Competition does not have to be foreign
    I think the union position is tenable, even though it is not in step with the Conservative Government (which should surprise no one). There will be Canadian job losses if Verizon or another large foreign company enters the market. Full stop. They represent workers, so it would be somewhat irresponsible for them not to bring the matter up (not sure it needs a rally, though).

    If competition is the panacea for our mobile woes (and I don’t think it is), there is no reason why a fourth national carrier could not come from the remaining old telcos (SaskTel, MTS, etc.) banding together, whether they picked up one of the new entrants along the way or not. The competitor does not have to be foreign.

  2. I agree with Anthony Reimer, the unions are protesting against government policies that will lead to job losses, full stop. They would protest just as loudly if Verizon bought Bell or if Rogers merged with Telus. To suggest they are protesting against “competition” is a helluva a stretch.

  3. Welcome to the White Kingdom, where out white tower becomes a dreary oubliette for all within.

  4. It’s not really the fault of the ‘line-workers’ that Canadians are calling for increased competition. The blame can be squarely placed on the heads of those in charge of policy. Years of policies that gouged average Canadians (5-figure roaming charges?) has earned little love for the Big 3, now that they are trying to rally the same masses to their rescue is it any wonder they are met with the sound of crickets?

    The lesson here is focusing on short term dividend reports, may please the board but disenfranchise your market.

    For the Canadian telcos it may be too little too late.

  5. @Crockett

    We are a nation of “recreational complainers”. It’s been almost 5 years since Wind Mobile started offering cell phone service at half the price of the big 3 but people still won’t switch. Why? Don’t they want to cut their cell phone bill in half? Or do they secretly prefer to stick with their higher quality service providers even though it costs a little more.

    You suggest the average Canadian is getting hit with 5 figure roaming charges – I call BS. I saw a piece on Yahoo a couple of weeks ago about a Florida woman who got a $30K roaming charge on her cell phone – so it occasionally happens to Americans who don’t pay attention to what they are doing as well. And when it does happen the media jumps all over it because it makes such a great headline, but in reality those cases are extremely rare.

    If Canadians truly hated their cell phone companies, Wind, Public Mobile and Mobilicity would be moving into bigger offices instead of going bankrupt.

  6. Cynic, I suggest you hang around the water cooler a bit more if you think Canadians are sticking with the Big 3 out of love. The reason they stay is because the small players, while offering better prices, are not able to offer as robust a network.

    We can argue the myriad reasons behind this, but the solution may actually be both government intervention and a deep pocketed entrant such as Verizon.

    Give the people a viable choice of lower prices, good coverage & respectful service … watch out for the migration.

  7. @Cynic “You suggest the average Canadian is getting hit with 5 figure roaming charges – I call BS.”

    Obviously, Canadians ‘on average’ were not subjected to this but certainly those that did were average Canadians. We cannot justify in any way the policies that enabled these occurrences to happen. I remember watching Marketplace on CBC, were one such average Canadian was on vacation with his children in Mexico, his son watched a one 75 minute movie on the cell phone and racked up $12,000 on the bill.

    Sure, such charges may have been specified in the 72 page agreements that no reasonable person takes a day off work to read, but that does not make them just. Neither does 75 minutes of streaming, even in Mexico, incur an infrastructure cost of more that a few cents. What then was the purpose of the Big 3’s policy in such matters? The obvious is to use such stories to scare people into buying international roaming plans, fine but I would posit there are much less severe and cruel approaches. How about a message on the phone that says your data limit has reached a limit and agree to a roaming plan to continue? Certainly not too odorous a technical feat to accomplish.

    Cynic, it is attitude of the Big 3 that was at issue. Profit over service, stockholders over customers. The roaming charge fiascoes were just the most prominent of an underlying malady.

    Can Verizon do it any better? Hard to say, they do get top score among the USA telcos but still have their detractors. I have seen evidence that even the threat of Verizon has made the Canadian incumbents tighten up their acts. I have my doubts that they will go far enough to win back the hearts of Canadians, or if even we are in the mood to reciprocate. I would actually be content though for Verizon to stay on their side of the fence if Canadian telcos truly took to heart the fact that they are a service company and not a portfolio stock.

  8. @Crockett

    Now we are getting somewhere. You acknowledge that some of the new players like Wind and Public Mobile, despite their grand proclamations about providing better service to Canadians, have failed to deliver an acceptable value proposition. So Canadians aren’t looking for basic level service at discount prices, they want premium service at discount prices. So, if that is the desire, what’s wrong with the discount brands like Koodo, Fido, Solo, Virgin, etc? All those discount services run on the premium networks of the bigger carriers.

    You mention that Canadians should get notifications of data usage when they travel out of country. Well, depending on their carrier they already do get those notifications. My wife and I are in the US right now for the long weekend, she has a Rogers phone and I have one from Telus. She hasn’t had any notifications yet but I’ve had 3 so far, plus Telus caps my data roaming charges at a maximium of $200 – no way I could get a 5 figure roaming bill even if I tried. I guess the carriers are all a little bit different in the service they offer their clients but I believe Canadians want to see competitive differentiation between service providers.

    I strongly believe that many Canadians have only ever tried one of the big 3 but “assume” that they are all the same. That’s a really big assumption and it’s wrong. If they are dissapointed with their current carrier they should simply try one of the others.

    Every company has an owner (shareholder) that demands a return on their investment and it doesn’t matter whether it is a service company or a growth stock. Unfortunately there is no way around that one.

  9. @Cynic “So Canadians aren’t looking for basic level service at discount prices, they want premium service at discount prices.”

    Cynic, its simple. Canadians want good service at reasonable prices. Compared to most of the world we aren’t getting that. It has to change. If it takes foreign competition, or just the threat of it, doesn’t really matter.

    Canadian telcos are some of the most profitable in the world, you don’t reach that level by charging less. If you are happy being a stockholder and enjoying the dividends then great for you. Most Canadians I think would be happier with lower price than funding your retirement portfolio.

    P.S. I just watched a TV commercial ‘warning’ Canadians that a foreign firm was about to buy up ‘half the airwaves’ a natural resource just like water. What they didn’t say was the incumbents already own 85% of the spectrum.

    The remaining 15% divided by 2 = 7.5%

    Hardly half. Honesty in advertising.

  10. Unless I’m mistaken, international roaming (including data) is negotiated by the providers and Canada has some of the worst rates

  11. Cynic said:

    >>>>Now we are getting somewhere. You acknowledge that some of the new players like Wind and Public Mobile, despite their grand proclamations about providing better service to Canadians, have failed to deliver an acceptable value proposition.

    I get pretty good value from Wind compared to my gigantic bills from Rogers. Yah the coverage is rural areas sucks but I can roam and if I’m in a rural area its going to be for camping so data access is not necessary.

  12. Whither now pray tell?
    So the summer of angst is over and the ogre no longer shakes the wireless incumbent’s druthers.

    http://business.financialpost.com/2013/09/02/verizon-not-interested-in-expanding-into-canada-ceo-says/?__lsa=ac26-2e06

    Now what?

    The temptation will be to immediately pull back on the preemptive measures they took to endear the public to their cause. That would be a mistake.

    The government has seemed fairly committed to speak to the consumer side of these issues. Now that the rug has been pulled from their current plans, they either withdraw or up the ante. If the incumbents take this as an easy victory they may not like the next card the government pulls from their deck.

  13. @Crockett said, “P.S. I just watched a TV commercial ‘warning’ Canadians that a foreign firm was about to buy up ‘half the airwaves’ a natural resource just like water. What they didn’t say was the incumbents already own 85% of the spectrum.”

    I saw that same ad as well. They were referring to the four 700 MHz blocks where new entrants can purchase up to two blocks and incumbents can only purchase one block. So the math is correct, a new foreign entrant can purchase half of the available 700 MHz spectrum.

    When you consider that IC is using Tier 2 licensing regions for this auction instead of Tier 3 there is going to be a horrific waste of some of the best spectrum ever offered for cell phones. What if Wind buys two blocks in Alberta and continues with their current strategy of serving only Calgary and Edmonton? Since their Tier 2 license covers all of Alberta, their 2 blocks of prime 700 MHz spectrum will never be used outside of Edmonton and Calgary. Such a waste.

  14. Yes, Competition Does Seem to Have to be Foreign
    Canadian players are shut out:
    http://www.cbc.ca/news/business/story/2013/07/31/video-ting-mobile-phone.html

  15. @Gregg

    Ting is nothing more than a aggregator/reseller and there are already lots of companies like that operating in Canada (E.g 7-eleven, President’s Choice, Sears, etc.) The wholesale wireless business is volume sensitive so you need to be buying a pretty good number of minutes to get a low enough price point to make the business work. It’s easier for Ting to get those kind of volumes in the big US cities where they can reach a big population base with a relatively small advertising budget. That’s much harder to do in Canada. The only reason 7-Eleven and PC can make it work in Canada is that they are cross-selling to their existing customer base and using their existing distribution channels to sell/support their customers.

    Some of us still remember the long distance aggregators/resellers from a decade ago. It’s the same concept – buy a massive bucket of minutes at wholesale prices from a big carrier and then resell them to your own customers. And hope to squeeze out enough margin to pay your suppliers and pay yourself at the end of the day.