Canada’s Cellular Shakeup

November 12, 2009 Updated: October 1, 2015

Three new mobile phone companies are poised to enter the Canadian market, promising deals that could dramatically change what consumers expect from their wireless providers.  (photos.com)
Three new mobile phone companies are poised to enter the Canadian market, promising deals that could dramatically change what consumers expect from their wireless providers. (photos.com)
TORONTO—Three new companies are poised to enter Canada's cellular market in the coming months with promises of revolutionary deals that could change the wireless landscape.

According to the Organisation for Economic Co-Operation and Development, Canadians pay more than almost all other nationalities for their monthly mobility. They are also the least likely in the developed world to have a cell phone.

The current big three providers, Bell, Telus, and Rogers, have earned a certain notoriety for hidden fees and bill shocks that send users dialing *611 for a free call to customer service.

Analysts say that frustration could translate into easy market share for the new companies and the increased competition could bring Canada in from the wireless backwater.

Newcomers Public Mobile, Wind Mobile, and Dave Wireless need only one million customers (out of the 15 million Canadians who have yet to get a cell phone) to create a successful business, said Iain Grant, who heads up Seaboard Group, a strategic consulting and research company focusing on the technology and communications industries.

Grant is among those optimistic that the new companies will bring major changes to Canada's cellular market.

"I think when people go in to their wireless company and look at the options taking a contract, they might be wise to drag their feet and wait for the launch of Public Mobile, or Dave, or Wind," he said.

All three companies are talking about better customer service and dramatically improved price points, including $40 all-in plans that are the fulfillment of a promise many Canadian consumers have only known as the wiggling worm in current bait-and-switch advertising campaigns.

Plans could include long distance, voice mail, call forwarding, caller ID and so on, says Grant.
"And if you talk for 1,000 minutes it’s included. What is different with the $40 plans from Dave for instance, is that they will be $40."

Public Mobile is also offering a flat $40-a-month plan with “unlimited talk and text” and no contracts or service fees.

Wind, like Dave, has not officially announced plans but, in some media interviews, top executives have said they will have as few as two or three plans although they expect to need only one.

Challenges ahead

But before Canadians can enjoy the fruits of increased competition, the newcomers need to get their networks up and running and secure handsets that work in their slice of the wireless spectrum (cellular airwaves).

Public Mobile, in particular, is working in a frequency virtually unused by previous cellular networks and may offer a more limited selection of handsets.

Public will launch in Toronto in the coming months and then extend coverage throughout the Greater Toronto Area by the end of 2010. Future plans include coverage for most of southern Ontario from Windsor to Ottawa and eventually Quebec, though only Quebecor's Videotron and the big three incumbents have spectrum there.

Dave, which has said it will change its name before launch, will service Canada's five most populous English markets, including Toronto, Vancouver, Calgary, Edmonton, and Ottawa. Like Wind, it is constructing an HSPA 3G network that works with smart-phones and data services.

Wind is the only newcomer that bought spectrum all across Canada except in Quebec. It had promised to be the first to launch in late 2009 but hit a regulatory snag when the Canadian Radio-Television and Telecommunications Commission (CRTC) said the ownership structure of parent company Globalive Wireless didn't fit within the requirements set out by the Telecommunications Act.

Either the company needs to revise its ownership structure or the CRTC needs to change its ruling for Wind to launch.

Wind is protesting the CRTC's ruling, but Grant says this is a “small matter” that may save the company from getting egg on its face.

"They may be actually breathing a sigh of relief in that they can't launch just yet. Because if they had been allowed to launch and had no impediment, they may have been announcing postponements."

The challenge for each of the providers is getting their network up and running reliably. Any delay would likely be due to that, said Mark VanderHeyden, former CEO of Siemens Networks Inc. and now president of Scire Solutions.

VanderHeyden is a key player in Canada's cellular market, helping companies, including almost all of the new entrants, develop their technological infrastructure.

Though the new providers will be fighting an uphill battle for market share, VanderHeyden says they do have a notable advantage.

Referring to a paper by the Seaboard Group, he noted that the price of establishing a wireless network now is a small fraction of what it was 10 or 20 years ago.

“The new entrants have an interesting cost advantage at that starting point,” he said.

“And there are other new ways they can manage their networks. The incumbents have large organizations and their own field crews. The new guys have an opportunity to do a fair bit of outsourcing and manage services, which can also help the cost structure. They may have the ability to give us much more impressive pricing plans.”

Network reconstruction boom

The boom in network construction—both Bell and Telus recently created a network capable of handling the iPhone 3G—has attracted a number of companies to Canada including Harris Stratex, Optimi, Mobile Content Exchange (MCE), and Smartprust. These companies offer everything from radio backhaul to a way to transfer content from one cell phone to another so that customers don't have to manually transfer all those ring tones and videos.

For the consumer, the extra competition from new cellular providers and the potential for slimmer business models due to outsourcing could lead to significant savings.

The incumbents aren't taking the threat lying down. Each of them now has a discount brand aimed at the lower end of the market where the new entrants are expected to grow.

For Bell, Telus, and Rogers, there are Solo, Koodoo, and Fido respectively. Each is already introducing plans that are notably cheaper from just 18 months ago.

But there is potential for progress to be stalled. Just as Fido once offered unlimited voice and data transfer to customers before being purchased by Rogers, so too could the new entrants be bought into the fold of the incumbent providers.

While it is too early to tell if the promise of better deals will be as elusive as those $40 bills, or if any change can stand the test of acquisition, it does seem Canadians will pay less for their cell phones in 2010.