Four New Canadian Wireless Providers Stoke Competition
TORONTO -- With four new providers starting service in the past year and two more to come in early 2011, pricing and marketing wars have broken out in the Canadian wireless market as the three major incumbents try to protect their $13 billion turf. Slightly more than a year after Orascom Telecom’s Wind Mobile unit, Canada’s first new national wireless provider in more than a decade, started service in this market and Calgary, three other new mobile entrants -- Mobilicity, Public Mobile and Videotron -- have introduced service in several major cities. All four offer discount pricing and simpler, unlimited service plans designed to lure consumers from the incumbent providers and widen the wireless market. Many Canadian consumers can now choose among four, five, six or even more wireless providers for the first time.
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Three of the new wireless providers -- Wind Mobile, Mobilicity and Videotron -- had signed up at least 230,000 subscribers total through year-end. Wind leads the way with more than 140,000 subscribers. Public Mobile has not reported customer figures publicly. The total represents just a small slice of the more than 20 million wireless subscribers in Canada. But the three entrenched players -- Rogers Communications, BCE’s Bell Mobility and Telus -- have responded aggressively in pricing and marketing. Rogers and Bell have struck back with new or revamped low-price brands.
Rogers, the nation’s largest wireless player, introduced a new discount brand, Chatr, over the summer. Aimed at urban residents who don’t travel much, don’t want unlimited talk and text and aren’t willing to pay much, Chatr offers two basic unlimited service plans and six handsets. The service is available in the Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver areas. Rogers officials have declined to release any Chatr subscriber figures. But they say they're “quite pleased with the results.” In a recent interview with Cartt.ca, Garrick Tiplady, Chatr’s senior vice president, said Rogers executives are “seeing strong results across the country in all the markets we've launched in."
Despite early concerns about cannibalization, Tiplady noted that Chatr is not taking subscribers from the company’s other mobile brands, Rogers Wireless and Fido. “We're seeing the growth of a new category, the all-you-can-eat market, similar to what we saw in the U.S. a couple of years ago,” he said. “Three-quarters of the customers are new customers with Chatr, so they're not porting."
Chatr is stirring up plenty of controversy in the wireless market. Rankled by Rogers’ move, Wind and Mobilicity have lodged separate complaints with the Canadian government over the new low-cost brand, basically alleging that it constitutes unfair competition to their own discount services. Mobilicity in September filed complaints against Rogers with several government agencies, including the Competition Bureau. The complaints charge that, by starting Chatr, Rogers violated Canada’s Competition Act, which prohibits market leaders from using “fighting brands to discipline or eliminate a competitor.” Rogers officials countered that they're simply offering consumers greater choice.
The competition should become even more heated this year, as the four new providers extend service to more areas and two more entrants, Shaw Communications and EastLink, introduce service. Like Videotron, Shaw and EastLink are large cable operators seeking to expand into wireless, as Rogers did years ago. Largely because of the increased competition and lower prices, analysts expect the Canadian wireless market to grow more rapidly over the next few years than it has. Convergence Consulting recently predicted that Canada’s wireless industry will grow by 1.9 million subscribers yearly on average 2010-2014, up from about 1.5 million 2005-2009. The consulting group forecast that the new wireless players will sign up just more than 6 million subscribers before 2015, capturing 19 percent of the market.
But wireless providers may make less money per customer. With competition intensifying, Convergence Consulting’s report estimated that the industry’s revenue per unit slipped 1 percent in 2010, after a 3 percent drop in 2009. Though data revenue continues to rise because of the popularity of smart phones, the consulting firm said, overall revenue per unit continues to decline. The report cited big drops in voice revenue as the new entrants undercut the incumbents on pricing.