Tuesday, August 13, 2013

What? Wireless companies can't take the heat?

Over the last few weeks, the three big players in Canada's wireless business -- Bell, Telus and Rogers -- have been running two separate but related series of ads which are related to the almost certain reality that America's largest phone, cell and IPTV company, Verizon, will made bids to buy out two of the smaller and financially troubled carriers, Mobilicity and Wind Canada.   They never mention the company by name, but we all know that's who they mean.

One set of ads tries to make us believe that wireless rates are actually lower in Canada than the United States.  Indeed it's laughable.   Where did the industry come up with the claim our cell rates are lower 65% of the time?   Did they create the scenarios to prove their self-served point?  (Yes!)

Briefly:  Do the math.   With a population south of the border nine times larger and therefore lower economies of scale, that's just not possible.   It's bunk, plain and simple.   We need real competition.   If it's an American company does it really matter if the service is better and tariffs lower?

The second set of ads involves people who claim to be actual employees of the Big Three.  Maybe they really are.   Maybe they're just voice actors.   But the point they try to make is that it's unfair that a company that had no role in building up the wireless infrastructure in Canada will be able to just piggyback onto what we have.   As well they complain that foreign companies are able to buy their way in while Canadian companies are forbidden from buying their competition even if they're in dire straits.

Let's break that argument in two, starting with the second.

The ban on pan-Canadian mergers, well I agree with them that part makes absolutely no sense.   I wrote about this some time ago, when the feds stopped Telus from buying Mobilicity.   At the present time, Telus is suing the federal departments of Industry (licensing) and Heritage (communications) saying the rules aren't fair.   As well as they should -- a government that claims to support free enterprise while tying our own companies behind the back is wrong-headed.   And if they're wrong-headed on that it just goes to show they're like that on a lot of other things.   The loophole should be closed so everyone is on a level playing field.

The first:   Well it can be argued that letting a company in that wasn't involved with the buildup would be fine if the conclusion was, they shouldn't be allowed in at all.    But why not?    Wind and Mobilicity are bleeding money.   The fact they're willing to sell out at a discount is proof.   There are other regional players, such as Cogeco Cable (mostly in Québec, almost no penetration in Ontario although they have way more cable customers here), Videotron (owned by Quebecor / Sun Media) and MTS (Manitoba's main telco).   They should be allowed to bid too since they have their own infrastructure by that logic, but they can't either.

The reason why so many Canadians are salivating at the possibility that Verizon could come here is the fact they have two things going for them -- a willingness to be here for the long term; and more importantly since they already have a huge share of the market in the States, they would be the only company with operations on both sides of the border and that could mean making Canada and the United States a single coverage area with the end of roaming charges.   That would be a huge competitive advantage.   Imagine, no roaming charges, especially when we're close to the border and our devices "accidentally" link to a cell tower on the other side of the border.   The incumbents make a huge part of their profits from roaming.  How are they going to survive having to cut or eliminate them?   I wonder.

The Canadian companies say they believe Verizon would only want to focus on big cities to the disadvantage of smaller ones.   But isn't that part of the reason why Wind and Mobilicity got into so much trouble?    A behemoth would be stupid not to offer the same coverage and services to rural areas as to urban ones.   People wouldn't stand to have 4G or better service in cities (if we can get it most of the time) but 3G, 2G or even analogue service in the back country, especially when we're travelling as many of us do.

Heck, when discount companies like Virgin come here they can do the same piggybacking.   In that case in particular, they got into a partnership with Bell until about four years ago when they were bought out.  Fido was actually T-Mobile (read:  Deutsche Telekom) in disguise until they were bought out by Rogers.    Koodo started out as Solo and Telus had a partnership with Amp'd until they declared bankruptcy.   So spare me the claim that this is a first time venture.   T-Mobile just didn't have the chance to ramp up fast enough -- and they're way bigger than Verizon worldwide.

It's the old saying:   If you can't stand the heat ... you know the rest.   By all means, do close the loophole so the incumbents can have a real crack.    But it does the consumer no good by stopping any company, even a foreign one, from coming here.   Competition is good for consumers, and it's also good for businesses.   We get lower prices, and the old players have to wake up from their complacency -- and greed.

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