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Arrival of the new entrants

They are betting big time that Canada is a nation of dissatisfied wireless customers. A new report backs up that claim.


May 1, 2010  


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Search news sites for stories on wireless service in Canada, and have a look at the comments that readers submit on the stories.

The names, places, service providers, packages, examples and other details differ, but a common theme emerges. If we are to believe the comments, Canada is a nation of dissatisfied wireless customers. Granted, those who are happy tend not to comment on news stories and that is true regardless of whether it is a story about wireless service, transit service, politics, business mergers, lending rates, the auto industry… take your pick. Story feedback tends to be the realm of the grumps, with occasional postings that take exception to the more outrageous claims.

So, are we really unhappy?

The new entrants are betting on it. And in their eighth annual report, The Battle for the Canadian Couch Potato: Bundling, TV, Internet, Telephone, Wireless, the analysts at The Convergence Consulting Group Limited in Toronto, make several educated guesses that give those new entrants some hope.

Here is a sampling from the 145-page report, published in April:

– First, Convergence Consulting predicts the new entrants will put pressure on the industry to reduce the price of voice and data services, which in turn will reduce the Average Revenue Per User (ARPU) from wireless service. APRU is a key measurement of a company’s success.

– Second, the consultancy forecasts that by the end of 2014, the new entrants will have captured 22% of the Canadian wireless market. Think about that – one in five of us will be getting our service from a company new to the wireless sphere.

– Third, Convergence Consulting estimates that the percentage of Canadian households that are wireless-only is going to more than double over the next couple of years – from 8% at the end of 2009 to a forecast 19% by the end of 2012.

Adding up those three things, and what I see is a market in which the incumbents – Bell, Rogers and Telus – are not only going to lose market share, but are also going to make less money from each subscriber they do have.

It is no wonder every incumbent has been trying to lure Canadians with new offers, and then lock them in with multi-year contracts.

And that makes la belle province a most interesting battleground for several reasons. For starters, one of the new wireless entrants is Vidéotron, the Québecor Inc. operation that already delivers television, Internet and telephone services to residential and business customers.

Vidéotron received a big boost in the form of Quebec’s Bill 60. The bill would amend the province’s Consumer Protection Act to make it easier for wireless users to cancel long-term contracts by reducing the termination fee they will have to pay. Now, this only applies to contracts signed after the legislation comes into force – scheduled for June 30th of this year.

Still, this amendment should make it easier for a new entrant like Vidéotron to attract some of those many writers of comments on popular Web-based news services, not to mention the many others who are unhappy but haven’t bothered to express it.

Time will tell and there is no guarantee. Any successful poaching of customers away from incumbents will still be due primarily to the new entrant offering a better service. And as always, the definition of “better service” is not based on price, but on value. Customers will pay more if they understand the value that is being delivered.

Regardless, Bill 60 lowers a barrier to competition in the wireless services market, and means it’ll be worth watching the wireless industry’s new experience in Quebec. I am sure that those who draft consumer protection legislation in other Canadian jurisdictions will be keeping a close eye on it. CNS