CityFido service unleashes wireless carrier dogfight

After years of waging a conventional battle for market share, over the recent holiday season the wireless wars went nuclear.

Microcell fired the first salvo in October with the launch of CityFido in Vancouver. Marketed as a replacement

to wireline phone service, CityFido offers a wireless package of unlimited local calling for $40 and let subscribers move their wireline phone number to CityFido.

Microcell’s offer was seen as a direct attack on Telus, the incumbent carrier in Vancouver. Telus Mobility was quick to respond with an ad campaign directly targeting Fido’s customers, using the familiar canines that are a staple of Fido’s advertising. Telus was followed by similar campaigns from Canada’s other major wireless carriers, Bell Mobility and Rogers AT&T Wireless.

Last fall, a report from the Seaboard Group welcomed CityFido as a paradigm-breaking move that would bring needed new ideas to the wireless marketplace, advising industry to stay focused on the larger picture of services, wireline-wireless migration, product innovation, and growing the market.

Three months later, Seaboard analyst Iain Grant said he isn’t surprised the advice wasn’t followed, but he is surprised by the ferocity of the response.

“”If you go down into the Toronto subway there’s poster after poster saying, ‘Fido users come on over to Telus,'”” said Grant.

The results of the skirmish will be known in mid-February when Telus and Fido announce their quarterly results, but Grant said he doesn’t expect Telus has migrated many customers from Fido. What it did achieve was to inadvertently raise awareness of the Fido brand.

Grant said the strength of the response from Telus is understandable given the trials the company has faced over the past year from labour strife, complaints over customer service on the wireline side and the B.C. forest fires.

“”I can understand why Telus may have felt a little picked-on,”” said Grant.

However, while its competitors have pilloried the concept as economically unsustainable, Grant said Fido’s model of wireline to wireless migration works and the traditional model of a home phone, work phone, and a cell phone is under attack.

“”There’s a lot of money on the table if you were to retire one or two of those phones,”” said Grant.

While the company obviously expected a response to CityFido, Microcell vice-president of regulatory affairs Dean Proctor said he didn’t expect what he characterized as “”anti-innovation.””

If Telus wanted to target churning customers, Proctor said, it would be better off going after Rogers and Bell, who are losing 130,000 customers monthly compared to the 30,000 leaving Fido.

“”They’re clearly doing this just out of spite,”” he said. “”Why not try to continue to grow the market instead of targeting one member of the market?””

Proctor also isn’t impressed with the ad campaigns from the other carriers, borrowing liberally from Fido’s own canine-themed marketing.

“”Imitation is the greatest flattery, but there are rules around what you’re allowed to imitate,”” said Proctor.

Those complaints are dismissed by Telus Mobility spokesperson Mark Langton, who said Microcell has challenged the ads in courts and the judge ruled the Telus ads were fair game.

“”You can’t trademark a dog, and I still think the ads had our look and feel,”” said Langton. “”Consistently the courts have said Telus Mobility has a right to compete.””

Telus doesn’t view CityFido as a threat, Langton added, characterizing it as just another wireless offering marketed in a new way.

“”It’s a competitive move at an exceptionally low price, but it’s unsustainable pricing,”” said Langton. “”You cannot operate a wireless company with the heavy investments required and continue to price it below cost or as a loss-leader.””

Telus experimented with similar offerings in Nova Scotia and Manitoba as it entered those markets, offering an all you can eat package because of the limited coverage it could offer at the time, but found the model unsustainable over the long-term.

Wireless has always been an extremely competitive business, and Langton said Telus matches offers from Bell and Rogers as well. The firm has targeted Fido customers more aggressively because customers are leaving Fido for identifiable reasons Telus feels it can satisfy, like coverage and handset selection.

“”If it’s clear that thousands of people are leaving Fido, we want to make sure they come to us,”” said Langton.

Strong competition is good for consumers and good for the companies, and Langton said Telus has been active rolling out camera phones and picture phones in the last quarter, something that has been overshadowed by the hype around CityFido.

“”When there’s strong competition it raises all boats,”” said Langton. “”Everyone works harder, and penetration goes up.””

CityFido heading east?

Seaboard’s Grant doesn’t expect Fido to stop with Vancouver. He expects by March the CityFido model will be expanded to other Canadian cities, which in part likely explains the reason why Bell joined in the attack on Fido. As the incumbent carrier in Ontario and Quebec, Bell could be next.

Proctor said the response to CityFido in Vancouver has been strong, with lineups outside their doors waiting to sign up.

“”Vancouver is the petri dish, but it’s not meant to be the last place we launch this. We are looking at other markets,”” said Proctor. “”Given what Telus, Bell and Rogers did to us after the launch in Vancouver, you can appreciate we won’t be giving any dates for other launches.””

While Bell may be next on Fido’s hit list, spokesperson Gina Gottenberg said the company doesn’t view wire line to wireless migration as a major market at this point. But should Microcell bring CityFido into Bell’s backyard, Gottenberg said they’re confident Bell Mobility has more attractive competitive offers in place.

“”It is about competition, and all’s fair in love, war and wireless,”” said Gottenberg. “”It’s up to the customer to determine what is best for them.””

Comment: info@itbusiness.ca

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