Also read and respond to our blog: CANADIANS LAMBASTE BELL MOBILITY, TELUS OVER 15 CENT “CASH GRAB”
Lawrence what’s the current status of Ottawa’s wireless spectrum auction?
The auction should be over almost any day. The [bidders] will then write their cheques to the Federal government. There’s a 10-day waiting period, and then Ottawa will say who’ve they’ve blessed from among the participants.
Successful bidders will be free to enter into partnerships or sell their licenses to one another. This has been countenanced by Industry Canada. How that plays out really depends on what will happen in some back rooms.
For example, we know Shaw Communicaitons in the West has been very aggressive in the auction, but has also been very blunt in saying they would like to sell their license if they get one. The second phase will be in the backrooms.
Is the auction likely to bring about any big market shifts?
So far it looks it looks very interesting. There’s potentially going to be more regional newcomers than expected.
Also the fact that Egypt-based Orascom – a company with deep pockets and extensive experience – is backing a small Toronto entrepreneurial operator, Globalive, could herald some big changes.
Orascom, which wants to set up a major network, has ample experience in an intensively competitive part of the world – Europe, the Middle East and Africa. What’s more, 96 per cent of their wireless customers- across the world – are pre-paid. So it’s the exact opposite of the situation in North America. They may come in and appeal in a big way to our pre-paid cell phone customers (those not on a monthly plan).
Also, [Orascom and Globalive] may try to provide some things that we hear a lot about in Europe, but don’t have so much of in North America – such as easily interchangeable SIM cards, the ability to top up your SIM card on your cell phone yourself, and so on.
How do you see users reacting to the possible entry of such players? Will they shift loyalties?
It’s a deregulated market and those who aren’t locked into a plan can go somewhere where they’re not treated like they were by Bell and Telus [that recently announced they would start charging pay-as-you-go customers for incoming text messages].
The decision by Bell Mobility and Telus to impose a 15-cents-per-incoming-message charge on their pay-as-you-go customers has sparked such a furor. What’s your take on the issue?
Up until now, the notion was that [incoming] text messaging, which rides of the voice network, was free. You could pay a few bucks a month to have the option. But basically for the provider the notion has been that it’s riding on an unused part of the network. Everytime we SMS each other, we’re using a portion of the voice network on a cell phone, which isn’t being [otherwise] used. So right now if I have a cell phone on, there’s almost no signal. The cell site knows that I’m on, the phone knows that I’m on, but there’s 55 other kilohertz of capacity that’s not being used.
But Bell and Telus justify the new charge citing the exponential growth of text messaging in Canada. They say they need to recover their investment in the network that supports this growth.
My first remark would be: if that’s the case then everybody who has a text message plan…why don’t they pay for a lot more usage. I think [the Bell-Telus claim] is a bit of a smokescreen or a specious argument that belies [the real reason] they’re doing this.
They are targeting people who aren’t on a plan. Clearly, it seems, they want to force those folk on to a plan – where they would paying a fixed amount of money a month that’s predictable and constant…an annuity stream if you will.
Some have gone as far as to call this a cash grab…
It’s surely a cash grab, but I don’t think that’s the motivating factor. I think the economics and demographics are such that it’s not going to result in a massive windfall for the two carriers. There are 45 million text messages being sent by Canadians every single day. And if we look at the approximate 18 million wireless customers in Canada right now – if 10 or 11 per cent of them are pre-paid – 10 per cent of the people paying 15 cents each…isn’t going to break the bank for the phone companies.
If it isn’t going to be such a windfall for them, why did Bell and Telus announce this scheme – given the risks involved from an optics and PR standpoint?
Clearly some sort of business strategy decision that’s in line with the broader move away from pre-paid in general.
And we can ask ourselves, if you’re Bell and Telus even if it’s a minority of customers that are on this plan that you’re affecting…coming into a more competitive environment do you really want to be alienating and frustrating those customers.
And I would say the bigger marketing gaffe may be that they are alienating the very segment that isn’t locked into fixed term contracts, that is free to switch to any other provider.
The persons in the backrooms [responsible for this decision] probably forgot all that’s currently happening in the sector or didn’t put the two together.
It certainly underscores what [Naguib Sawiris] the CEO of Orascom Telecom – the Egypt-based company backing Globalive – said. He said he is greatly looking forward to competing in Canada because of the lack of competition here.
It seems to me Bell and Telus couldn’t have made this announcement at a worse time. What do you think?
There’s a timing issue – but it isn’t just about basic public relations, namely do they look bad or greedy.
The more fundamental issue right now is that the wireless spectrum auction – being concluded in Canada – is going to see licenses awarded to newcomers. And one of them – Orescom – very much wants to stoke the competitive flames of the wireless sector in Canada. Wireless is now the single biggest segment of the telecommunications market in Canada.
While charging for incoming messages may not provide huge revenues to Bell and Telus, if you consider the flip side, the [negative] impact on the average Canadian consumer…
…Sure 15 cents per message is a bunch of money. And if you watch young people texting, at least those who are keen on it… I know I can send many hundred emails a day on my computer. I don’t do a lot of texting on the phone. But if my vehicle of choice were this wireless device, I could easily do 100 texts a day…That’s 15 bucks. To a lot of us it may not seem like a huge amount of money. But that’s almost as much money as those on a pre-paid rate would spend on a month talking on the phone. And you’re on pre-paid because you’re watching your nickels.