Wireless firms rein in data price wars
At this time last year, phones were ringing off the hook at Rogers, Bell and Telus, as Canadians swamped the telecom giants with demand for deep discounts, in a price war sparked by Freedom Mobile.
Customers fumed at two- and three-hour wait times. Still, they waited, mostly, as the deals — $60 a month for 10 gigabytes of data — were so much cheaper than Canada’s notoriously high standard rates.
There could be some holiday discounting in the Canadian mobile phone market this season, but don’t hold your breath for anything like the price war last year.
A move last month by Freedom Mobile to make it easier to avoid data overage fees could prompt a response from other phone companies, but it’s unlikely to create anything like last December’s deep discounting, industry watchers say.
For one thing, last year’s discounts hit the bottom line at the telecommunications companies.
“Last year’s promotions were very aggressive,” said Maher Yaghi, a telecommunications analyst at Desjardins Securities. That started to affect the average revenue per user (ARPU) obtained by the mobile giants in recent quarters. That’s not something they’d be keen on extending any time soon.
Still, Yaghi acknowledged, price battles aren’t always driven by charts and data. “It’s not always rational. It only takes one guy to think they’re getting hurt by Freedom to respond to this, and then the others would have to,” he said.
Freedom unveiled its Big Binge Bonus, which gives customers an extra 100 Gigabytes of data, which they can then dip into in any month where they would otherwise have gone over their mobile data cap, during the course of a two-year contract. Rogers-owned Fido has had a similar offering called “Data Bytes” for over a year, but that’s restricted to five 1-gig sessions per month.
The Freedom move was applauded by industry watcher Laura Tribe, who said anything that chips away at the prices Canadians pay for their wireless data is a good thing.
So, Tribe added, is flexibility.
“What last year’s promotions did was address affordability. What Freedom has done this year is address flexibility,” said Tribe, executive director of Open Media, an advocacy group that “works to keep the Internet open, affordable and surveillance-free.”
Earlier this year, Finnish consulting company Rewheel unveiled the latest study to find Canada has some of the most expensive data plans in the world. In a 41-country study, Rewheel looked at how much monthly data consumers could get for 30 euros (roughly $46 Canadian). Here, the average was 2 megabytes, fifth-lowest in the study. In some countries, that same price buys you unlimited data.
Tribe wouldn’t be surprised to see the three national mobile carriers — Bell, Rogers and Telus — respond to the move by Freedom, which is owned by Alberta-based Shaw Communications, a regional player.
There’s a bottom-line risk to discounting, whether it’s through the carriers’ main brands or through their budget brands (Rogers’ Fido, Telus’ Koodo or Bell’s Virgin Mobile). But there’s a bigger risk to the carriers, Tribe argued, by potentially letting customers slip away for good to a rival company.
“Anything that challenges their market share, they are going to respond to,” said Tribe.
Representatives from Bell, Rogers and Telus pointed to current promotions, including some geared to the Black Friday sales, which have become an increasing feature of Canadian holiday shopping, especially online.
Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer