Can a successful regional mobile provider go national? Not in Canada.
At least, not if telecom giants Rogers and Bell get their way.
The Canadian Radio-television and Telecommunications Commission (CRTC) could learn a lot from the oft-cited maxim, “Sharing is caring.” Before you ask: No, this isn’t “Care Bear Economics,” we’re talking about here. We’re talking about practical solutions to fix our dysfunctional telecom market, where Canadians pay some of the highest cell phone bills in the industrialized world.
Indeed, this maxim has found itself at the centre of a debate playing out over the future of new, innovative, mobile phone providers in Canada in a surprising way.
As we blogged last week, Rogers is actively trying to kill a brand new Canadian cell provider. In January, a cell phone startup called Sugar Mobile launched $19 a month wireless plans – a price that customers of the Big Three (Bell, Rogers, and Telus) can only dream of.
But, just a few weeks later, Rogers undertook efforts to block Sugar Mobile from roaming on their wireless networks, claiming that Sugar is violating the terms of agreement between the two companies. The CRTC has since intervened to investigate the matter, and OpenMedia plans to fight Rogers’ anti-competitive efforts tooth and nail at the Commission through a detailed policy submission on March 17.
So, why does Sugar Mobile need access to Rogers’ network? Sugar Mobile’s service operates a thoughtful, highly innovative hybrid WiFi and cellular network. The model follows in the footsteps of movers-and-shakers in the United States, such as FreedomPop, Republic Wireless and Google’s Project Fi, which have disrupted the cellular market through their hybrid service, and are doing customers a huge favour in the process.
For you policy wonks out there, this makes Sugar (and the others) “mobile virtual network operators” or “MVNOs” instead of facilities-based operators like Bell, Rogers, and Telus. In short, it’s another, more efficient way to make use of existing cellular infrastructure and sell cell phone services.
And we think the prices of these providers speak for themselves. Here’s an excerpt from Bloomberg’s round-up on the three company's services in $USD:
[Google’s Project Fi] plan costs $20 per month for talk, texting, and Wi-Fi and data plans start at an extra $10 a month. At Republic, by contrast, 40 percent of customers pay $10 or less a month. FreedomPop offers a certain amount of data at no cost, and only half of its customers exceed that. The average user pays $7.50 to $8 a month.
There’s no doubt Canadians (especially low-income residents) would benefit from more services like Sugar Mobile, or the type of pricing described above.
It’s also worth remembering that there is a huge digital divide when it comes to mobile services in this country. According to estimates from the CRTC, only two-thirds of Canada’s lowest income residents have cell phones, compared with 96% of the highest income earners. This is a big gap that we need to fill.
However, some observers have reacted poorly to Sugar’s entrance. They’ve argued, for example, that Rogers shouldn’t have to share their network if they don’t want to, or that Sugar is getting a “free ride,” or that Rogers isn’t to blame here – they’re just “enforcing the rules.”
But here is why these commentators are wrong. Like, dead wrong.
First and foremost: sharing is caring. One of the biggest reason the federal government’s strategy to lower cell phone prices and increase the range of providers has failed is simply because new providers were forced to build their own network. Unfortunately, that bar is technically and financially too high for new companies to justify duplicating national cell phone infrastructure that already exists, and that can be used more efficiently through fair open access rules.
To those who say, “They should have to pay their own way and build their own infrastructure,” I implore you to show me where that has actually worked in Canada – since Public Mobile, Mobilicity, and now Wind have all either failed or been sold to Canada’s dominant providers.
Second, what Sugar is doing is allowed under the CRTC’s rules. As I said elsewhere:
Rogers says that Sugar is violating the terms of its roaming agreement. But this is nonsense. Innovative services like Sugar, also known as “mobile virtual network operators” or “MVNOs” in policy-wonk-speak, are allowed in part under the CRTC’s Regulatory framework for wholesale mobile wireless services.
As we mentioned in our comments to the Commission regarding a recent attempt to ensure fair open access rules for MVNOs, the CRTC’s framework prohibits wholesale roaming arrangements from containing clauses that restrict MVNOs who operate on the roaming partners, which, in this case, is Rogers.
So then, to use the vernacular, “What’s the big deal?” Get this: Rogers is saying that because Sugar Mobile has innovated and spends half its time operating on WiFi, and the other half roaming on the available cellular network (just like the U.S. services described above), then they aren’t protected under the rules. Or, put simply: Sugar is being punished for innovating.
Third, this should be a Canadian success story. A small, successful, regional provider, Ice Wireless (Sugar Mobile’s parent company), has decided to go national and sell services outside its initial operating territory in Canada’s north. Remember: this company took on the challenge of doing business in one of the most geographically and economically challenging regions in the country.
Instead of allowing it to expand and succeed, we instead see Rogers (and their lackeys at Bell) using every trick in Big Telecom’s anti-competitive handbook to kill new providers and stifle innovation. Instead of growing and prospering to meet the needs of Canada’s cell phone market, Sugar Mobile is now being dragged through a long, drawn-out, bureaucratic CRTC complaint process.
Fourth, this case will set a precedent for other regional providers in Canada. Nothing — except this type of bullying from Rogers and the arguable ambiguity in the CRTC’s rules — is stopping other regional providers like Videotron, SaskTel, MTS, and others from doing the same thing that Ice Wireless has done with Sugar.
In fact, this model is very similar to what Rogers, Bell, and Telus have done with Fido, Virgin, and Koodo respectively. These providers are “flanker” brands which are owned by the Big Telecom giants, and operate nationally. How the CRTC comes down on this issue will clarify the rules, and send a clear signal that these types of services are, or are not, welcome in Canada.
Fifth, and finally, the stakes are high for residents of Canada’s north. We’ve spoken with a number of policy experts who are worried that, if Rogers’ anti-competitive efforts are successful, they will not only disconnect Sugar Mobile (and their customers) from using Rogers' networks, but also all of Ice Wireless’s regular cell phone customers.
Thus, ICE customers from the North could find themselves unable to roam on Rogers when they travel south. We’re keeping a close eye on this threat as the situation develops.
Here’s what we need you to do: we just launched a new campaign called Stop Blocking New Providersand are asking Canadians to sign on in order to show how many of us support greater wireless choice. Will you join us?
Please, sign now and tell the CRTC: "Do not cave to Big Telecom’s demands. Stop these giants from blocking innovative and affordable MVNO providers." You can sign the petition at https://act.openmedia.org/blocked.
In the meantime, we’ll be preparing our detailed comments in time for the CRTC’s March 17 deadline. We’re going to use every trick we’ve got to kick the legs out from under Rogers’ plan, but we need you to add your name and show the Commission that Canadians mean business.
Big Telecom’s cartel is long past its expiration date. We must continue to stand up, and build a citizen-driven movement that can counter the lobbying muscle of this cartel.
At this point, siding with Rogers means siding with rampant price-gouging. We stand at a cross-roads. Will the CRTC (i) allow a regional provider to go national? Or (ii) cave to Big Telecom’s demands and destroy innovation in Canada’s market?
In the meantime, our team will keep you updated as things develop.