Assignment 1: Case study
The Big 3: Mobility Barriers*
“Realize that everything connects to everything else.”
– Leonardo da Vinci
While it may be said that we live in tumultuous times and it is becoming harder to find common ground, there is one statement that can be made with which Canadians would almost all agree: cellular phone bills in Canada are far too expensive.
A recent report from Finnish Research company Rewheel shows this concern over high prices to be well founded. Of the 50 countries ranked around the world, Canada came in second-most expensive, behind only South Africa. Canadians pay 25 times more than French citizens per gigabyte of data, and a whopping 1000 times more than Finland. One of the researchers at Rewheel, which has been analyzing wireless prices for the last decade, noted about Canada: “Canada didn’t used to be one of the most expensive countries when I started … although prices have been falling in Canada, they have been falling much slower than most other countries.”
So why does Canada have such a dubious distinction when it comes to their over-inflated cellphone bills? Much of the blame is placed squarely in the laps of the Big 3 telecommunications (telecom) companies in Canada: Rogers, Bell (BCE), and TELUS. Over the last 10 years, Rogers (range 31.6–34%), Bell (range 28.8–20.7%) and TELUS (range 27.8–29.3%) occupy close to 90% of revenue market share for Canadian wireless business.
When you walk in a mall anywhere in Canada, you do get the impression there are many more companies offering wireless services, often positioning themselves as lower-priced options to the Big 3. There is Fido, chatr and citiphone. There is Koodo and Public Mobile. There is Virgin and Lucky. However, Rogers owns the first three, Telus owns the middle two, and Bell owns the last two on the list. The appearance of diversity of options is more of a mirage.
| *Rothaermel, Strategic Management Canadian Companion Connect, 6th Edition, McGraw Hill, 2023 |
And this mirage has just gotten a lot more difficult to see with the always-soon-but-not-yet-happening merger between Rogers and the number four telecom in Canada, Shaw Communications. A Western Canadian company with over three million subscribers, Shaw offers Rogers a noticeable increase in customer and network size. Which is precisely why the Canadian government has made this process a drawn out one—trying to ensure that further consolidation in this industry in Canada does not continue to disadvantage the telecom customer.
Three sources of government approval are needed for such a deal, especially in such a concentrated industry. The proposed deal was announced in March 2021, but then it took a year to get the first layer of approval from the Canadian Radio-television and Telecommunications Commission (CRTC), which greenlighted the deal but did so with certain stipulations. The deadline for the merger was extended multiple times in the first 16 months, and in May 2022 the Competition Bureau of Canada, another layer of government approval, filed an application to block the merger, citing “worse service and higher prices for consumers.” Meanwhile, in late 2022 the third government approval source, Industry Minister Francois-Phillipe Champagne, added new conditions to the deal, including asking Freedom Mobile (owned by Shaw) to be offered to Quebecor’s Videotron, a Quebec-based telecom that would grow significantly in size if this transfer were to happen. As of early 2023, there is still no deal, with Champagne yet to deliver a final verdict. A court has struck down the Competition Bureau’s attempt to block the transaction.
During all this potential re-shaping of the Canadian telecom industry, a worst-case scenario played out on the technological side of the industry. On July 8, 2022, Rogers experienced a massive network outage, causing its customers to be unable to make wireless phone calls or use data. As well, Rogers Internet and TV were rendered useless. While the outage ended within hours, it revealed a potentially catastrophic flaw of having only a few companies and their networks control much of how Canadians communicate in a modern world. At a government hearing a few weeks after the outage, Rogers’ executives were grilled about the incident from all political parties, and it was concluded that a coding error was the cause. However, what came out of those meetings was a focus on what happens when a more challenging event, such extreme weather to cyber-terrorism, is the cause.
Even a cheerier aspect to telecom tech in Canada has a decidedly political edge: 5G. The fifth generation of wireless technology comes with upgrades in speed, reliability and capacity. Many of the technology aspirations of telecoms and their customers can be better imagined using the 5G network. With the many advantages come many headaches. In a country so large, promising coverage will be a challenge for remote areas, reigniting past concerns over care and concern for underserved rural communities in Canada. Security is a concern, not just from hacking but also potential espionage, as seen by the Canadian government’s reticence to provide Canadian 5G licenses to foreign-owned entities.
As the Toronto Star observed about the current state of Canadian telecoms, “A merger of Rogers and Shaw … is a loss for consumer choice and affordability. It’s a win for no one but rich investors when competition for profits prevails over competition for prices.” And with no Robin Hood in sight to take control of the situation, it may come down to consumers, and more specifically consumers turned voters, who end up deciding how the telecommunications industry continues to operate in Canada. Because being at the top of a worldwide list is great when it comes to standard of living, but not so much when it comes to paying exorbitant prices to make a phone call or watch a movie.
Questions:
1. The web of companies owned by or connected to the Big 3 telecoms in Canada is an intricate one. As mentioned in the case, one of the contingencies for the Rogers–Shaw merger is the sale of Freedom Mobile to Quebecor. But Freedom Mobile was not always known by that name. In fact, the company (although now owned by Shaw) started out as an up-and-comer that tried to take on the Big 3. Known as Wind Mobile, the company started in 2008 and for eight years attempted to enter the Canadian wireless market. Due to a number of factors, it had to exit the market in 2016 with its sale to Shaw. However, the company behind Wind, Globalive, is now back, this time trying to resurrect a defunct small Canadian telecommunications company. Search and do an assessment of this new bid for Xplore Mobile. Conduct a Porter’s Five Forces analysis on this bid.
2. Create a PESTEL analysis for a specific company in the Canadian telecommunications industry.
Sources might help you in this assignment:
“Canada Telecom Market Analysis – Industry Report – Trends, Size & Share.” n.d. www.mordorintelligence.com. Accessed February 13, 2023. https://www.mordorintelligence.com/industry-reports/canada-telecom-market.
Pedersen, Katie, Virginia Smart, and David Common. 2023. “Why Are Canadians’ Cellphone Bills Higher than Other Countries?” CBC. January 13, 2023. https://www.cbc.ca/news/business/marketplace-high-cell-phone-bills-1.6711205.
“The State of 4G and 5G Pricing, 1H2022 – Country Rankings.” n.d. Accessed February 13, 2023. https://research.rewheel.fi/downloads/The_state_of_4G_5G_pricing_17_release_1H2022_countries_PUBLIC_VERSION.pdf.
Church, Floella. 2021. “Most Popular Canadian Telecommunication Companies in (2021).” Canada Telecommunications. January 8, 2021. https://www.ctca.ca/most-popular-canadian-telecomunication-companies/.
“Canada: Retail Mobile Revenue Share 2020.” n.d. Statista. https://www.statista.com/statistics/1171206/retail-mobile-revenue-market-share-in-canada/.
“Rogers-Shaw $26-Billion Proposed Deal: A Timeline of Key Events.” n.d. Financial Post. https://financialpost.com/pmn/business-pmn/rogers-shaw-26-billion-proposed-deal-a-timeline-of-key-events.
“Deadline for Rogers, Shaw Merger Extended Again.” n.d. Financial Post. Accessed February 13, 2023. https://financialpost.com/telecom/rogers-shaw-quebecor-merger-deadline-extended.
“Rogers Executives Face Hearing into the ‘Complete Loss of Connection.’” 2022. Thestar.com. July 25, 2022. https://www.thestar.com/business/2022/07/25/rogers-executives-to-face-hearing-on-massive-network-outage-today.html.
“Opinion | Time to Launch a Government Run Telco to Force Rogers, Bell and Telus to Lower Prices? There’s Already a Precedent.” 2023. Thestar.com. January 14, 2023. https://www.thestar.com/business/technology/opinion/2023/01/14/why-canada-needs-a-nation-wide-public-telecom.html.
