And, MVNOs won’t help
By Ahmad Hathout
GATINEAU – The CRTC’s last mandate for the wireless industry – low-cost data-only plans which originally stood in lieu of a regulatory regime for mobile virtual network operators – have not been popular with customers, Rogers executives told the CRTC today.
“A substantially bigger package of data without voice and text is not as appealing” as less data with talk and text, David Watt, Rogers’ senior vice-president of regulatory affairs, said Wednesday in front of CRTC commissioners reviewing the wireless industry.
“I think we had thought low-cost data-only [would] appeal to people who use a fair bit of Wi-Fi but also would use a voice app on the data. It really hasn’t proven to be the case,” he added.
In its original intervention to this proceeding filed in May last year, the company believed the then-new LCDO price plans would provide “tremendous value” and “will enable more Canadians to participate and thrive in a digital economy.” It also said in the same intervention that “early indications are that the plans will be popular, but it will take time to observe their full impact in the market.
“The talk and text plans have proven to be more attractive,” instead Watt added. “These are ones that we introduced in conjunction with the $30, one-gig data-only plan.”
Still, Rogers president of wireless Brent Johnston said the company has a “substantial number of people” on the data-only plans. “We have also seen Canadians’ desire for full solutions remains intact and there’s many, many Canadians that are looking for other alternatives.”
It’s worth noting that both Bell and Telus reported similarly lower-than-expected uptake on the LCDO plans. Commissioners have questioned each of the operators about them, how they are marketed and positioned in retail and digital channels and how employees are trained to sell them to customers. To observers, it appears the Regulator believes the low penetration is at least in part due to poor marketing.
The CRTC had ordered the big three telecoms to propose low-cost data-only plans in lieu of mandating MVNOs as a result of its previous study of the wireless market in Canada, following a 2017 government order to relook at the issue wireless affordability. Critics mourned the decision as a missed opportunity, and panned the resulting low-cost data-only offers as bad deals. In fact, the Commission made the industry into a do-over when the first proposals came up well short of expectations.
Launched in March 2019, Rogers’ flanker brands – as have the other major cellcos – offer data-only plans ranging from $15 for 250 MB to $30 for 1 GB of data.
After the low-cost data plans were introduced in the market, Rogers then moved in June to be the first to release broader no-overage data plans, which eliminates overage charges but throttles users’ speeds after a certain data threshold is reached. Rogers said in its wireless review submission last year it would be premature for any change to the wireless wholesale policy in light of the new pricing developments.
The Regulator has been asking hearing interveners all about other cheap data plans with more data – something consumer groups have been clamouring for, including 2GB or 4GB packages in the $20 to $30 range. But Rogers cautioned about the impact of that price range – big discounts to what it currently offers.
Changing the price point for such a mandated plan would challenge all of “the pricing of all of the plans in the market across Canada,” Johnston said, adding their chatr brand offering of $30 for one gigabyte with unlimited nationwide talk and text is a plan that would satisfy the basic needs of Canadians “understanding how much Wi-Fi is consumed amongst our customer base when they’re not on wireless connectivity.”
Joe Natale, CEO of Rogers (pictured above in a cpac.ca screen cap), took it a bit further. “If it’s aimed specifically at groups of low-income Canadians or seniors with the right [means-testing], then I think it’s a conversation we’re willing to entertain/discuss and how to best approach it. If it’s a plan that’s probably available to everyone, it could be devastating overall.
“MVNOs do not bridge the digital divide. They do not bring new services to underserved communities. They do not bring more rural coverage to Canadians.” – Joe Natale, Rogers
He said the company’s average revenue per user is hovering around $55 with a break-even in the $40s, so a 4GB plan in the $20 to $30 range – which he said would impact two-thirds of Rogers’ customer base – would “eradicate” the “vast majority of our profits, and more importantly it would actually stop investment in totality.” Natale explained the loss of data overage charges when the company introduced its “unlimited” plans would seem “immaterial by comparison” to the damage that would be wrought by such a move.
The Big Three carriers have been pointing to how wireless prices have been decreasing over the last few years and that the Regulator should let the market continue to drive the downward trend without such interference as mandating MVNOs in Canada. When asked about the possibility of a new entrant coming into the market, Rogers executives said because of these price trends, they found that unlikely.
“I think there’s a real market difference between possibility and probability,” said Howard Slawner, vice-president of regulatory affairs for telecom. “I don’t think you witness a lot of market entry in a competitive market when prices are declining every single year, so even if the opportunity is there, whether or not somebody actually tries to enter, seems questionable.”
In response to a question about the Competition Bureau’s limited MVNO model – which recommends a conditional MVNO regime for five years where only pre-existing companies like Freedom and Eastlink could take advantage and only as long as those operators continue to invest in their own networks while using mandated MVNO to speed up expansion – Natale said the model is problematic for the complex questions it leaves.
Primarily, five-year sunset period for mandated MVNOs is unmanageable, said Natale. “We just can’t seem to figure out how we could actually effectively manage a five-year sunset if we were given responsibility for it,” Natale said, adding it would actually harm the regional players. “I don’t know what would happen in year four, for example, when there are customers being served by that provider yet they have not met their obligations with respect to building and then we’re into this very difficult circumstance that will probably start with a plea to extend the period longer and we will really never effectively be managing to that complexity, is the worry.”
Despite Rogers’ opposition to MVNOs, the company opined that if the regulator were to go that way, it should steer clear of the newer regional players, such as Videotron and Freedom, but subject older companies which dominate their regions, namely SaskTel and TbayTel, to such a mandatory regime.
Smaller players, including Distributel and Iristel, as we have reported, have called for full MVNOs without a limited timeframe because the full potential of such a new entrant may not be realized in a defined period, especially as short a time frame as five years.
“If we change the economic thesis of our industry, we will open up a digital divide on the wireless part of our world, which I think will be a shame,” Natale said, noting investment in rural regions would be hit first and hardest if the CRTC mandates resellers.
“Ninety-nine per cent [coverage] of Canadians is, I think, a trophy in our mantle as a country – I want to keep it there,” he added.
“MVNOs do not bridge the digital divide. They do not bring new services to underserved communities. They do not bring more rural coverage to Canadians… We have a massive appetite for investment and want to continue on our path of excellence in nation building, especially on the doorstep of 5G. But we can only make those bets when we have regulatory certainty and support in our future.”
The hearing continues Thursday.
