What did Canada’s big three telcos learn from the Verizon fire drill?

On Monday, Verizon CEO Lowell McAdam ended months of speculation with five simple words. "Verizon is not going to Canada". If Verizon's potential move into the Canadian market was merely the largest and most realistic fire drill the incumbents have faced to date, what did they learn?

On Monday, Verizon CEO Lowell McAdam ended months of speculation with six simple words. “Verizon is not going to Canada”. If Verizon’s potential move into the Canadian market was merely the largest and most realistic fire drill the incumbents have faced to date, what did they learn?

Whew.

That was an utterance likely voiced separately by BCE’s George Cope, Telus’s Darren Entwistle and Rogers’ Nadir Mohamed as the sun set on Labour Day in Canada.

In an interview with Bloomberg yesterday, Verizon CEO Lowell McAdam ended months of speculation with six simple words.

“Verizon is not going to Canada,” he said.

McAdam, it seems, had bigger fish to fry; on Monday morning the giant U.S. carrier announced it had reached a deal to acquire Vodafone’s 45% stake in the company for (U.S.) $130 billion.

The short, sharp declaration ends months of debate on the subject of whether or not Canadians would be better served with a fourth player that boasts more than $115-billion in annual revenue. The incumbent telcos have lobbied hard against the idea of the company’s entry, to the government and the general public.

BCE CEO George Cope went as far as to pen an open letter to Canadians.

“A company of this scale certainly doesn’t need handouts from Canadians or special regulatory advantages over Canadian companies,” he said. “But that is exactly what they get in the new federal wireless regulations.”

The Big Three claimed a disadvantage because current rules allow a new entrant to buy smaller Canadian carriers, buy more wireless spectrum than they can, and to piggyback on their wireless spectrum, rather than building their own.

But for months now, it seemed, they were fighting an uphill battle.

In an extremely popular article which was first syndicated by Cantech Letter and later picked up by The Huffington Post, University of Manitoba Masters Candidate Ben Klass pointed out that Cope was describing much the same conditions that Bell had when it first entered Canada.

“Bell began its life in Canada as a branch plant of an American company; in a strange twist of fate, it’s now a descendant of National Bell Telephone – Verizon – which is contemplating (re)entering the Canadian market.” said Klass. “And they leveraged this relationship to get an early leg up on the competition – using patents owned by its American parent, Bell quickly monopolized the market for Canadian telephone services, a monopoly it used to funnel profits back to the States. You suggest that “US giants don’t need special help from the Canadian government,” but that’s exactly how Bell got to where it is today!

So, for today at least, Verizon’s brush with the Canadian market was merely the largest and most realistic fire drill the incumbents have faced to date. The fact that Verizon is passing on the market is a clear victory for them.

“I would think there are champagne corks being popped right now in Toronto and Vancouver,” Iain Grant of SeaBoard Group told the Canadian Press.

But are the Cope, Entwistle and Mohamed et al heading for a real hangover? Their collective share prices will rise this week, but it seems the road ahead is defined by its uncertainty.

One of the biggest surprises is that Stephen Harper’s Conservative government seems more than intent on bringing competition to the Canadian market.

Industry Minister James Moore has been possessed of more determination than many casual observers might have expected. He openly criticized Rogers, Bell and Telus’s attempt to sway the debate with radio, TV and print ads that blanketed Canada in the second half of this summer.

“I think Canadians know very well what is at stake and they know dishonest attempts to skew debates via misleading campaigns when they see them,” said Moore. “Equally, Canadian consumers know instinctively that more competition will serve their families well through better service and lower prices.”

Another thing the Big Three have learned is that the public backlash against them may be larger than they realized, and that their campaign was simply ineffective against it. Klass’s article struck a chord, and it is clear that the more debate about a fourth player entering the market, the more educated the general public will be about the contentious subject.

The curious thing is that the three companies didn’t hammer home what was likely their strongest play; that Canada is actually middle of the pack, worldwide, for wireless pricing.

“Conventional wisdom suggests that wireless subscribers pay much less for service in the United States than they do in Canada, but a closer look at the numbers might tell a different story,” wrote tech writer Ted Kritsonis recently. Kritsonis says plans in many parts of Europe and Asia are much cheaper, and that “…$65 per month for a plan that only provides 1GB of data is still high by world standards,” but says the American market faces many of the same problems we do.

Next time round, we may be talking about Sprint, AT&T or T-Mobile looking north of the border. And at that time Rogers, Bell and Telus will once again forget their differences and present a unified front against the invader. When that day comes, the Verizon experience will have served them well, and the debate is unlikely to be as one-sided as this summer’s national harrumphing was.

This is good news for Canadians, as a more effective PR campaign from the Big Three cannot consist of weightless concessions; it can only be won by actually moving closer to consumer demands.

________________________________________________________________________________________________________________________________________

About Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

  • Jagdeep Singh

    We are not getting the basic points what they are saying. Here is a recap of them.

    - Verizon should come and do the rollout even in villages.
    - No international company should be given the loopholes to take advantage.
    - Will USA allow sprint to be taken over by Only Canadian companies and for significant
    discount the answer is no.
    - Big three are offering unlimited voice plans for 60 Bucks which is @ par with the US.
    - Govt should not block the local companies for bidding let every one big and a fair price for struggling companies

Read previous post:
Cantor Fitzgerald analyst Justin Kew says Amaya Gaming's imminent graduation to the TSX is one of many catalysts that could spur a strong second half to its fiscal 2013.
Expect a better second half from Amaya Gaming, says Cantor Fitzgerald

Amaya Gaming's (TSXV:AYA) Q2 results were a bit softer than he expected, but Cantor Fitzgerald analyst Justin Kew says he...

Close