Here is our take on this week's game-changing developments and three key provisions to make this really work for everyone. Read what will be possible and explore examples of tiny telecom differentiated propositions from around the globe.
You may have already heard the news, but it bears repeating. The Government of Canada, Navdeep Bains (Minister of Innovation, Science and Economic Development) and the CRTC released their updated policies on making wireless more affordable in Canada - all in the same week!
Once the initial excitement faded, Alex and I settled on being cautiously optimistic. With level heads and decades of combined experience in the Canadian wireless industry, we know just how much work it will take to truly make a difference.
The battle has just begun.
Government proceedings can last years, and the incumbents have time and lots of money. We remember very well both of the Wireless Code of Conduct (WCOC) proceedings. I had a chance to participate and took a lead role in the discussions that brought consumers things like shorter contracts and rid the country of antiquated phone unlock fees. We also understand the tactics that these companies use to drive their customers to spend more money. They own the brands that restrict international roaming, limit you to 3G data speeds, or charge you for a weekend at the cottage. It seems that the goal of big telecoms to use all decoy brands (sometimes located side by side in the shopping malls and all owned by big telecoms) is to make your connectivity experience not quite right, so you give up and accept the high cost of major brands.
Settle in for a little while.
This will be a long post because Alex and I are on a long flight home from the Mobile World Congress in Barcelona, so all we can do is talk and type and enjoy the view from up here.
We’ve got some great examples from around the world to share, also our perspective on the Canadian wireless industry, and our initial reaction to the notice of consultation.
If you want the TL;DR, click here.
The wireless networks are world class, but the wireless service is not.
Up until now, the Canadian wireless industry was protected by regulations that allowed the big telecoms to make all the decisions about who could offer services in the Canadian market. This sounds fair, since they’re investing in the construction of mobile networks. Credit where credit is due, the engineers at Bell, Rogers, and Telus have built some fantastic network facilities. On the flip side, there are plenty of other countries with great networks who don’t face the same affordability issues or completely miss what wireless subscribers like seniors, youth, new Canadians, people that are looking to save and small business really need. Wireless service in Canada is sub-par and it's disproportionately affecting certain groups of people. Just try to find an affordable LTE plan for your parents or kids that works anywhere in Canada and includes voice and bit of data. Something's clearly amiss.
All of today’s telecoms are exactly the same for a reason.
Focusing on purely infrastructure competition makes it almost impossible for new innovative companies to enter the market. It costs a lot of money (billions) to build a network, so it makes sense that new companies making that kind of investment tend to follow a similar business model.
When a new wireless service provider enters the market to build a network it looks something like this:
Buy a Spectrum License
Licensing wireless spectrum from the government lets you transmit cellular signals over the air. Spectrum is a finite natural resource – it’s the reason that every radio dial starts and stops at the same frequencies. It’s also the reason it costs a truck load of money.
Build Lots of Towers
Leasing land or rooftops and building the physical infrastructure is a long process. It took 10 years for the fastest regional rollouts that Canada has seen to be absorbed by bigger companies.
Create Multiple Brands
After all that time and investment, it's time to start offering your service. To do that, you need a few different brands for marketing and advertising, plus several thousand plan variations to sell the megabytes, messages, and phone calls your network delivers. Then, you have to open stores, call centres, and hire full teams of people to oversee and manage all this complexity you’ve created.
Even after all these expenses, the average profit margin is still 39.5%. On top of that, the Canadian wireless market is growing in size. Shareholders and investors like a steady return from investing in those with market power, and in Canada telecommunications business is good.
Up until now, anyone who wanted to enter the market and compete had to follow the same path. This is hugely expensive and ends up creating nothing but more of the same. If you’ve ever wondered why so many of the offerings look like they’re copy-pasted, or why everyone raises prices at the same time – this is why. It pays not to do anything different.
More of the same hasn’t translated to a more affordable and competitive marketplace. All of the smaller companies who followed the infrastructure path have been bought up by the big ones and the prices simply rise again.
This week proves that Alex and I aren’t the only ones who think something about this approach needs to change. The Canadian Government finally stepped in and now there is no turning back.
Previous attempts at breaking this vicious cycle from outside failed.
There have been some attempts in the past few years to break into this market without building a brand new network infrastructure. They’ve all failed, or been shut down by force. Yes, that doesn’t sound too promising; however, they all made similar mistakes – trying to break into the market through loopholes or slightly illegal interpretations of existing business contracts with mobile networks. Many of them also tried to offer rock-bottom prices which were designed to grab a lot of customers very quickly, but were not sustainable in the long run.
The good news is that balance is possible – everyone can win, from consumers through to the big telecoms. In other countries there are hundreds of wireless companies to choose from, and they still continue to invest in new technologies and better coverage.
Tiny telecoms (MVNOs)
It's us! Built around affordability and the needs of our members we are an intelligent all-digital connectivity application. Digital experiences are not a compromise they are an upgrade to the sad state of service you already know. Read Alex's recent post about that. You can also register now to become a founding member. Learn more about our future service in our Build and Membership sections. Or ,if you are geeks like us, spend a week reading the MVNO regulations.
As we've already mentioned in our intro video, tiny telecoms are popular in US and around the world. They serve customer and small business needs that big telecoms do not. Here are some examples of the innovative tiny telecoms around the world:
Fresh off the press. And a bit edgy?! Look at that branding! We love it though. Not only are they fully digital but they have some cool network features. This is thanks to their decision to build their core network (different from the towers) from scratch. Space age. Literally.
Independently owned by Austrian value retailer Hofer. It's a 'supermarket brand'. We got this example from friendly Austrians on our flight, flying to Toronto for the first time. Without us even telling them, they already knew that they won't be able to be connected as good as at home. We promised to fix this for the next time they visit Canada. Oh and they have cost control. Just like we will. Goodbye bill shock!
Circles Life is also an MVNO in Singapore with the highest Net Promoter Score in the country (a score that reflects how likely you are to recommmend your service provider to others) and an all-in-the-app experience with things like SIM delivery. Net promoter score is negative in Canada. It's like we are in a different league.
Oister is from Denmark. They thought of building a service that is tailored for kids. We don't have that in Canada. Shared plans are all the rage, but monthly fee you pay for additional line doesn't even give you any additonal data. And with carriers constantly upping the data overage rates it is a dangerous place to be. We also don't think (as some) that a $50 per month ($700 per year out of pocket) plan is a "perfect" plan for kids. Screen time, proper controls, affordability and a reliable way to contact kids and keep them safe are important to any family.
They are from the UK. Run on 'Three' network which has dozen tiny telecoms on its infrastructure and they have data rollover! What you don't use goes to another month.
Definitely in our good books.
Republic is from the US. They are about saving money, not paying exactly the same and getting more of the service that you don't need.
They are many tiny telecoms in the USA. Check the WhistleOut if you are extra curious.
If you want to see it for yourself be our guest. We’ve done all of our own comparisons of US pricing by using WhistleOut. They’re sort of an Expedia for wireless prices. They update things daily and it’s worth checking out if you want to make informed decisions and not pick just the first option there is. Smart consumers keep companies honest.
(We’ll wait while you do that - this is your break before we go even deeper. Also, we are not affiliated with WhistleOut in any way.)
You’ve heard of most of the big telecoms in America, but what about all those other ones? Most of them are MVNOs (Mobile Virtual Network Operators), or as we like to call them, tiny telecoms. They sell services that use the networks already built by the big telecoms. They focus on innovation, and servicing smaller communities or people with specific needs. They fill in the gaps and ensure the market stays competitive.
So the government finally stepped in. What does that really mean?
After a decade of trying to improve competition in the wireless industry, the Canadian government has finally committed to supporting tiny telecoms. We’ve highlighted a few things from the directive they released this week, which tells the regulator to promote competition, affordability, consumer interests and innovation.
i. encourage all forms of competition,
ii. foster affordability and lower prices, particularly when there is potential for telecommunications service providers to exercise market power,
iii. ensure that affordable access to high quality telecommunications services is available,
iv. enhance and protect the rights of consumers in their relationships with telecommunications service providers,
v. reduce barriers to entry and barriers to competition for new and smaller telecommunications service providers,
vi. enable innovation in telecommunications services, including new technologies and differentiated service offerings,
vii. stimulate investment in research and development and in other intangible assets that support the offer and provision of telecommunications services;
To be honest, this sounds like it was written by us to describe dotmobile™ and our approach to building a tiny telecom. We are independent, with ambitions to be small and nimble so we can solve real-world problems through innovation. There’s a reason we think of ourselves as a telcotech company, rather then just a telecommunications service provider. Forward thinking technology companies build products and experiences purposefully to suit their user needs. They develop and adapt fast. They build efficiently. And with new technologies like eSIM we will soon be able to help more people to have more affordable and enhanced connectivity. Who need's to go to a physical store? The wind is at the backs of small innovators.
This is just the first step
All of the above is great! But to be clear, this is the start of a long road of negotiation between the regulator, the big telecoms, new innovative startups like us, and the Canadian public. The CRTC has announced a full review of mobile wireless services, with the presumption that tiny telecoms (MVNOs) will be required to fulfill the government’s directive (see under #39). YES! So why just a reserved smile from the team here and not a loud Canadian cheer?
The devil is in the details (remember the name of this post after all that reading?).
We’ve been thinking about this for a while, so let me share a few of the most important things that are needed to make sure that tiny telecoms fulfill their purpose.
1. Access to the latest network technology.
First is the connectivity itself. Everyone should have unrestricted access to all current and future network technologies, otherwise competition can be stifled on the technology level. Today that would mean LTE for data/text and voLTE for phone calls (clear HD voice, faster call setup times, and handover to any reliable Wi-Fi networks). These newer technologies are more efficient too, so anything less is discriminatory and backwards. We have already decided to include Connectivity Intelligence as a part of our application to consumers and small businesses. We will be able to measure the quality of connectivity (network type, service availability, average speed, latency, outages... you name it) our members get and hold our network partners to a standard by making this information available to everyone. Quality of connectivity should be a common goal and there needs to be clear provisions to protect MVNOs from technology discrimination.
2. Restrictions on manipulating phone software.
It takes two to tango. If a phone supports a particular service it can be configured to only support it on the network provider you purchased it from. Switch providers and you’re out of luck, even though the feature is listed on the box. We’ve seen our fair share of examples of this, partly as fallout from the Wireless Code of Conduct mandate that all phones be unlocked. The more open this ecosystem is, the more competition will flourish.
Big telecoms should not be allowed to limit features of phones that you own.
Let’s use an analogy. You sign up for a cable TV package and it comes with a new 4K TV. Awesome! A year later, you move and decide to try a different cable TV provide and find out 4K doesn’t work. The first provider decided to customize how 4K works on that TV so now it only works with their signals, even though buying the same TV from anywhere else wouldn’t have this problem. Consumers absolutely need to know these things ahead of making purchasing decisions on expensive equipment.
3. Agree on sensible wholesale margins.
We haven’t touched on the wholesale rates yet and we’re already talking about margins. Why? Answer: We want to see affordability happen next year, not in 2030.
Wholesale rates are set based on big telecoms cost, costs are set by accountants, and surely they’ve padded them at each step. The bottom line is that the big telecoms have to sell to each other at a maximum mandated rate of up to $14/GB, and guess what - this wholesale rate includes 40% margin (don’t believe it? read more on it here. The latest margin and inter-carrier rate has been available since 2015). This has allowed carriers to provide extended coverage where they struggled to build towers before. Imagine that. The big telecoms decided to stop building 3-4 towers next to each other and started co-operating. Credit is due…
Our recommendation on this key provision (considering the cost is already padded) is to regulate it at 25%. Anyone building world class networks and selling them wholesale will make a healthy 25% margin without having to open a store, answer a phone call, or lift a finger. This is a fair and balanced solution that will allow tiny telecoms to serve their customers, and the big telecoms to continue investing in their networks.
There are some important assumptions behind our 3 principles for sustainable competition. For example, safety and emergency situations shouldn’t need negotiation. Each carrier is obliged to supply 9-1-1 services with increasingly smart features, like routing emergency calls to local emergency services if you are in trouble somewhere on the side of the road. Mobile networks are obliged to do that irrespective of whose customer you are, or even if you’ve forgotten to pay your bill, or have a SIM in the phone. We debated including this as a 4th principle, but if we have to make this point we are in the wrong country.
Therefore we assume that we won’t have to fight for basic safety, privacy, and security provisions and that as a country we will avoid unnecessary duplication and complexity when it comes to such important matters. Full stop.
Why we need the power of our members.
The regulatory proceedings are going to be long (in addition to a delayed start of hearing almost a year from now, on January 13, 2020), and the big telecoms are going to throw everything they have at them. We know it’s going to be difficult, but we will have the power of our members on our side.
Signing up as a dotmobile™ member shows that you support Canadians like us who are building independent tiny telecoms.
Being a member can also be more than just signing a petition. We’re driving the business with our members in the passenger seat, and there will be lots of ways to contribute – from completing surveys, to early access testing of our app, to participating in discussions with other smart and talented members.
It’s important to us that everyone has a chance to be a part of the conversation. It’s easy to say “lower prices, yes please!” but we’ve been saying it for years and keep ending up in the same place. It’s time to make a difference.
Spread the word, tweet this out, get more of your friends and family to sign up as a member. Let’s work together to build a wireless company that has a different approach. We will be affordable and awesome! We promise.