Usually when you write a post title in the form of a question in infers that you might have an answer. The truth here is that no one really knows what will happen now that Verizon appears to be aggressively taking on the “Big 3” telcos in Canada (Rogers, Telus, and Bell).
In case you’re not a geek that begins their day by scanning through a couple of newspapers, you might not have heard that Verizon (one of the major players in the massive American market) recently made a splash by purchasing Wind Mobile for roughly $700 million. While not confirmed, there were also rumors being published (don’t you love how journalists have had to sacrifice the integrity of their reporting in order to compete with blogs and modern media?) that Verizon was looking at snapping up other assets in the Canadian market such as Mobilcity in order to compete with the big boys long term. In addition to all of this Verizon has confirmed that they will be aggressively competing in the upcoming government auction of the 700 mHz spectrum that is seen as a key resource in the telecom market.
Our Love Affair With Stability
Another day another large number on the front page of the business section which will likely have no bearing on my life right? Maybe not. It can’t be denied that us Canadians love our Oligopolies. Banking, Grocers, Telecos, Pipelines, Railways, many Canadian sectors are routinely dominated year after year by the same names operating under very similar systems. This is very nice in terms of stability and very nice for dividend-conscious like our staff writer Young who enjoy raking in the premiums generated by oligopolies, but not so nice for Canadians on the consumer side of the argument.
Between Rogers, Telus and Bell the Big Three currently control about 90% of the Canadian market. They have so far successfully made it nearly impossible for any upstarts to become serious contenders and gain any major market share. While certain regional entities such as MTS and Sasktel have fared ok within their niche, it doesn’t take a merger genius to figure out that one day it will likely be impossible for them to stay competitive with the big boys.
Meeting Their Match…
The thing about big guys though is that they are often so used to being the bully, they’re not sure what to do when someone bigger than them steps to the plate. If our three amigos in Canada were the biggest boys on the elementary school playground, then Verizon becomes the 8th grader that ventured across the playground in order to create chaos. Verizon has roughly 90 million subscribers in the USA and is much larger than all three telecos combined. They certainly have the backing to survive the initial hostility that has been so intimidating for other businesses looking to gain market share in Canada. Apparently I’m not the only one to think this way since Canada’s entire teleco sector took a major beating yesterday when the news broke. While some Canadians may instantly revert into protectionist mode and the idea of the big bad American company that has come to take us over, the truth is that this should be a great thing for most Canadians.
Bad for Investors, Great for Consumers
One basic truth of the free market is that the more competition to offer a product or service, the better value the buyer is likely to get for their money. Canada’s three telco brethren had gotten pretty comfortable in their song and dance and it was time for someone to break us all out of the rut. Verizon has unparalleled (in Canada anyway) economies of scale to work with in terms of buying cell phones and offering free perks to go with their plans. At the very least, I think one can safely assume that the promotional plans that will be offered by the new kid on the block, and the competing offers by the incumbents will be great to take advantage of.
A North American-wide Plan?
Personally, I’m really looking forward to seeing what sort of North American-wide plans Verizon can put together as well as if they can offer some sort of non-roaming plan in the USA. I have a lot of family in the States and tend to vacation there often (as I know many other Canadians do). There are ways around the roaming fees and long distance charges already (Skype offers a great service as a cheap rate for one) but these features in a plan would definitely make it more attractive to me. With the huge network Verizon has in the States I don’t see why they wouldn’t offer such a plan. I know it would be an instant hit in communities very close to the USA border (one of which I grew up in).
Related: Negotiating a Cell Phone Plan
When you combine these developments with the government’s ruling about two year contracts being the new maximum in Canada, you get a much rosier picture for Canadians than was the case a couple of years ago. This is a major positive for consumers since Canadians pay some of the highest rates in the world for our internet and phone packages. I’m nearing the end of my current contract and I definitely plan on checking out what Verizon has to offer (although since I live in Manitoba I’m not sure if their coverage will extend my way any time soon).
What about you? Are you going to stay loyal to your Canadian teleco overlords or are you considering on jumping on the massive bandwagon that Verizon is cross the border with?