On May 5th, U of Ottawa Law professor Michael Geist wrote an article for the Toronto Star arguing that the impending arrival of the Apple iPhone in Canada highlights flaws in our wireless industry, pointing out that we have high prices and poor choice. In response, Rob Bruce, the president of Rogers, wrote a letter to the Star saying that we have all the choice we need. I want some of what Mr. Bruce is smoking, because it seems to be truly distorting reality for him.
The truth of it is that Rogers, nicknamed "Robbers" by many pundits, only offers the choice of one high-priced wireless data plan versus another. Virtually every offering of theirs costs more, and delivers less, than the plans offered by their two competitors Telus and Bell. But even the plans of these other competitors are markedly higher than the cost of plans in our neighbouring country to the south, and US plans cost a multiple of the plans in Europe.
Last year, Rogers reported profits of $2.6Billion on revenues of $5.5Billion. That's nearly a 50% profit margin, and is higher than any company in the Fortune 100 listing; the most profitable telecoms company on that list, Teléfonica, had only a 12% profit margin last year, while Rogers was nearly 4 times higher!. It really does serve to bring meaning to the old phrase "Sure, you can have a monopoly without greed, but what would be the point?". And make no mistake, in many ways Rogers is a monopoly, for just a few years ago it bought out its only real competitor, Fido. And before you blame the Conservative government for that, it happened under the previous Liberal government.
Rogers is also a monopoly for technical reasons. Cell phones are very personal devices. If you want to buy and use a specific model of phone, you'll find it will run on only one network. A model like the iPhone will only run on the Rogers GSM network; it won't operate on the Telus or Bell CDMA networks (and vice versa for many CDMA models). And since Rogers coerces(1) customers into signing 3-year contracts (longer than anywhere else in N. America, if not the world), you are indeed in the hands of a monopolist as soon as you buy one of their devices. In the United States however, there are two GSM networks (T-Mobile and AT&T), so if you have an unlocked phone, you can switch between networks (though it must be pointed out that AT&T has an exclusive contract for two years on the original iPhone; other cellphone models can be bought 'unlocked' and as such are easier to move from one network to another).
In summary, we have the worst of both worlds in Canada: no choice, and no value. The current spectrum auction should bring a new player to the scene by 2009, but it's too early to tell if better prices for Canadians will result. Should we suspend judgment and wait to see what happens, or should we start agitating now to dump the restrictive Canadian ownership provisions in the cellular industry and let in right now the big foreign players with their markedly lower prices?
(1) Rogers' subsidiary Fido refuses to provide you with its latest wireless data package unless you sign a 3-year term.