Canada is one of the countries where consumers pay the highest mobile contract fees in the world. In short, this situation is mainly due to an oligopolistic/cartelistic structure that favors providers/retailers over consumers, which lowers competition and encourages scarcity on the supply side. The customer empowerment concept can essentially be thrown away for that particular market. To better understand how this market is evolving in Canada, and especially in Quebec, one interesting approach, that some may argue simplistic, is to use the 5 components of the Porter model: (1) manufacturers, (2) retailers/providers, (3) new entries, (4) substitute products, and (5) consumers.
Let’s start with manufacturers. This is where the competition is most aggressive, since it is an international competition. Companies continue to evolve and many new products are launched. The following companies are actually selling/competing in Canada.
1. Apple (iPhone)
8. Research in Motion (BlackBerrY)
Providers have to be considered as the starting point of our anti-competition story. First, there are not many providers/retailers, and secondly, all of these providers control other sub-brands.
1. Rogers controls Fido
2. Telus controls Koodo
3. Bell controls Solo & rent its network to Virgin Mobile
Thirdly, as in most countries, the low number of providers encourages exclusivity for a specific phone. For instance, Telus has, at the time being, exclusivity on the HTC Pro 2 which reinforces the power of the provider over consumers.
3. New entries
The end of this oligopolistic structure is still under legal fights, notably for access to networks. Up to 6 providers (for more on the topic, I would suggest to read the following post by Ian Hardy) are supposed to join the market in the next few years. Here is the list:
1. DAVE Wireless
4. Public Mobile
6. Videotron (already slowly entered)
Like in most oligopolistic markets, the entry of these new competitors would favor lower prices and give more power to consumers.
4. Substitute products
In comparison to other products, with the emergence of powerful smartphones that are integrating features (see my post entitled Three types of convergence – Is the future friendly? for a discussion about convergence), the mobile market in Canada is taking market shares away from other products such as cameras, MP3 players, electronic agendas,etc…
Many customers are still locked-in with awful 3-years contracts. Furthermore, the structure of monthly contract fees encourages these 3-year contracts. Some providers have even started to pay the end of some consumers contracts’ with another provider in order to gain new clients they would thereafter locked-in with 3-year contracts.
To conclude, the mobile market in Canada doesn’t favor competition at all which puts the consumers handicapped with expensive contracts. However, the possible entry of new providers should favor more competition and lower the prices in the next few years. Let’s wait and see what the future will be, and like the Telus catchy sentence say, we only hope that the “future is friendly” for the consumers that we are? Any comments?
5 thoughts on “Pointing Towards a Competitive Future for Mobile Markets in Canada?”
The current structure pointed out here is exactly why we will see a slower developpment for the m-business as a whole. I recently stumbled upon an article stating the current uses of m-business overseas and it’s potential for penetration in areas where there is no solid infrastructure in place i.e developping countries. http://www.ecommercetimes.com/story/68626.html gives some insight on what is and also some reasons for slow penetration in the US. We can transpose an additionnal difficulty with our telecommunication system.
@Jonathan. Thanks for your nice comment. That’s interesting to realize that the US are considered as moving slowly, while Canada is slow as molasses in comparison. Philippines are moving faster than the US, that’s still scary.
I just changed my cell phone last Friday. In Sherbrooke, Bell offers an incredible deal to University students. It cost me $200 to leave Rogers, but with Bell’s deal and with the $100 credit they give customers when we switch, I’m actually only paying $10 for a new cell phone. I think their strategy is really great to attract new clients that are currently with competitors. However, I have to admit I am disappointed since we do pay more in Canada than in Europe. And when I see all the technological advances they have in Japan and other Asian countries, I start wondering… When will providers offer us the same services, with a competitive price?
I’m from France and I have to say that I was surprised to see that Canada is fare behind France in terms of competition in the mobile market. Ans also, I can add to your posts that you could do the same demonstration in the internet market. In fact, in Montreal the choice is very easy to make: Videotron or Bell ?
Hey @Cassandra and @Eve, nice to hear from both of you and thanks for the comments.
Cassandra, I think your example is an interesting one in this nearly saturated market where more and more switching costs are taking in consideration by the retailers. Concerning your last issue concerning prices, I would tend to think that it all depends on barriers to entry that are related to legal issues concerning the network access. 2010 is crucial so I’ll hope for the best.
Eve, the point you’re making concerning the Internet market in Quebec is a good one. The Internet market in Quebec can be considered as a duopoly and sincerely this is certainly why Videotron is offering the Illico service that looks more like a 1990 Videoway-type of service than one offered in 2010.