smartphones - JF Bélisle

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.

1. Manufacturers

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)
2. HP
3. HTC
4. LG
5. Motorola
6. Nokia
7. Palm
8. Research in Motion (BlackBerrY)
9. Samsung
10. Sanyo

2. Retailers/providers

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
2. EastLink
3. Globalive
4. Public Mobile
5. Shaw
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…

5. Consumers

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.

Conclusion

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?

Jean-Francois Belisle

Convergence, convergence and convergence, but what the heck are you talking about? Convergence can take many forms and since it is a buzzword for managers – along with words such as “viral”, “word-of-mouth”, “social media”, “sustainability” or “economic crisis” – there are still many individuals that have difficulties to define what convergence really is. According to the Merriam Webster online dictionary, the word “convergence” refers as: “the merging of distinct technologies, industries, or devices into a unified whole”. Thus, in relation to this definition, the problem with the word “convergence” is that it can take many forms. To be more concise, it can take at least three forms that are useful to know for e-marketers.

The first form of convergence is used in terms of technological tools. In this way, most of useful (and even useless) electronic devices are now integrated in smartphones. In fact, most smartphones include (or will include) features of “traditional” cell phones, but also, devices like cameras, computers (desktop or laptop), electronic agendas, GPS, MP3 players and video game consoles. Moreover, it seems like a matter of time (but perhaps lots of time) before everyone has its own smartphone.

The second form of convergence is translated by the increase in the number of technological tools and transportations that converges to the Internet. Nowadays, it is possible to have access to the Internet in any transportation vehicle (airplanes, cars, boats and trains), as well as via many technological tools (cell phones, computers, interactive digital televisions, interactive kiosks and smartphones). Linking this second form of convergence with the first form leads me to predict that the convergence in terms of technological tools in smartphones will also result in an explosion in the number of smartphones kit available for any type of other technological tool, similar to the iPod car kit.

Finally, the third form is the convergence of the content of media to the Internet. Thus, more and more media such as advertising billboards, magazines, newspapers, radio stations, SMS, and television networks, produce content that includes an expression such as “visit our website at …”, that refers to a specific Internet website. By linking this form of convergence with the other two, media such as advertising billboards, radio stations, SMS, and television networks, will be able (in a near future) to instantaneously converge to the Internet by using smartphones. In the case of magazines and newspapers, it is still hard to predict what will happen, but the decreasing number of subscribers who actually read them will tend to convey those two media to concentrate their effort towards niche markets.

Convergence to the Internet - Not the isolated Internet metaphor anymore

In conclusion, if the “future is friendly” as the Telus catchphrase proposes, then everyone will end up in the next few years with a smartphone that they will be able to plug everywhere using some sort of kit. So, do you think the future is that friendly?

Jean-Francois Belisle

Pointing Towards a Competitive Future for Mobile Markets in Canada?

Three Types of Convergence – Is the Future Friendly?