It has taken awhile but someone – Globe & Mail columnist Derek DeCloet – has spelled out what the deregulation of Canada’s local phone market means: it’s highly unlikely there will be prices wars. Why not? It’s simple: the major carriers (Bell, Telus, etc.) can’t afford it because they’re struggling to grow revenue and cash flow any way they can. Think about it: if Bell decided to slash local phone prices by $2 a month to keep customers happy, it would be walking away from $300-million a year in sales. This explains why Rogers and Shaw have been able to sell digital phone service at premium prices, which feeds into their mantra of healthy ARPU and profitable growth. So, let’s just brush aside the idea of price wars because they simply don’t exist anywhere within Canada’s telecom landscape.
Update: Rob Hyndman has some thoughts as does Andy Abramson, who politely disagrees with my thesis based on the idea that Web-based services such as Skype will force prices lower. (Now, if we could only get SkypeIn in Canada!)
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Sorry Mark… what about long distance
Everyone points to LD as an example of what competition can produce but, sadly, I think it’s an anonmaly within the telecom industry. Maybe it has to do with the large number of competitors and the low cost of doing business. I see the other telecom sectors (wireless, high-speed Internet) as more indicative of how the local phone market will evolve price-wise.
Regarding SkypeIn in Canada:
you can subscribe to DID WorldWide as an alternative. Go to http://www.didww.com to get a Canadian number that will forward to your Skype for $5/month (that’s hardly that much more than the cost for SkypeIn, plus it’s paid monthly instead of upfront). Then just make sure you have SkypeOut and you’re all set!
Regarding pricewars:
A have heard from some people in “the biz” that Cingular is going to come to Canada sometime in the next 18 months. Every Canadian MVNO to date leeches off of Bell/Telus and none off of any GSM spectrum. So Cingular is planning on coming to town to offer a “true” North American plan.
I hope they eventually decide to build their own network. But that’s thinking way further down the line. Regardless, when they launch (hopefully), I think it will shake up the market a little.
Have we not seen price wars in Quebec from Videotron? And what about nomadic VOIP such as Vonage and Primus – a much lower price then Bell and Rogers with many more features.
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