Shaw ‘set off a bomb’ in cellular data fight
Renewed consumer choice and aggressive pricing by Shaw’s Freedom Mobile has “set off a bomb” in the cellular data market, one expert says.
Two years ago, the Canadian Radio-television and Telecommunications Commission set the stage for price competition by releasing cellular customers from confining long-term contracts that were the norm in the industry, said Lindsay Meredith, a professor emeritus at SFU’s Beedie School of Business.
Suddenly, it was much easier for providers to poach customers from their competitors.
Over the weekend, Rogers temporarily dropped its price for 10 gigabytes of data per month to $60 for customers with their own phone. Price-matching moves by Bell and Telus’ Koodo brand followed quickly. Ten gigabytes of data usually costs around $115.
“You can bet there are some fevered backroom meetings going on at the major carriers about what to do next,” Meredith said.
Another discount offer could trigger a “death spiral” of pricecutting, he said.
“These guys have done a wonderful job of avoiding direct price competition for quite a long time,” Meredith said. “Everybody’s product is exactly the same, like gasoline ... so they are very careful just to match each other’s prices and not undercut prices under any circumstances. That prevents consumers from playing one off against the other.”
That all changed in October when Shaw introduced a Freedom Mobile plan offering 10 gigs for $50, which “set off a bomb in the market,” Meredith said.
Shaw rolled out its LTE data service in Canada’s urban markets on bands available to the majority of handsets and added service for iPhones, according to Shaw spokesman Chethan Lakshman.
Its broader appeal and aggressive pricing likely triggered a rush of new customers, said Marc-David Seidel, a professor at UBC’s Sauder School of Business.
“People are now able to unlock their phones and switch carriers more easily, so that creates more competitive pressure,” he said. “That price shakeup from a fourth carrier (Shaw) is what sparked this.”
Even more change — and more competition — is coming.
Some canny Canadians are already taking advantage of US$40 T-Mobile One plans from the United States with unlimited voice, text and five gigs of data, even when the phone is in Canada, Seidel said.
“$60 for 10 gigs may be low — even half-price by Canadian standards — but it’s still well above what people pay in other countries,” he said.
Seidel predicted an even bigger shakeup when global players such as Google arrive with plans such as Project Fi, which offers unlimited calls and texts to U.S. customers for US$20, with flat-fee data that rolls over month to month.
In the meantime, customers who missed the weekend price war and want a better rate should call their provider and threaten to switch carriers, Meredith said.
“They have a lot of (price) flexibility for customer retention, and it’s far cheaper to retain an existing customer than to recruit new ones,” he said. “If this (weekend) is the start of price competition, consumers might win one for a change.”