Monday, June 04, 2007
Just how cozy is Canadian wireless?
It is easy to point to the national subscriber share of Canada's major wireless carriers and complain about a cozy oligopoly. After all, if you look at the numbers with a little blurred vision, the big three each have about a third of the market.
Such a simplistic assessment fails to consider substantial regional differences as seen in the table below.
Interestingly, when looking at these provincial numbers, US consulting group ETI suggests that this table provides "important evidence of market dominance and concentration". This is seen as leading to a less competitive wireless market, contributing to higher consumer prices.
What is the proper way to characterize the market? Is it a comfortably balanced market shared by 3 players or do we have genuine rivalry between the carriers, driving battles to improve market position province by province?
People seem to think that US-style price-based advertising is the real evidence of a competitive marketplace. I have a colleague who likes to say that price discounting is a lazy approach to marketing. Canadian carriers have learned from experience that, in a starvation contest, the fat guy usually wins.
So, instead of suicidal price discounting, we have carriers advertising that they are building "Canada's [insert superlative here: best quality / fastest / most powerful / coolest] networks". We have video calling from one carrier, another designing their own phones, another re-launching a new brand. Adding enterprise productivity enhancement services, corporate tracking services, turn-by-turn directions, multi-service bundling, and on and on.
All of the carriers looking for an edge to improve their attractiveness to the unserved market. All of the carriers trying to improve their share of subscribers and share of revenues. Province by province and nationwide.
Are these behaviors consistent with a cozy comfort with carriers' current market positions?
Once again, we see how important it is to scratch below a superficial assessment of the numbers.
Technorati Tags:
statistics, ETI, CWTA, CRTC, mobile service, market share
Such a simplistic assessment fails to consider substantial regional differences as seen in the table below.
| Wireless Subscriber Share (%) by Province (2005) | ||||
|---|---|---|---|---|
| Bell Group | TELUS | Rogers | Other | |
| Canada | ||||
| Newfoundland and Labrador | ||||
| Prince Edward Island | ||||
| Nova Scotia | ||||
| New Brunswick | ||||
| Quebec | ||||
| Ontario | ||||
| Manitoba | ||||
| Saskatchewan | ||||
| Alberta | ||||
| British Columbia | ||||
Interestingly, when looking at these provincial numbers, US consulting group ETI suggests that this table provides "important evidence of market dominance and concentration". This is seen as leading to a less competitive wireless market, contributing to higher consumer prices.
What is the proper way to characterize the market? Is it a comfortably balanced market shared by 3 players or do we have genuine rivalry between the carriers, driving battles to improve market position province by province?
People seem to think that US-style price-based advertising is the real evidence of a competitive marketplace. I have a colleague who likes to say that price discounting is a lazy approach to marketing. Canadian carriers have learned from experience that, in a starvation contest, the fat guy usually wins.
So, instead of suicidal price discounting, we have carriers advertising that they are building "Canada's [insert superlative here: best quality / fastest / most powerful / coolest] networks". We have video calling from one carrier, another designing their own phones, another re-launching a new brand. Adding enterprise productivity enhancement services, corporate tracking services, turn-by-turn directions, multi-service bundling, and on and on.
All of the carriers looking for an edge to improve their attractiveness to the unserved market. All of the carriers trying to improve their share of subscribers and share of revenues. Province by province and nationwide.
Are these behaviors consistent with a cozy comfort with carriers' current market positions?
Once again, we see how important it is to scratch below a superficial assessment of the numbers.
Technorati Tags:
statistics, ETI, CWTA, CRTC, mobile service, market share
Posted by Mark Goldberg @ 6/04/2007 06:50:00 AM 
Comments:
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What about wireless data Mark? How is it possible that we have the highest costs in the entire world? If this isn't evidence of a cozy oligopoly - than I don't know what is.
Arr, tis a doozy this question is. After travelling around the world a bit, you begin to get a sense that Canadian wireless pricing is a bit weird. System Access Fee? Talk about the elephant in the room that no one wants to talk about. Ditto Andrew's point on data rates. Here's a concept - how about selling voice and text messaging at rates that actually stimulate people to subscribe? Then there's long contracts, high break fees, bad customer service. Bell's recent quarterly subscriber numbers are awful. 13000 new subs in Q1 07? Is it any wonder that people won't buy?
Posted by 
: 3:34 PM, June 04, 2007
: 3:34 PM, June 04, 2007
Is it simplistic to say that the Canadian wireless market displays signs of being a cozy oligopoly? I have to admit that this has been my position for some time now. However, not being an economist, I Googled "oligopoly" for a description or definition of the term. Pretty well every site started with the classic and basic definition: "an oligopoly is a market dominated by a few large suppliers selling similar product". I think everyone would agree that this is the case in Canada.
The "tutor2u" site (http://www.tutor2u.net/default.asp) went on to add some additional descriptors (as did the others) to further clarify the term. A number of them seemed to apply to the Canadian wireless market. For example: (i) The degree of market concentration is very high (i.e. a large % of the market is taken up by the leading firms); (ii) firms within an oligopoly produce branded products (advertising and marketing is an important feature of competition within such markets); (iii) there are barriers to entry; and (iv) a high degree of interdependence between firms (i.e. each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions). One could argue all of these points describe the Canadian wireless market.
One other factor mentioned in the "tutor2u" caught my eye and you mention it as well - extensive use of "non-price competition" can be found in oligopolistic markets.
So, while this examination is incomplete, I believe it at least suggests that it isn't simplistic to say the Canadian wireless market could very well be a cozy oligopoly.
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The "tutor2u" site (http://www.tutor2u.net/default.asp) went on to add some additional descriptors (as did the others) to further clarify the term. A number of them seemed to apply to the Canadian wireless market. For example: (i) The degree of market concentration is very high (i.e. a large % of the market is taken up by the leading firms); (ii) firms within an oligopoly produce branded products (advertising and marketing is an important feature of competition within such markets); (iii) there are barriers to entry; and (iv) a high degree of interdependence between firms (i.e. each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions). One could argue all of these points describe the Canadian wireless market.
One other factor mentioned in the "tutor2u" caught my eye and you mention it as well - extensive use of "non-price competition" can be found in oligopolistic markets.
So, while this examination is incomplete, I believe it at least suggests that it isn't simplistic to say the Canadian wireless market could very well be a cozy oligopoly.
Posted by : 12:22 PM, June 05, 2007
: 12:22 PM, June 05, 2007 << Home
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