Rogers Wireless kills CityFido with new pricing and minute cap structure: analysts

Rogers Wireless Inc. has for all intents and purposes killed the CityFido home phone replacement program by upping the cost, decreasing local calling areas, instituting a cap on minutes and implementing expensive out-of-zone calls, according to two industry analysts. They say the name remains, but the essence of the package has been completely removed. The country’s largest wireless operator unveiled CityFido’s new structure late last month when it introduced two versions of the controversial wireline replacement initiative. One remains priced at the original $45 per month, but the number of free anytime minutes per month has been capped at 750. The higher-end version runs at $65 per month with 1,500 anytime minutes included. In addition, the company has reduced the size of local calling areas and implemented out-of-zone calling at 50 cents per minute (out-of-zone refers to long distance calls) for both plans. Johanne Lemay, co-president of telecom consultancy Lemay-Yates Associates, says there is no question changes to CityFido will have a negative impact on subscriber additions to the package. Referring to the excessive long distance rates, she says, "I think what this is telling you, if you look over the course of 2005, this will seriously limit the takeup rates on CityFido…and that may be the idea. I would argue that Rogers doesn’t quite know yet exactly what they want to do with it, but I think 50 cents outside of zone (calling) is a definite disincentive, so that would bring clients onto other Rogers’ plans basically." The fact that local calling areas have also decreased in size takes away some of the attractiveness of the plan, says Lemay, adding that if Rogers continues to remove elements that were previously attractive from the program, the company might as well cancel it. Fido division president Alain Rhéaume remains convinced that CityFido is still relevant. In a news release, he proclaimed that CityFido continues to be a distinctive landline alternative and niche market offering. But Ian Angus, president of Angus TeleManagement Group, says nothing can be further from the truth. "Basically, there is still something called CityFido, but it is not what CityFido was at all. They have destroyed it. (Their) claim that it is targeted at a niche market is truly intriguing. These are people whose local calling area is smaller than the wireline local calling area. Basically they’re killing it. I suspect that there will also be over time pressure on current CityFido customers to migrate (to other Rogers’ plans)," he tells Report on Wireless. With CityFido essentially on its deathbed, the same can be said of wireless as a substitute for local landline. Angus explains that there is no incentive for the three national wireless operators to promote wireless in that way because they are already in, or about to be in, the local wireline market. This means "they have no interest in promoting wireline substitution or wireless as an alternative to wireline," he says. As long as the ownership of the wireless industry remains as it is today, "I think we can say there is going to be no effort to price or position wireless in such a way as to be a competitor to wireline. And when you’ve only got three competitors, you do not have a competitive market in my opinion. You’ve basically got an oligopoly and they will tend to price very similarly," Angus states. Rogers’ acquisition of Microcell Telecommunications Inc. last November demonstrates, Lemay says, that the wireless carriers have regained pricing power in the industry and that has already led to price increases. She notes that Bell Mobility has already upped prices and believes that Telus Mobility has done so also. Wireless number portability no panacea With the prospect of a less competitive rivalry in the Canadian wireless industry, RoW asked the two analysts whether the implementation of wireless local number portability (LNP) might be an answer to improve the level of competitiveness. Both are unsure what kind of impact wireless LNP could have on the industry. Lemay says that the introduction of wireless LNP in the United States "certainly wasn’t a watershed experience," but adds there could be an impact in Canada. "I’m not sure to what extent it has an impact on really supporting competition…I think it’s important for the clients, but I’m not sure how much importance it has in sustaining competition," she says. Angus says the lack of wireless LNP is only one barrier to having greater competition in the market. "Wireless number portability will help (to promote competition), but again it’s going to depend on the wireless guys doing it and implementing it properly," he says. The other impediment to greater competition, he adds, is the fact that wireline local service is priced at very low rates. A recently released Public Interest Advocacy Centre (PIAC) consultation paper advocates the implementation of wireless LNP, or as it calls it mobile number portability (MNP), as a way to stimulate competition not only in the wireless sector, but also for the provision of local voice services in general. "Number portability between WSPs and fixed-location local service providers can also enhance competition in the base local services market. Despite this market having been opened to competition in 1997, by 2003 new entrants had a market share of only 6% in aggregate. In view of the slow pace at which local competition is evolving, some commentators have pinned their hopes on entry by players using different technologies or approaches. Easy switching to mobile telephony may be one of the missing factors in the development of widespread local competition," reads the consultation document.

Rogers Wireless kills CityFido with new pricing and minute cap structure: analysts

News | February 8, 2005

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