Small B.C. wireless provider crowded out by incumbents

For much of the past half decade, small incumbent telco CityWest has watched its wireless business decline in the face of new competition that offered more advanced mobile services. Now it’s getting out of the mobile game altogether. In a release last week, the municipally-owned telco in Prince Rupert, B.C., said it will shutter its wireless business after reaching a deal that will allow its subscribers to switch to Telus Corp., the country’s second-largest wireless provider. In a telephone interview Tuesday, Donovan Dias, CityWest’s director of sales and marketing, said increasing competition and the cost of offering next-generation wireless services pushed the company out of the mobile business. “Over the last couple of years, as things started to migrate and move towards HSPA and LTE networks, the investment to get into that game just became overwhelming for us,” Dias said. “It became very difficult for us.” CityWest, which has operated as an incumbent telco in Prince Rupert since 1910, first launched an analog mobile service in 1993, becoming the first wireless provider to offer services in northwest British Columbia. By the mid-2000s, CityWest decided it was time to upgrade its analog wireless services to digital and, in 2007, it struck a deal with northern telecom provider Northwestel Inc. (a BCE Inc. subsidiary), which allowed the company to offer wireless services over Northwestel’s CDMA network as a mobile virtual network operator (MVNO) provider. For several years, Dias said, CityWest’s MVNO service was a good business proposition because it allowed the company to decommission much of its analog network while continuing to offer wireless services, which it could bundle along with home phone, Internet services and cable TV. “It was absolutely profitable,” Dias said of the company’s MVNO deal with Northwestel. “It was one of the more profitable services in our portfolio at the time.” Around 2009, incumbent providers Telus, BCE and Rogers Communications Inc. launched their own mobile networks in northern British Columbia using HSPA wireless technologies, which offered faster data connections than CityWest could provide over Northwestel’s CDMA network. Since then, Dias said, the company has seen about half of its wireless subscribers leave the company for one of the incumbents, bringing its total wireless subscriber base well below its historical peak of about 5,000 customers. The drop in subscribers, he added, made the wireless service unprofitable, and forced the company to consider other alternatives to its previously lucrative MVNO deal. “We looked at what it would cost for us to actually build our own network and looked at opportunities for us to partner,” he said. “We knocked on several doors that were out there and there was just not a deal that was worthwhile for us to make a business out of it.” Under its deal with Telus, CityWest’s wireless subscribers will be allowed to transfer to the Vancouver-based incumbent provider without incurring a cancellation fee, the company said in its release. Those subscribers will also be allowed to trade in their CityWest wireless devices in exchange for credits towards a new Telus device, the release added. Brent Johnson, Telus’ vice-president of mobility solutions, said in an interview Tuesday that Telus and CityWest will also develop joint promotions and joint packages under the deal. He declined to say whether this would include packaging options that would allow CityWest to bundle Telus wireless services with its other products, or whether CityWest will receive a payment for each of its wireless subscribers that transfers to Telus. “That is definitely something that we aspire to do as part of this agreement,” he said of cross-promoting products across the two companies. “We haven’t nailed down the specifics but that’s the idea.” Keith Stevens, the chairman of Woodstock, Ont.-based Execulink Telecom Inc., said in an interview that the ability to bundle wireless services with other products is important to small telcos because it allows them to compete for subscribers against larger providers who can offer bundled services. He said this was a major factor in Execulink’s decision to launch its own HSPA+ wireless network in southern Ontario two years ago. “Customers want that quad-play,” he said of bundled packages that offer wireless, home phone, Internet and TV services. “They want their cellular bundled with other phones and that’s what we’re trying to offer our customers.” While Execulink’s wireless service was designed to help the company retain its existing home phone, Internet, and TV subscribers, Stevens said the company has also been able to make money off its wireless offering so far. “We never suspected it to be a huge success on its own because we’ve always marketed it as another add-on for existing customers,” he noted. “It’s meeting its need quite well.” Dias said CityWest’s wireless customers have also complained to the company that they were unable to use popular mobile devices with its CDMA service, such as Apple Inc.’s iPhone products. He said part of the company’s motivation to strike the deal with Telus was to ensure those subscribers could gain access to “the latest and greatest technology” when it starts to shut down its MVNO wireless service in April or May. Johnson noted Telus has been building out its wireless network across the rural highways that connect Prince Rupert to the rest of the province, and that it plans to extend its LTE network to Prince Rupert next year. Telus, he added, also has the ability to extend that network further throughout British Columbia’s northwest, giving subscribers more flexibility to use their mobile phones while travelling throughout the province. He wouldn’t say whether CityWest would have been able to offer the same breadth of coverage to its MVNO subscribers, though he noted that its easier for a larger provider to build a wider network footprint. “What I know about the wireless business is that scale matters,” Johnson said. “Access to the latest technology, to be able to continue to invest in technology and to be at the cutting edge is extremely important.” Dias said in an email Tuesday evening that CityWest will refocus its energy and resources after shuttering its wireless service. “As the saying goes, when one door closes, another opens. Although we are exiting the cell business, CityWest is on the cusp of some tremendous opportunities,” he said. “We have branched out into other areas, and by transitioning out of cell, we will be able to focus our energies on developing some exciting new products, which we’ll be announcing later in 2014.” — With reporting from Nicholas Kyonka at nkyonka@thewirereport.ca and editing from Anja Karadeglija at akarad@thewirereport.ca

Small B.C. wireless provider crowded out by incumbents

News | December 19, 2013

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us