When Industry Canada announced it was planning to boost competition by setting aside certain spectrum for new competitors entering the wireless marketplace, the Conservative government promised Canadians they would see a new era of robust competition and lower prices as a result.

Today, it turns out the only competition around is watching which of the three largest wireless carriers snap up their newest competitors first.

Telus, Canada’s third largest wireless carrier, today announced it was acquiring Mobilicity for $380 million — almost exactly the amount of outstanding debt owed by the Data & Audio Visual Enterprises Holdings’ venture. That means Telus will pick up its competitor just by agreeing to pay its bills.

Mobilicity said it was burning through cash at an alarming rate and simply could not attract enough customers in its home service cities Toronto, Ottawa, Calgary, Edmonton and Vancouver, to become profitable. It also reportedly lacked financial resources to take part in a forthcoming spectrum auction that would have been critical to the company’s long-term survival.

Informal merger talks among the three largest independent carriers — Wind Mobile, Public Mobile, and Mobilicity — reportedly went nowhere.

“Mobilicity has been losing a significant amount of money every month,” Mobilicity’s chief restructuring officer, William Aziz, said today. “The financial strength of Telus will allow the business to be continued in a way that will benefit customers and employees. An acquisition by Telus is the best alternative for Mobilicity.”

But that may not be the best alternative for Canadians. Regulators are expected to scrutinize the merger and current rules do not allow Telus to acquire the spectrum Mobilicity holds until next year. But with few other expected buyers, regulators may have no choice but to allow the deal to go through.

If approved, Telus will pick up Mobilicity’s 250,000 customers and likely switch them to Koodo Mobile, its prepaid division.

Minister Paradis

Mobilicity customers could do worse. Koodo Mobile, given a “C” grade by Canadian consumers, was Canada’s highest rated wireless carrier. That disparity hints at how much Canadians loathe their current wireless options.

Bay Street investors were not surprised by the announced merger, believing competition has its limits in a marketplace dominated by three enormous telecom companies — Bell (BCE), Rogers, and Telus — all collectively holding more than a 90% share of the Canadian wireless market. Many expect the remaining independent providers to also jettison their businesses or combine them in a last stand.

Industry Minister Christian Paradis, the Conservative government’s point man on independent competition in the wireless market, was caught off guard by the apparent faltering of the new carriers.

Paradis said he remains committed to making sure Canadians have a fourth choice for wireless service in every regional market in the country. But his only assured success is in Québec, where Vidéotron — the provincial cable company — competes with the big three providers. That competition has worked in that province to hold pricing down. According to The Globe & Mail, the average monthly bill in Québec dropped to $50.36 a month in 2011 from its peak in 2009 and is on par with where it stood in 2007. In comparison, according to CBC News, the average monthly wireless bill across Canada was $77 in 2013, up from $68 in last year’s survey.

Paradis is now pondering new regulations that would prevent the three largest carriers from buying out the remaining two independent providers just for their spectrum assets.

The merger will need regulatory approval from The Competition Bureau, Industry Canada, and the Canadian Radio-television and Telecommunications Commission.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/BNN Telus in Talks to Buy Mobilicity 4-13.flv[/flv]

BNN reported back in April that Telus and Mobilicity were in acquisition talks. The news channel speaks with Maher Yaghi from Desjardins Securities about the implications the merger would have on the Canadian cell phone market and the prices consumers pay. (5 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/BNN Telus Acquiring Mobilicity 5-16-13.flv[/flv]

BNN this morning reported the ball is back in Ottawa’s hands as the government tries to decide how it can salvage its wireless competition agenda. (6 minutes)

Rogers Communications, Canada’s largest cable operator, told investors at an investment bank conference it intends to accelerate plans to monetize wireless and broadband data usage this year.

Anthony Staffieri, chief financial officer of Rogers Communications told attendees at Morgan Stanley’s Technology, Media & Telecom Conference that Rogers’ future revenue outlook was going to be data-centric.

“We think data, monetizing data, is going to be a key aspect of that, both on the wireless side, as well as on the cable side of things,” Staffieri said.

Staffieri

Key to Rogers is the development of data plans that maximize revenue potential by exploiting the customer’s discomfort with overlimit fees. Staffieri admits the company has plans that can cost the company revenue if customers downgrade to a usage bucket that brings them very close to their usage limit.

But most customers do not choose those “exact fit” data plans. They typically select more expensive, larger-bucket plans so they can rest easy knowing they will not get slapped with a overlimit fee.

“And so they’re coming into data plans that are probably more than they need,” Staffieri said. “But for most users, what they’re looking for is comfort in usage. And so what we found is there’s a preponderance to buy more than what you need. So there’s no surprise at the end of the month in terms of billing. And so it’s all about that comfort in usage that we’re focused on in the price plans.”

In wireless, Rogers is also counting on the explosive growth of usage that comes after introducing 4G LTE coverage.

“Simply on 3G to LTE, you see an immediate growth in data usage,” Staffieri said. “Same users, but if you were to look at the data set, it’s just within a defined period of time, they can just access more. And so for whatever reason, whatever they’re doing with it, it’s just driving more usage, more efficiency and they’re using it in the business context.”

Staffieri says Rogers is experiencing 30-50% increases in data usage year over year. Rogers introduced new wireless plans in the fall of 2012 that refocus customers on their anticipated data usage, with gradually more expensive wireless plans to match.

“That really gets the customer focused on choosing something that continues to drive data growth,” Staffieri noted.

Rogers Cable broadband customers have also faced data caps and consumption-oriented billing for years. Although Rogers competitively responded to a Bell offer introduced in January that includes unlimited use service for customers who want it, that option comes at an added cost — one that can be priced up or down according to marketplace conditions.

Rogers primary focus is on encouraging its cable broadband customers to move towards higher-speed, more expensive data plans.

MONETIZED: Rogers sells a 25/2Mbps broadband plan for $52 a month that includes only an 80GB monthly usage allowance. A $2/GB overlimit fee applies, up to a maximum of $100 per month. Taxes, a modem rental fee or purchase, a one-time activation fee of $14.95 and up to a $99.99 installation fee also apply.

“On the cable side, making sure we have the best Internet experience was the other piece of it,” Staffieri said. “We ended the year with 90% of our footprint able to get 150Mbps data speed ($122.99/mo with 250GB usage allowance). And so to the extent that we continue to lead on Internet, we think that’s going to be important ingredient for the top line [revenue] growth.”

On the wireless side, Rogers is following the lead of big providers in the United States and gradually shifting the cost of new smartphones away from itself and onto its customers by adjusting its subsidy program.

“As we see data [usage] pulling [revenue] growth, overall, that bodes well for a continuation of the subsidization,” Staffieri said. “For us, it’s really been about making sure that we give the customer choice. And so when we combine that with the introduction of the Flex Plan, which we did in 2012, what we’re seeing is more and more customers opting into new handsets. But more and more, it’s on the customer’s nickel as opposed to our nickel on the Flex Plan programs.”

Rogers Wireless’ Individual plans. Rogers’ customers have to pay extra for long distance calling — most plans only cover local calls. Data plans are stingier and more expensive than what most Americans pay, and steep overlimit fees up to $0.02 per megabyte ($20/GB) apply. Like in the United States, Rogers is moving to bundle unlimited calling and texting into more of their plans. What differentiates more plans today is how much data usage is included.

Staffieri admitted Bell is giving Rogers the most competitive headaches in Ontario because of their aggressively priced promotions.

“Certainly, [Bell’s Fibe IPTV] has been competitive for us. In the short-term, we continue to deal with what I would consider to be aggressive pricing in terms of acquisition and retention offers by our IPTV competitor,” said Staffieri. “We’ve always been competing with their satellite product and so that competition has always been there. But I would describe it as certainly having picked up and continuing to pick up. And it’s largely been through pricing offers as opposed to product.”

Staffieri says Rogers is competing with improved set-top equipment like the NextBox 2.0 — a whole-home DVR with an improved user interface. It also offers customers Anyplace TV, a TV Everywhere service that allows customers to watch the Rogers’ TV lineup on tablets inside the home.

The Toronto Maple Leafs, the National Hockey League’s most valuable sports franchise, is today 75% co-owned by Bell Canada Enterprises (BCE) and Rogers Communications.

As is the case in the United States, Canadian cable companies are also facing dramatically increasing programming costs, particularly for sports programming.

But to a greater degree than in the U.S., Canadian media conglomerates own and control a larger share of cable and broadcast networks, programming producers, would-be competitors like satellite television, and even sports teams and the networks that show their games.

That positions them to negotiate with themselves over content costs, because they own or control the sports franchise, the cable or broadcast network that televises their games, and the cable, satellite, or telephone provider through which most Canadians watch.

“We’ve tried to be disciplined on the extent that content price increases are there because consumers want it, then we want to make sure we’re disciplined in passing on that cost to the customer,” Staffieri said. “And so we strive to make sure that in the TV and video business our gross margins are consistent.”

“So if you were to look at how that’s played out over the last several quarters and several years, it’s been fairly consistent. And so that’s what we strive to do is to make sure that those programming costs ultimately are passed on to the consumer, which is ultimately driving up the cost through their demand.”

General Motors announced Monday it was planning to introduce built-in 4G wireless connectivity from AT&T in OnStar-enabled vehicles starting with the 2015 model year, gradually ending a relationship GM has maintained with Verizon Wireless since 1996.

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The deal is part of AT&T’s aggressive expansion into the wireless connected-vehicle world and could enable streaming video and other bandwidth-intensive services not now supported by GM’s agreement with Verizon.

OnStar currently relies on Verizon’s CDMA digital network to provide a car phone and slow speed data network to share vehicle diagnostics and enable certain remote functions. Current vehicle owners can continue to use OnStar services delivered over Verizon’s wireless network. But starting in mid-2014, most new Chevrolet, Buick, GMC and Cadillac models will be equipped with AT&T 4G LTE service instead. In Canada, OnStar will continue to rely on Bell Mobility.

New GM vehicle owners receive one free year of OnStar’s basic service, which includes automatic collision notification, stolen vehicle and roadside breakdown assistance, remote door unlock, remote horn and light flashing to find a vehicle, remote vehicle diagnostics, and a built-in speakerphone that can be used to make or receive calls (after an initial trial, customers must buy additional minutes). Some newer GM models also allow OnStar staff to slow down a stolen vehicle and even disable it. After one year, the basic Safe & Sound package can be continued for $18.95 a month ($24.95 in Canada). Drivers that want to add turn-by-turn navigation pay $28.90 a month ($39.90 in Canada), which also includes all the basic features offered in the Safe & Sound package.

OnStar has traditionally only offered limited interactive data service with its telematics system, mostly powered through spoken voice commands. The new agreement with AT&T could mean your next GM vehicle will become a roving hotspot, powering smartphones, laptops, built-in televisions, and various in-car apps that need a 4G data connection to work well.

AT&T expects expansion into wireless in-car communications will be highly lucrative at a time when smartphone sales are starting to slow. There is no word on the cost for the AT&T-enabled version of OnStar, but prices will likely be higher than traditional OnStar service plans, and will vary depending on the amount of data consumed.

“We’re sitting on the greatest growth opportunity in history,” Ralph de la Vega, CEO of AT&T Mobility said in an interview with CNNMoney. “With Mobile Share, we don’t care so much anymore about what you’re doing on the network … but all those things like cars and home security are where the monetization opportunity is.”

In its latest annual Visual Networking Index, Cisco predicts by 2017 the average American will use a total of 6.2GB of data per month on various mobile devices. Last year, consumers used an average of 752MB. At current AT&T pricing without an unlimited data option, the average customer will pay at least $40 more per month in data use charges within four years.

AT&T’s rush into vehicle connectivity, home security, and wireless machine-to-machine communications will also place more burdens on AT&T’s network at the same time the company is complaining about spectrum shortages.

Ford Motor says GM’s OnStar system has one significant flaw: it lacks an upgrade path. GM vehicle owners are stuck with the technology that comes built-in with the car. Historically, that has been a problem. In the early 2000s, OnStar customers with older analog-only service lost access to OnStar completely when Verizon dismantled its analog wireless network. More recent GM vehicle owners are frustrated to find the newest OnStar features are only available to the most recent new buyers. Vehicles as little as 24 months old are still unable to use OnStar’s smartphone app, which enhances the value of OnStar for subscribers.

Ford says it will stick with its SYNC system, developed with Microsoft, which links the owner’s smartphone with the vehicle using Bluetooth. Users upgrading a phone can continue to use Ford SYNC by pairing the new phone with the in-car system, bringing along any new features like faster data connectivity.

Atlantic Canada provider Eastlink still offer unlimited access for speeds of 20Mbps or slower, but the fastest speeds now come with usage caps and overlimit fees, as depicted on this sample invoice.

While broadband pricing in the United States depends primarily on whether one lives in a rural or urban area, in Canada, which province you live in makes all the difference.

Canadian broadband pricing varies wildly across different provinces. If you live in northern Canada, particularly in Nunavut or the Yukon, Internet access is slow and prohibitively expensive, assuming you can buy it at any price. Customers in Atlantic provinces including Nova Scotia, Prince Edward Island, Labrador and Newfoundland pay the next highest prices in the country, often exceeding $60 a month. But Atlantic Canadians often find unlimited use, fiber optic-based plans are often part of the deal. In the west, fervent competition between dominant cable operator Shaw and telephone company Telus has given residents in British Columbia and Alberta more generous usage allowances, faster speeds, and lower pricing.

The Canadian Broadcasting Corporation reports the most significant gouging takes place in the Canada’s two largest provinces: Ontario and Québec, where Bell (BCE) competes with three dominant cable operators: Rogers and Cogeco (Ontario) and Vidéotron and Cogeco (Québec). Critics contend that “competition” has been more in name-only over the last several years, as prices have risen and usage allowances have not kept up.

“These disparities are influenced by the competition,” Catherine Middleton, a professor at the University of Ryerson’s Ted Rogers School of Management told CBC News. “For example, Bell competes against Rogers in Ontario, but against Vidéotron in Quebec, with different plans for different markets.”

(Coincidentally, in 2007 the University of Ryerson accepted a gift of $15 million from the late Ted Rogers, founder of Rogers Communications, which won him naming rights for the Ted Rogers School of Management.)

Rogers and Cogeco charge Ontario residents more money for less access. Vidéotron treats their customers in Québec somewhat better, so Bell has plans to match.

“Ontario gets the worst when it comes to competitiveness,” Michael Geist, a law professor at the University of Ottawa and Canada Research Chair in Internet and e-commerce law told CBC News. “It tends to be the least competitive when it comes to getting bang for your buck.”

Prices start to moderate in the prairie regions. SaskTel and MTS Allstream are the largest providers in Saskatchewan and Manitoba. Both offer customers unlimited service plans, something of a shock to those further east. But unless you live in a larger city where the two companies are upgrading to faster fiber-based networks, DSL at speeds averaging 5Mbps is the most widely available service.

Nearing the Canadian Rockies, usage-restricted plans are a reality once again. In Alberta and British Columbia, Telus and Shaw competition means more generous usage allowances, and Telus does not currently enforce their usage limits. Shaw raised its own usage limits significantly beyond what a customer would find from Rogers back east. Prices are often lower as well.

The CBC notes unlimited broadband from cable operators has become a rarity. Eastlink, which provides service in Atlantic Canada, has phased out unlimited access on plans above 20Mbps. Rogers has a temporary “unlimited use” offer for customers paying for its premium-priced 150Mbps plan, and only until March 31.

The most significant recent change for eastern Canada was Bell’s decision to offer an unlimited-use “add-on” for $10 extra a month for Bell customers in Québec and Ontario who choose at least three Bell services (broadband, television, phone, satellite, or wireless service). Rogers has matched that offer for its own triple-play customers. Those who only want broadband service from either provider will pay three times more for unlimited access — an extra $30 a month.

The mainstream Canadian press often ignores third party alternative providers that offer an escape from usage-capped Internet access.

But there are other alternatives, often ignored by the mainstream media.

A growing number of third-party independent providers buy wholesale access from large Canadian networks and sell their own Internet plans, often with no usage limits. TekSavvy, Distributel, Acanac, among many others, provide Canadians with DSL and cable broadband at prices typically lower than one would find dealing with Bell, Rogers, Shaw, or other providers directly. Some discount plans still include usage caps, but those limits are often far more generous than what the phone or cable company provides, and unlimited access is also available in most cases.

One website allows consumers to comparison-shop 350 different providers across Canada. Despite the growing number of options, the majority of Canadians still buy Internet access from their phone or cable company and live under a regime of usage caps and high prices, if only because they do not realize there are alternatives.

Usage caps have cost Canadian broadband consumers both time watching usage meters and money paying overlimit penalties. But the cost to innovation is now only being measured. While online video has become so popular in the United States it now constitutes the largest percentage of traffic on broadband networks during prime time, usage limits have kept the online video revolution from fully taking hold in Canada. That is a useful competition-busting fringe benefit for large telecom companies in Canada, which own cable networks, cable systems, broadcast networks, and even satellite providers.

Netflix’s chief content officer called Canadian broadband pricing “almost a human rights violation.” The online video provider was forced to introduce tools to let Canadians degrade the quality of their online video experience to avoid blowing past monthly usage allowances.

Despite years of arguments that Bell Canada (BCE) could not sustain offering unlimited Internet access, the company suddenly managed an about-face Monday, announcing the launch of a $10 unlimited Internet add-on option for broadband customers who do not want to worry about their online usage.

Bell customers in Québec and Ontario who choose at least three Bell services (broadband, television, phone, satellite, or wireless service) can qualify for the add-on. Broadband-only customers and those with two qualifying Bell services can also buy unlimited access for an additional $30 a month.

Oosterman

“Canadians are the heaviest Internet users in the world and our time spent online is growing every day,” said Wade Oosterman, president of Bell Mobility and Residential Services. “Thanks to Bell’s massive network investments and the success of the new Fibe network, Bell is taking the lead in maximizing the online experience with affordable unlimited usage options.”

Another factor may be a forthcoming ruling regarding wholesale access to Bell’s network from Canada’s chief telecom regulator, the Canadian Radio-television and Telecommunications Commission (CRTC), rumored to be beneficial to the growing number of independent providers that already offer unlimited access.

Canada’s largest cable and phone companies have imposed usage caps for at least five years, although a few in western Canada have not enforced them. Most providers offer allowances tied to Internet speeds, compelling customers to upgrade to avoid overlimit penalties if they exceed the limit.

Bell’s decision to offer an add-on may force Canadian cable operators, particularly Rogers, to follow suit.

(Thanks to Stop the Cap! reader Alex for the heads up.)