When is a cable, wireless, and video rental conglomerate big enough to start its own financial institution?  When it achieves the size and scope of Rogers Communications.

Rogers announced, through a tiny legal notice filed over the weekend, it had taken the first steps to achieve its ambition of launching Rogers Bank:

ROGERS BANK

APPLICATION TO ESTABLISH A BANK

Notice is hereby given, pursuant to subsection 25(2) of the Bank Act (Canada), that Rogers Communications Inc. intends to apply to the Minister of Finance for the issue of letters patent incorporating a bank under the Bank Act (Canada) primarily focused on credit, payment and charge card services.

The bank will carry on business in Canada under the name of Rogers Bank in English and Banque Rogers in French, and its head office will be located in Toronto, Ontario.

Any person who objects may submit an objection in writing to the Office of the Superintendent of Financial Institutions, 255 Albert Street, Ottawa, Ontario K1A 0H2, on or before October 24, 2011.

If approved by the Minister of Finance, don’t expect to get your next home mortgage or checking account from the cable company.  Rogers Bank intends to focus mostly on the payment services business, according to the application.  Among the potential angles to be pursued by Rogers Bank:

• Offering a Rogers-branded credit card to interested customers, perhaps tied to a rewards program;
• Getting a substantial discount processing credit card payments and the growing popularity of mobile micropayment services, which allow consumers to purchase items from vending machines, parking meters, and other in-person transactions using a mobile phone;
• Offering its own payment transfer service, similar to PayPal;
• Leveraging credit opportunities by running the credit-granting institution inside the company, instead of appealing to outside institutions.

Rogers’ idea, while unusual, is not unique.  Canadian Tire and Loblaw both operate their own “banks,” primarily for financing products and services.

Next time you wonder why you are paying substantially higher cell phone bills than your neighbors abroad, take note: just three cell phone companies control 94 percent of the wireless marketplace in Canada, with more than 23.5 million combined subscribers.  The four other significant carriers have a combined subscriber base of around 1.5 million, hardly worth noticing by the largest three:

Rogers Communications

The telecom giant Rogers controls the largest share of the Canadian wireless market with 9,127,000 subscribers as of the end of June.  Nearly 7.5 million of those customers are on two year contracts and pay an average bill of $70.07 per month.  Prepaid customers pay substantially less for their occasional-use phones: $16.14 a month.  Rogers adds more subscribers than it loses, picking up 591,000 new customers during the first quarter, while losing 456,000 current customers, winning a net gain of 135,000.

Data revenue is becoming increasingly important for Rogers, now constituting 35 percent of earnings for the company’s wireless division.

Bell

Coming in at second place is Bell Canada, with 7,283,000 customers.  Over 5.7 million are on contract, 1.6 million are using Bell prepaid phones.  Bell added just under 38,000 new customers last quarter, the smallest net add among the three largest providers.  The average contract customer pays Bell $63.18 a month; prepaid customers pay $16.88.

Telus Mobility

Telus, western Canada’s largest phone company, sells wireless service across the country and has become the third largest wireless provider with 5.8 million contract customers and 1.2 million prepaid clients.  Together, they pay an average of $58.88 a month.  Telus picked up 94,000 net additions last quarter, which is better than Bell but worse than Rogers.

Everyone Else

Among the rest, Saskatchewan’s phone company Sasktel had managed to reach 568,000 subscribers, mostly in the province, as of late March.  MTS Allstream Inc., a wholly-owned subsidiary of Manitoba Telecom came in with 489,722 customers.  Videotron, Quebec’s biggest cable company, had 210,600 clients, mostly in Quebec.

Among the newest entrants, Wind Mobile, subject to considerable controversy for its foreign financial backing, may one day be a much larger player in Canada’s wireless marketplace, but not today.  It had just 271,000 customers as of March 31st.

Even fewer customers rely on some of Canada’s regional providers, which include companies like Thunder Bay Telephone, Lynx Mobility (co-owned by an aboriginal partner with a mission to serve rural Canada), Calgary-based AirTel, which is popular with oil/gas workers for its “push to talk” service, and Ice Wireless, which is the largest GSM carrier in northern Canada, reaching 70% of the population of Nunavut and the Northwest Territories.

Canada’s largest three providers also own or control several “competitors” that mostly sell prepaid service.  Customers thinking they are escaping the big boys often really are not:

• Fido is owned by Rogers;
• Virgin Mobile Canada is owned by Bell;
• Koodo Mobile is owned by Telus

Rogers Communications has announced usage cap and speed adjustments for many of its Internet service plans — changes that will bring increased allowances for some of the company’s most premium customers.

Rogers has modestly adjusted usage caps on its popular Extreme Internet Plan a year after slashing them, and brings dramatic increases for the company’s most expensive service tiers, even as it leaves usage caps unchanged for the bulk of their customers subscribed to the basic Express service plan:

A Rogers spokesman explained the changes.

The bar gets raised only for those who agree to spend more.

“With the rapid rise of online video, social media and online gaming, the way Canadians use the Internet is changing dramatically. We’re always reviewing our plans to ensure they meet your changing needs so starting later this month, our Hi-Speed Internet tiers are being upgraded with faster download speeds and higher data allowances for customers on Rogers DOCSIS 3.0, our best and fastest wireline network,” wrote RogersMarina on the company’s RedBoard blog.

Apparently the way Canadians use the Internet with Rogers’ most-popular Express plan hasn’t changed much, because Rogers leaves that cap unchanged at 60GB of usage per month.  Rogers previously reduced its usage cap for its Extreme level of service from 95 to 80GB, days after Netflix announced it was bringing its streamed video service to Canada.  Rogers’ latest increase amounts to just 5GB more usage than customers had during the spring of 2010.

The increased speeds that some usage tiers are gaining with the introduction of DOCSIS 3 technology come “at no additional cost” according to Rogers, but the company also mentions it charges higher prices — $1.50-$3 more per month — for the required DOCSIS 3 modem.

For customers certain to exceed their allowance, Rogers will sell you an insurance plan to protect your wallet from their $0.50-5.00/GB overlimit fees:

“Also starting later this month, you’ll be able to add a data assurance option if you’re currently using the Express and Extreme tiers. For an extra $20 per month, you’ll receive an extra 80 GB of data on top of your existing allowances. If you don’t need quite as much data, you can also get an additional 20 GB for an extra $5 per month.”

Most customers were not impressed.  Take Matt, for example:

“Speed increases are great but all they allow us to do is to get to our low data caps faster. These days with YouTube, Netflix, VOIP, and work VPN (heavy work from home user) $60 for 100 GB of data is pretty expensive, especially when a GB of data probably costs Rogers pennies per user. Competitors are starting to offer higher data caps for a similar price. In Toronto you can get a plan for same or slightly cheaper starting with 200GB.  In Vancouver you can get 50Mbps for $29 a month with a 400 GB data cap!”

Cambo notes the usage upgrades come easy for higher-priced tiers, but customers on the most popular Express tier have no increase in their usage allowance at all.

“You guys just don’t get it,” he writes on RedBoard.  “Speed isn’t the issue. Usage is. Why is it every tier gets a usage bump except the most popular Express? What is the point of bumping the speeds up and not significantly increasing usage, so we can get to the caps even faster I suppose. Sounds like a ploy to get people to spend more, to me.”

Andrew agreed:

“I also agree with this. I would rather get a larger usage bump than a speed bump — I don’t see a point in raising speeds when the data cap is still extremely restrictive. After all, I’d want to enjoy using the Internet, rather than monitoring my usage restrictions every day. If Rogers really listened to the customers, they’d know that most of us are more critical of their plans’ usage restrictions than their speeds.”

Rogers Communications claims usage caps are not creating problems for customers, but if and when they do, the company says it will get rid of them.

Luiza Staniec, manager of public relations for Rogers’ Quebec and Atlantic Canada region, made that remarkable claim in an interview with the New Brunswick-based Times & Transcript.

“At this point there is a cap. It hasn’t really caused a problem,” Staniec said.  “If the cap begins to affect users online, we will abolish it.”

At issue is Netflix’s popular streaming service, which opened for business in Canada last year.  Consumers are embracing the $7.99 service which delivers unlimited streaming of the Netflix online library.  But an increasing number of customers are discovering that while they can watch as much Netflix as they’d like, Internet Service Providers like Rogers have usage limits in place to keep online viewing under control.

Netflix told investors to expect $50 million in operating losses in international business this year, in part because growth in Canada is being hampered by stingy usage limits and high priced broadband.  Once consumers get a broadband bill with overlimit fees attached, some are reconsidering their love affair with video streaming.

Lindsey Pinto, communications representative for OpenMedia.ca, a consumer rights organization, says a regime of usage limits in place at most Canadian ISPs will ruin high bandwidth applications and services like Netflix, as consumers find them too expensive to use.

“It takes a lot of bandwidth to stream a movie or watch Netflix,” Pinto told the newspaper. “People will stop doing things that will bring them over the cap. There will be a disintegration from these services under this model.”

Staniec counters that Rogers offers higher usage cap plans (for more money) to accommodate Netflix viewing.

“If you watch a lot of movies, pick the package with the highest cap,” she says. “If you don’t watch too many, you don’t need the high cap.”

She added Rogers is willing to be flexible, adjusting caps “to suit the consumers.”

But last summer Rogers actually reduced the usage cap of its popular Extreme service plan from 95GB to just 80GB per month, one day after Netflix announced plans to enter Canada.

[Updated 5:12pm EDT — We heard from Ms. Staniec who wants readers to know she was respectfully misquoted by the reporter at the Times & Transcript:

“The correct message I conveyed was that our offer will evolve as customers needs/use evolves. The journalist added, ‘perhaps one day they will be abolished altogether.'”

Staniec would like our readers to know she herself made no statement about the issue of abolishing usage caps.]

Unless Canada deregulates the media industry further, a “technological storm” by “audiovisual Wal-Marts” will harm or destroy Canada’s media companies.  No doubt looking directly at Netflix, those were the views of Quebecor CEO Pierre Karl Peladeau at the outset of hearings held this week by the Canadian Radio-television and Telecommunications Commission on media ownership and vertical integration issues.

Canada’s media landscape is rapidly consolidating at a rate that will allow even ordinary Canadians with a passing interest in the issue to recognize the handful of remaining media moguls and identify them by name.  Phone companies that own major Canadian television networks, cable operators that own cell phone companies, and mergers among the dwindling pack have left consumers soaking in Shaw, Rogers, Bell, and Quebecor — whether they flip on their televisions, make a cell phone call, read a newspaper, or download something from the Internet.  Talk about vertical integration!  Now the supersized are back for more deregulation so they can trade programming rights between themselves, fend off the devil — Netflix, and of course continue to buy each other out.

There is one exception, of course.  Allowing party crashers.  While all of the incumbent players want the rules loosened up on their respective media and telecommunications operations, they are hellbent on keeping foreign competition out of Canada — the only real deep pockets sufficient to break up a convenient cartel of phone and cable companies.  Rogers and Shaw stay on their respective sides of a line dividing eastern Canada’s turf for Rogers and western Canada’s territory for Shaw.  Bell and Telus do much the same.  Quebecor provides cable for Quebec, and a handful of much smaller players fight for any remaining crumbs.

For Americans, it would be the equivalent of turning over your telephone, broadband, cable, television, newspapers, magazines, and radio stations to Rupert Murdoch or ex-media baron Ted Turner.

For Canadians, these hearings come just a tad too late.  Shaw Communications is absorbing their latest buyout — Canwest Media’s TV assets, which are hardly meager.  Shaw will run more than two dozen local broadcast TV outlets, 30 cable and satellite networks, and Global — a major broadcast network.  Bell is still popping Rolaids over its digestion of the enormous CTV and smaller upstart A-Channel network.  When it’s finished, “A” will become “CTV Two.”

The Globe and Mail notes between them, Bell, Shaw, Rogers and Quebecor control:

• 86 per cent of cable and satellite distribution;
• 70 per cent of wireless revenues;
• 63 per cent of the wired telephone market;
• 49 per cent of Internet Service Provider revenues;
• 42 per cent of radio;
• 40 per cent of the television universe;
• 19 per cent of the newspaper and magazine markets;
• 60 per cent of total revenues from all of the above media sectors combined.

As far as growth goes, as Alan Keyes used to proclaim, “that’s geometric!”

But it’s still not enough now that Netflix has arrived in Canada.  Despite the fact the operation has been challenged by punitive usage caps restricting viewing (or lowering its video quality), Netflix and new technology companies like it are the 21st century boogeymen for these multi-billion dollar media corporations.  The only way to defend against it?  Deregulate to allow them to trade viewing rights, grow larger, and charge whatever they like.  Somehow that seems to miss the point: Netflix is popular because it costs less, allows people to stream the shows they actually want to watch at a time of their choosing, and let’s families drop some overpriced premium channels and video rental fees along the way.

Bell’s dollar-a-holler researcher expanded on why large media conglomerates miss the point, even if he did so unintentionally.

According to University of Alberta economics professor, Jeffrey Church, “vertical integration is beneficial for consumers.” Sit down as you read why:

• it reflects efficiencies, spurs competitive innovation and is a global trend;
• telecom, media and Internet markets in Canada are “highly competitive;”
• our ‘small media economy’ needs a few deep-pocketed national champions to compete globally and invest heavily in innovation at home;
• instances of harm are mostly imaginary and few and far between;
• it helps keep “consumers . . . within the regulated system” (Shaw’s submission, p. 4).

Like cattle.