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Telus bogeymen are getting crazier and crazier

05 Aug
I'm afraid of Americans. I'm afraid of the world...

I’m afraid of Americans. I’m afraid of the world…

The good folks at Telus are at it again, with another dose of fear-mongering of what the evil bogeyman known as Verizon might bring when and if it enters Canada. On the company’s policy blog, regulatory vice-president Ted Woodhead recycles some of those old yarns and adds a new one or two. You know what that means, pardners: gather round for another session of Reality Checking (season eight, episode 12).

Bogeyman #1: Verizon won’t be anyone’s white knight. It’ll only come into Canada and charge high prices, like it does in the United States. “If Verizon enters the Canadian market, it will still have analyst expectations to meet, investors to answer to, and brand value to protect. Its actions will be driven by profitability, revenue growth and return on investment – not becoming Canada’s national discount brand,” Woodhead writes.

Reality check: No matter what happens, Verizon’s network and therefore its service won’t be as good as the Big Three’s for many years to come. Will the company charge Canadians the same amount for crappier service, and would Canadians put up with that? That’s mind-boggingly illogical. Also, the incumbents believe federal government ministers are sweet talking Verizon into coming to Canada. If that is indeed happening, wouldn’t one of the first things out of those politicians’ mouths be: “We want lower prices?!?” If it isn’t, then what the hell are they doing down there?

Bogeyman #2: Smaller regional carriers such as SaskTel and Videotron could get shut out of the auction by Verizon, thereby shafting residents in less-populated parts of the country. “The auction would become a battle of the deepest pockets with Verizon easily outbidding all new entrants and regional carriers for as much of the enormously important 700 MHz spectrum it can get, along with potentially shutting out one of the national carriers.”

Reality check: Clearly Mr. Woodhead remembers the 2008 spectrum auction, where Wind Mobile – backed by giant international wireless company Orascom – nailed down all the spectrum across every province. Oh no, wait a second… that didn’t happen. A lowly Canadian company, Videotron, did everything in its power to keep that big foreign devil out of Quebec, and outbid it at every turn. Regional players have every reason to blow the bank to keep Verizon out; the U.S. company, as Telus notes in Bogeyman #1, has to generate a reasonable return on investment. Either it cedes spectrum to those defensively bidding regional carriers or, if it does indeed blow the bank, it will most certainly roll out services in those regions in order to get some sort of return. Damn, there’s that pesky logic again.

Bogeyman #3: Bye-bye investment into rural communities, since Verizon will drive spectrum prices up in the regions. “This will unnecessarily suck money out of the industry that would otherwise go towards technology and infrastructure, particularly outside the biggest cities.”

Reality check: See the above reality check. And also, if competition increases in less-populated areas, you betcha investment will too (with apologies to Sarah Palin).

Bogeyman #4: Verizon is a U.S. company that hands its users’ information over to the U.S. government. “It’s [sic] entry into the Canadian market would require significant oversight by our government to protect the privacy of Canadians.”

Reality check: Holy crap, is he being serious? Pretty much every service that runs on cellphones, from email to Facebook to Twitter and so on, routes through the United States. Actual phone calls and text messages may be the least of privacy advocates’ concerns. Also, how about that LTE network that Huawei built for Telus? You know, the same company that both the United States and Australia banned from providing telecom equipment on concerns that it is spying for China? Even the government of Canada has those same worries.

The deadline for applying for the next spectrum auction – and therefore the de facto deadline on whether or not Verizon is coming or not – is fast approaching, on Sept. 17. Are there more whoppers coming from the incumbents between now and then? The only thing left, really, is the suggestion that Verizon will kill your puppy.

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27 Comments

Posted by on August 5, 2013 in telecommunications, telus, verizon

 

27 responses to “Telus bogeymen are getting crazier and crazier

  1. Marc Venot

    August 5, 2013 at 12:23 am

    Let dream:
    from wikipedia: “The 1993 children’s book The Three Little Wolves and the Big Bad Pig inverts the cast and makes a few changes to the plot: the wolves build a brick house, then a concrete house, then a steel house, and finally a house of flowers. The pig is unable to blow the houses down, destroying them by other means, but eventually gives up his wicked ways when he smells the scent of the flower house, and becomes friends with the wolves.”

     
  2. guy incognito

    August 5, 2013 at 1:19 am

    If Verizon officially throws its toque into the ring, will Rogers further pander to nationalists and attack Bell and Telus for their Huawei-built HSPA and LTE networks?

     
  3. trixxiii

    August 5, 2013 at 1:59 am

    frankly I’m for anyone who wants to take on the Big Bad 3 Pigs, being Bell, Rogers and Telus

     
  4. Lorex

    August 5, 2013 at 12:42 pm

    The reason why Telus bought Clearnet in 2000 was to gain national wireless capabilities. By 2000, Telus was the product of the merging of several regional telephone companies called Telus (Alberta), Ed Tel (Edmonton), and BC Tel (BC). Telus, or AGT as it was called, was owned by the Alberta government until 1990 at which time a holding company called Telus was created. Ed Tel was owned by the Edmonton government until it merged with Telus in 1995. BC Tel was always a private company. These regional entities had a strong foundation of regional wireless assets (PCS, paging) and combined them to create a robust BC-Alberta network, but that wasn’t enough to compete with national providers like Cantel AT&T, which was the new expectation for consumers. So, as Telus watched minority shareholder GTE (which held a minority stake in BC Tel and now in Telus) merge with Bell Atlantic, merging wireless assets and creating a company called Verizon, it seemed a natural progression to buy Clearnet to become a national wireless company.

    In buying Clearnet, Telus was burdened with debt after the largest telecommunications acquisition in Canadian history and had to restructure, which sadly included laying off thousands of employees. A high performance culture had to be developed to survive in the intensely competitive world after deregulation, something not used to the old-timers. The road wasn’t easy as some critics like to suggest.

    Back in those days, Canadian telephone companies closely followed their U.S. counterparts. As
    a result, we Canadians have a similar wireless market structure. Traditionally landline and now
    wireless companies, Bell could be likened to Verizon (landline holdings concentrated on the East
    Coast). Telus could be likened to AT&T (landline holdings concentrated on the West Coast).
    Rogers, the market leader, is an oddity because no traditional cable company in the U.S. has
    wireless assets.

    Now in the U.S., there are also 2 national providers called Sprint and T-Mobile.They project an
    image of “cheaper than the other guys”, namely premium carriers AT&T and Verizon, in their
    marketing. They are not doing well financially (stock is in the dumps). That is why T-Mobile wanted to sell to AT&T. T-Mobile’s parent Deutsche Telekom wants to get rid of their US assets. Companies in bad financial position don’t provide competition.

    In Canada, we are lucky to have three national carriers in good financial shape, which provide
    even more competition than in the U.S.

    Like Bell, Verizon is a premium carrier. They have one of the two highest profit margins in the US
    wireless industry. They will compete on a VALUE (mostly brand) proposition, much like Target,
    not a PRICE proposition and at best for consumers shuffle market share away from the Big 3.
    Then they will gain as much ARPU out as they can suck out.

    To compete with a gigantic subsidized carrier, the Big 3 will have to lay off thousands of
    employees. And they will remain unemployed because they will have nowhere to work because
    Verizon won’t be hiring. Back office functions (accounting, billing, marketing) will be done of out
    of the U.S. (why duplicate costly functions in Canada?). The network build and maintenance will
    be done completely by CHEAP contractors like Nokia Siemens from out of country. I’m not
    talking about the equipment vendor, but the people who will do all the RF analysis, backhaul
    planning, IP routing, etc. will all be cheap contractors. Verizon Canada will truly be a branch company.

    See the picture, Peter? Care to rebut me, because please do!

     
    • Peter Nowak

      August 5, 2013 at 6:35 pm

      So high prices are needed to justify jobs? That seems highly inefficient, which is what you’re suggesting. Verizon’s arrival might actually drive some effiiciency into the system then, no?

      With their third-highest EBITDAs in the developed world, it sure looks like the Big Three can absorb some more operating costs. Of course, they’ll probably slash jobs, like you suggest, instead of taking a smaller cut. That will make for some good optics.

       
      • Lorex

        August 5, 2013 at 7:30 pm

        OMG, why do you keep saying Canadian prices are high? The 2013 OECD reports suggests otherwise, so no, the Big 3 ARE efficient. Jobs just come along the way.

        Just because you have a high EBITDA doesn’t mean there must be more competition. It means your business strategy is resonating with customers.

         
      • trixxiii

        August 5, 2013 at 7:45 pm

        Canadian prices are ‘crazy high’- where do u live????

         
      • Lorex

        August 5, 2013 at 7:42 pm

        If you actually look at the cost per minute cost and the cost per data cost, it is in the middle of all the countries. Those rates are more important. One could have a low cost per minute cost, but because they use their phone so much, the overall ARPU is high.

        Canada’s high ARPU is an indication that Canadians LOVE their smartphones and are using them a lot! This should be celebrated.

         
    • KL

      August 9, 2013 at 3:55 pm

      No justification that I can see in your FUD to justify protectionist policies.

      Stop conflating the private interests (of the Big 3 corporations, their employees and shareholders) with the public interest.

      The public will be best served by a competitive market with lower prices. And you never make public policy based on narrow private interests.

      1) If the Big 3 have to lay off thousands, that means their CEOs aren’t doing their jobs right now, because there is fat to trim.

      2) If Verizon is such a premium carrier with high prices, what are the Big 3 so afraid off? When VZ fails, they’ll be able to buy the spoils at a discount.

       
  5. jvanl

    August 5, 2013 at 2:04 pm

    Lorex…

    in retrospect, was it a mistake to privatize AGT and EdTel?

    IMHO, our industry and government have painted themselves into a hopeless corner called ‘facilities-based competition’.

    Increasingly, the world is coming to view open access fibre-to-the-premise (FTTP) as a new and essential economic utility (see Australia’s National Broadband Network initiative).

    At the same time, open WiFi networks are becoming de facto community amenities like public sidewalk networks, which all are welcome and encouraged to use in the name of improving the economic and social prosperity of communities.

    A country with Canada’s physical and demographic geography can least afford facilities-based competition.

    As I see it, the only sensible way forward is for communities to take responsibility for their telecom futures like the community of Olds, Alberta has done:

    http://www.cbc.ca/news/technology/story/2013/07/17/technology-gigabit-internet-olds.html?cmp=rss

    Ultimately, we should have all service providers including the Big 3 competing strictly on the basis of their services, on a completely level infrastructure playing field.

    Until we start moving policy and regulation in this direction, we should expect Canada to continue falling behind the rest of its economic peers in terms of the capability, accessibility, affordability of its telecom networks.

    We should also expect to be overtaken by less developed nations that don’t have our crippling legacy of facilities-based competition to deal with.

     
    • Lorex

      August 5, 2013 at 2:13 pm

      Yes, it was a mistake to privatize AGT and EdTel in the IDEAL world.

      In this world that you describe, internet access would be only provided on one single fiber-based infrastructure for the public good. But then, cable companies like Shaw and Rogers would SCREAM, because they also want to provide internet as well. They would say that this is socialist policy, blah, blah, blah.

      It’s so dumb I don’t want to even talk about it. We just live have to live in the world that has evolved.

       
  6. jvanl

    August 5, 2013 at 2:37 pm

    Any thoughts on the initiative in Olds, AB?

     
    • Lorex

      August 5, 2013 at 2:58 pm

      I think it’s a great initiative.

      Usually, the only type of wired network infrastructure in rural areas is the twisted copper pair (that phone companies like Bell/Telus use). Cable companies never served these areas for economic reasons and probably never will, especially in this deregulation era. Deploying DSL on these lines in such low density areas is also not economical. This is just general principle (doesn’t apply to Olds) but at the end of the day, if you bring in $500, 000 of fibre investments in a neigbourhood (DSL only goes so much distance on copper wire and so you need to have a mixture of fibre and DSL in the network), and only have 50 customers, you are not going to make ROI for an extremely long time.

      However, if you have taxpayer money to use, you can justify the extremely long time for ROI.

      FYI, Telus is doing FTTH (Fibre to the Home/Fibre to the Premises) on all new homes in BC and Alberta.

       
      • KL

        August 9, 2013 at 3:56 pm

        What does Telus doing FTTH have to do with wireless competition?

         
  7. Kevin OConnor

    August 5, 2013 at 3:20 pm

    It is not uncommon for a large company to enter a new market with cut rate prices that lose money , bankrupt the competition , and then when they’re a monopoly raise prices sky high. Microsoft does it all the time.

    the difficulty here is two fold. Rogers / bell / telus arn’t sharing their networks with the compeition , so you have to build your own. And two : you only get permission to broadcast in a certain area on a certain frequency. I seriously doubt they get the favorite 700 Mhz frequency across the whole country. They’ll get it only in certain places.

     
  8. Lorex

    August 5, 2013 at 7:49 pm

    Peter, why are you being so racist with regard to Huawei partnering with Telus? Huawei equipment is only used for “unintelligent” radio access at cell sites. The “intelligent” IP core is probably a mixture of equipment made by North American and European companies like Cisco, Juniper, etc.

    Every wireless engineer will tell you this Huawei stuff is just fear mongering.

     
    • Aaron Wrotkowski

      August 6, 2013 at 2:33 am

      Racism? What are you talking about? The point was Telus claiming that an American infrastructure was going to be used for spying on Canadians. This despite the fact Telus has used Huawei infrastructure, which was feared was going to be used for spying for China. He’s simply pointing out the hypocrisy. He wasn’t even saying it WAS going to be used either way.

      I’m pretty sure the reason Peter won’t reply is because your question was preposterous.

       
      • trixxiii

        August 6, 2013 at 1:06 pm

        Excellent – i totally agree!!! with u Aaron

         
  9. jvanl

    August 5, 2013 at 8:11 pm

    Thanks for the feedback on Olds, I share your perspective.

    Their initiative deserves a great deal more attention and recognition.

    Rural and remote communities have the most to gain from broadband, and we need a great many more communities to be taking similar initiative.

    Financing is a central challenge, and I’m exploring the feasibility of using social impact bonds (SIBs) on the premise that financing world-class broadband in smaller communities will quickly pay for itself through reduced demand and cost for social services.

    As for the Huawei spectre… many are leery of them because of China’s track record with hacking and spying.

    No excuse for fearmongering (pans vs. kettles)… due diligence is essential in vetting equipment from any manufacturer.

    If any manufacturer were discovered to be hiding secret doors and compartments in their equipment, they wouldn’t be in business very long.

     
    • Lorex

      August 5, 2013 at 8:16 pm

      Yes, and I think Bell Canada and Telus have done their due diligence regarding Huawei. Otherwise, they would risk losing lucrative government contracts. Nothing like money to keep you in check!

       
  10. Lorex

    August 5, 2013 at 8:33 pm

    Peter, why won`t you answer my question on why you`re so racist with regards to Huawei

     
    • jensen

      August 6, 2013 at 12:55 pm

      It’s not racism, Huawei was banned in the United States and Australia because of spying concern. Huawei is singled out because of spying concerns, not because it’s a Chinese company. This point is related to spying concerns brought by Ted from Telus.

      “Canada’s high ARPU is an indication that Canadians LOVE their smartphones and are using them a lot! This should be celebrated.” The high ARPU is to be celebrated as well? there is no correlation between “Love” of smartphones. In Peter’s post, he mentions that smartphone penetration is low in Canada compared to other developed countries. We love smartphones but high prices prevent increase adoption.

      “Just because you have a high EBITDA doesn’t mean there must be more competition. It means your business strategy is resonating with customers.” Wherever did you get the idea that high EBITDA means it is resonating with customers?

      Peter Nowak
      August 5, 2013 at 7:33 pm
      Lorex: I don’t know where you’re getting your information. OECD says prices ARE high. See the table here: http://wordsbynowak.com/2013/07/23/telus-wireless-4/

       
      • trixxiii

        August 6, 2013 at 1:08 pm

        so glad someone has good information as well at Peter – as Lorex does not- tytyty

         
  11. andyb

    August 14, 2013 at 9:02 pm

    This Lorex caracter has been making the rounds spamming any site that doesn’t follow the big 3’s wishes

     
 
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