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SaskTel cries poor over wireless competition

15 Apr

PalpatineOne could be forgiven for thinking a story last week about SaskTel’s wireless woes was an article from The Onion. The story, which featured chief executive Ron Styles complaining about too much wireless competition in his home province of Saskatchewan, did indeed read like something from the notorious news parody outlet:

The CEO of SaskTel says he is heading to Ottawa to argue that new federal regulations are hurting the Crown corporation’s bottom line.“We just need to make our case … that some of the things they are putting in place … are having unintended consequences,” Styles said as he outlined the position he will take when he meets with federal government officials.

The humour, of course, lies in the apparent fact that Styles hasn’t been paying attention to anything regarding his industry for… oh, the past few years. Those lower profits – and therefore lower prices – are actually exactly what the federal government has been desiring for some time, not just in Saskatchewan but in every part of Canada. It’s reminiscent of the Emperor telling Luke Skywalker near the end of Return of the Jedi that when his friends arrive at the Death Star, they’ll find the shields to be “quite operational,” except in this case our young executive Padawan must be learning that the consequences his company is experiencing are, in fact, “quite intentional.”

A follow-up story in the Regina Leader-Post a few days later went into a little more detail about why SaskTel is aggrieved. With the Big Three wireless carriers offering rate plans in the prairie provinces that are 40 to 50 per cent cheaper than in other regions, the company is feeling the pinch: it’s expecting net income to drop to $59.2 million this year from $90.1 million last year. The issue of predatory pricing – defined as selling something at a low price in order to hurt competitors or drive them out of business – comes to mind, with Styles ironically asking if “there’s a broader question of whether the practices being employed right now are anti-competitive.” According to the article, he “wondered aloud if federal competition regulators … should investigate this.”

That’s an interesting thought. Should regulators get involved with what is clearly a case of too much competition? It is surely unfair that Bell, Rogers and Telus are charging more elsewhere in the country, so how about – as SaskTel is inferring – a rule that requires a service to be priced the same regardless of region? After all, if the bigger carriers can afford to charge significantly less in certain areas, they could also do so in other provinces, right?

Theoretically, the answer is yes, but in practice such a rule would be an incredibly bad idea. If enacted, prices would go in only one direction: up, way up. The chances of the Big Three lowering prices in the rest of Canada to match those in the prairies are on par with George Lucas winning a screenplay Oscar. Rather, they’d raise them to match Manitoba and Saskatchewan, which Styles would love as it would give his company much leeway to also increase prices.

He also raises the point that all this competition could cripple or kill SaskTel and leave it open for an acquisition by Bell, Rogers or Telus. Again, he must not have been paying attention since the government has been adamant in saying it won’t approve any transfer of spectrum – the lifeblood of any wireless company – that will result in increased concentration of market power. So a weakened SaskTel being taken over by the Big Three? That’s a mighty big red herring.

That brings us to the ultimate question of what should the government and regulators do with the excessive wireless competition in Saskatchewan? The answer is pretty obvious: absolutely nothing.

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4 Comments

Posted by on April 15, 2014 in bell, rogers, telecom, telus

 

4 responses to “SaskTel cries poor over wireless competition

  1. Ben Klass

    April 15, 2014 at 1:18 am

    From SaskTel Annual Report 2013:

    “Revenues increased $22.7M over 2012, with significant increases in wireless ($17.6M) and maxTV, Internet and data revenues ($16.7M), both due to increases in customers and average revenue per user. These increases were partially offset by decreases in local and enhanced services ($9.2M) and long distance ($3.4M), both due to a decline in wireline accesses. Wireline access losses
    are partially attributed to wireless displacement, where customers are choosing to abandon traditional wireline services for wireless alternatives.”

     
  2. Ben Klass

    April 15, 2014 at 1:26 am

    One more for the dog and pony show:

    “Wireless revenues increased by $17.6 million (3.9%) to $471.8 million in 2013. This resulted from an 8,035 increase in accesses due to organic growth and legacy wireline customers abandoning their traditional wireline services for a wireless alternative. Customers continue to migrate
    from voice-only devices to data-capable devices such as
    smartphones. In 2013, the number of data-capable devices increased to 412,993, up 16.8% from 353,490 in 2012. Adoption of data-capable devices such as smartphones, has also resulted in customer migration to more expensive and feature rich data plans, which increased the average revenue per subscriber from $62.99 in 2012 to $64.39 in 2013.”

     
  3. Daryl

    April 15, 2014 at 12:35 pm

    I agree it would be a bad idea to regulate a minimum price or regional parity. What if every customer of the big three, located outside of Saskatchewan, demanded similar preferential prices as Saskatchewan customers get? That might make for an interesting customer relations response.

     
  4. Doug

    April 15, 2014 at 2:29 pm

    The question is:
    Are the big three using profits from the rest of canada to lower the price is SK,, using illegal bussiness practices to kill off SaskTel or is the lack of (real) competition in the rest of the country allowing the big three to rob us? If I had to guess, both.

     
 
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