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Rogers begins the rape of FIDO (pg. 6)
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| dEsidEL |
| quote: | Originally posted by baystreetboi
Rogers Wireless in 2002 spent $465 million on additions to plant, property and equipment (essentially network builds). In 2003, that number was approx $500 million. I'd say that's a large chunk of potential profit being reinvested in improving / expanding the network. Obviously money is being spent.
Profit in 2003 was $138 million, and a $90 million loss the year before. So over this 2 year period, close to a billion has been spent on network builds, with resulting net profit of approx $50 million. For a company the size of Rogers Wireless (now a fully-owned subsidiary of Rogers), $50 million isn't exactly a ton of money, particularly when you compare it to the required investment of $1 billion to earn that.
You say they need to innovate... innovation requires cash! You want to take profit away from them, yet want them to spend more on developing new services / products. Where is this money going to come from? Taking the past 2 years as an example, they could only have invested an additional $50 million into network development before they broke even. How much of an improvement do think $50 million on the $1 billion invested is going to make?
Do you expect investors in Rogers to take a loss so that you can get great new services / products at a cheap price? |
call it personal bias or what have you, but honestly, i don't firmly believe that added revenue going to Rogers will result in noticeable improved services or (distinct) innovation on their part over time .. i mean what have they done in the past that hasn't been synonymous to advances in the overall global wireless market in general? or that gives them a distinct competitive advantage over Bell and Telus? iDen? GSM? well what choice do we have seeing as how they're now the only carrier of that sort..
i'm not going to be delusional and expect Fido to carry on business if it does so at a loss just for the sake of me having a cheaper monthly plan, but at the same time there's no doubt that it appears Fido was apparently attempting to change the status quo with its approaches to international roaming, urban network deployment, wireless internet thru iFido, etc.. pricing was just one aspect. people on Fido knew full well that their coverage in comparison with the 3 larger carriers would be far smaller, but that's relative to how much we pay in terms of our service plans. but if i'm going to be paying more to Rogers i'm obviously gonna expect a lot more as well .. the ability to roam on their network at an additional $5/month is just the start.
i'll be fair however and see what happens.. tho i'm not holding my breath either..
let's just hope they can prove me wrong
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| malek |
| agh wtf you ing ontarians ruined it for us :toothless |
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| infinity HiGH |
| quote: | Originally posted by malek
agh wtf you ing ontarians ruined it for us :toothless |
haha, yes...blame it on Ontario :rolleyes: first its our fault that the Liberals are still in power, now this? :toothless |
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| malek |
| quote: | Originally posted by infinity HiGH
haha, yes...blame it on Ontario :rolleyes: first its our fault that the Liberals are still in power, now this? :toothless |
hahhahaha :p |
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| DigiNut |
| quote: | Originally posted by baystreetboi
So on the one hand you want increased competition in order to drive prices down. This only results in declining profits for the wireless providers.
On the other hand, people are arguing that Canada's wireless services are behind the times and don't innovate.
How are companies supposed to innovate when they don't have the profit to invest in R&D / network expansion / upgrades? |
You do realize that what you just said makes no sense, right?
Economics 101: Competition is a price-cutter AND an innovator. Some companies respond to competition by cutting prices, others respond by providing better service. |
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| baystreetboi |
| quote: | Originally posted by DigiNut
You do realize that what you just said makes no sense, right?
Economics 101: Competition is a price-cutter AND an innovator. Some companies respond to competition by cutting prices, OTHERS respond by providing better service. |
You said it yourself.... some do one, some do the other.
I think what you'll see over the next 5-10 years is the CRTC forcing the three cell companies to open up access to their networks much like what Bell is going with Virgin, just like Bell now has to do with other local landline providers. They will likely provide cheaper service, but it will be barebones, with few if any innovative features being added, so your choice comes back down to price vs. service. The three main providers will continue to have their "premium" priced plans, but provider greater functionality, etc.
Seems you want the existing Canadian wireless providers to do both... that's not a sustainable strategy in the long run.
What is it you want? Cheaper prices or better service? |
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| SurrJRS |
| I'm just thankfull that my work picks up my cell phone tab. |
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| dEsidEL |
just to add insult to injury, Rogers is also hiking the price of 911 access for Fido customers to $0.50/month up from $0.25/month.. word on the street is that they're gonna hire sexier switchboard operators when you call the police for this 'premium' service.. :rolleyes:
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| infinity HiGH |
| quote: | Originally posted by baystreetboi
What is it you want? |
both :p |
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| DigiNut |
| quote: | Originally posted by baystreetboi
You said it yourself.... some do one, some do the other.
I think what you'll see over the next 5-10 years is the CRTC forcing the three cell companies to open up access to their networks much like what Bell is going with Virgin, just like Bell now has to do with other local landline providers. They will likely provide cheaper service, but it will be barebones, with few if any innovative features being added, so your choice comes back down to price vs. service. The three main providers will continue to have their "premium" priced plans, but provider greater functionality, etc.
Seems you want the existing Canadian wireless providers to do both... that's not a sustainable strategy in the long run.
What is it you want? Cheaper prices or better service? |
Ok dude, since Economics 101 apparently didn't take, I'll give you the LONG DRAWN-OUT explanation:
First, let me repeat: Competition in an industry creates better service/product AND lower price. You want proof? Just look at computer hardware! A 40 gig drive once cost $400, now you can get a 250 gig drive for $200 that lasts twice as long. Do you see a trade-off here? I don't. Same goes for microprocessors, you can now get a 2 GHz processor for $100 - a few years ago it cost triple that much for a 500 MHz processor.
When there is a healthy amount of competition, the companies DIVIDE. Some companies simply lower their prices and don't improve their service - they market to the people who want to pay less. Some companies improve their service - they market to the people who *want better quality* and are willing to pay more for it. They improve their service by innovating and developing new technology. When that technology is developed, it increases the production level. Increased production means lower operating costs. These lower costs enable the innovating company and other companies to in turn lower their consumer costs.
And the cycle then begins anew. You have better technology available at a lower cost. The industry is stable for a year or two. Then one company decides to undercut the rest, or comes out with a new technology that improves their service. Other companies have to lower their costs or do additional R&D to keep up.
Lower cost and better service are NOT mutually exclusive. The only time these things become mutually exclusive is when you have idiotic restrictive policies and bureaucratic red tape on the industry, which limits the competition and limits the wealth generated by these companies. Which, sadly, is exactly what we have in this country. |
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| baystreetboi |
| quote: | Originally posted by DigiNut
Ok dude, since Economics 101 apparently didn't take, I'll give you the LONG DRAWN-OUT explanation:
First, let me repeat: Competition in an industry creates better service/product AND lower price. You want proof? Just look at computer hardware! A 40 gig drive once cost $400, now you can get a 250 gig drive for $200 that lasts twice as long. Do you see a trade-off here? I don't. Same goes for microprocessors, you can now get a 2 GHz processor for $100 - a few years ago it cost triple that much for a 500 MHz processor.
When there is a healthy amount of competition, the companies DIVIDE. Some companies simply lower their prices and don't improve their service - they market to the people who want to pay less. Some companies improve their service - they market to the people who *want better quality* and are willing to pay more for it. They improve their service by innovating and developing new technology. When that technology is developed, it increases the production level. Increased production means lower operating costs. These lower costs enable the innovating company and other companies to in turn lower their consumer costs.
And the cycle then begins anew. You have better technology available at a lower cost. The industry is stable for a year or two. Then one company decides to undercut the rest, or comes out with a new technology that improves their service. Other companies have to lower their costs or do additional R&D to keep up.
Lower cost and better service are NOT mutually exclusive. The only time these things become mutually exclusive is when you have idiotic restrictive policies and bureaucratic red tape on the industry, which limits the competition and limits the wealth generated by these companies. Which, sadly, is exactly what we have in this country. |
I understand Economics 101 just fine thank you very much, and have worked in an investment bank which had a strong practice in the wireless telecom sector... so I think I understand a thing or two about how these companies operate. What you are describing is a perfectly competitve market environment where there are an infinite number of small firms, none of which have the ability to set a market price. I'm not arguing your analysis, but here's a news flash... we don't have that in Canada.
What you have to understand is I am explaining how things will play out within the CANADIAN context as they exist TODAY. Sure, if the CRTC opened up the markets to foreign (read US) investors / companies, something like what you described could happen. That is not the reality today though. Whether or not it should be is a separate issue.
As the CURRENT Canadian wireless market stands with the three service providers, you will not get the outcome you describe. The market is not nearly large enough for the companies to "divide" as you put it, allowing some to focus on price while others focus on service. There are about 15 million wireless subscribers in Canada. Realistically, that number isn't going to grow by a huge amount in the years to come. As a result, there aren't really many gains to be made by improving productivity, which in this industry, is essentially getting more users on your existing network. Nor will you have new entrants to the market come and establish their own networks because of cost.
In the end, you're left with the situation I described above and which you have just mirrored. The only realistic outcome is that the CRTC will force the existing providers to sell time on their networks to third parties who will re-sell it.
I challenge you to find a research analyst that will say the cancellation of the CityFido plan was a bad move on Rogers' part. As nice as it was from a consumer standpoint, it was not healthy for the industry and it was inevitable that its lifespan would be limited. |
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| dEsidEL |
| quote: |
Branson to recharge cellphone battle
Branson's Virgin Mobile wireless covets the youth market
Analysts expect edgy advertising, aggressive pricing in launch
TYLER HAMILTON
TECHNOLOGY REPORTER
Virgin Mobile Canada plans to launch its mobile phone service on March 1 and could begin an advertising blitz as soon as Feb. 14, just in time for Valentine's Day, industry sources say.
The highly anticipated arrival comes less than a year after U.K.-based Virgin Group, founded by flamboyant billionaire Sir Richard Branson, announced its intention to enter the Canadian market as part of a joint venture with Bell Mobility.
The company plans to focus on pre-paid calling packages and is centring its attention on the high-growth youth market — teenagers and young adults who don't have a mobile phone or are unhappy with the service they do have.
Bell, which has a large minority stake in the new venture, is selling network access to Virgin Mobile on a wholesale basis. Virgin has been quiet about its launch plans, but analysts following the industry say the company will position itself as the "cool" operator in a market of complacent rivals.
Brian Sharwood, a telecom analyst with the Seaboard Group, said Virgin may be happy to lose money for a couple of years just to make its point, and to build its subscriber base.
"They may not care less about being profitable," said Sharwood. "They just want to get subscribers, to get the brand name out."
If that theory holds true and Virgin comes out with aggressively priced wireless offerings, the strategy could prove a thorn in the side of Rogers Wireless, Telus Mobility and its partner Bell Mobility, which have all signalled a move toward more stable pricing and "profitable growth."
Increased stability was achieved last fall when Rogers Wireless acquired Montreal-based Microcell Telecommunications Inc., considered a nuisance in the industry for its low-cost Fido service and unlimited CityFido local wireless plans.
The acquisition created a three-carrier market that, according to a draft report published last week by the Public Interest Advocacy Centre (PIAC) in Ottawa, may settle into a "comfortable oligopoly."
As expected, Rogers dramatically altered the CityFido plan two weeks ago by decreasing coverage, upping the cost and capping talk time.
Financial analysts applauded the move. Rogers' initiative "will trigger ease in price competition in the Canadian wireless industry," Kona Shio, an analyst with Conscius Capital Partners in Montreal, wrote in a research brief. "And thus we believe the whole wireless industry will benefit from pricing discipline."
This disciplined approach sets Canadian carriers apart from their peers in other countries. PIAC cited the fact that Canada, where 43 per cent of the population has a wireless phone, is well behind other developed nations and said that the reason may be lack of competition and relatively higher prices.
The United States, by comparison, has a market penetration rate above 50 per cent and much cheaper and more feature-rich mobile phone plans than in Canada. Some European and Asian countries have surpassed 70 per cent and 80 per cent penetration.
Lack of number portability may be one explanation — Canada is one of the few countries that doesn't let phone users keep their telephone numbers when switching to a wireless carrier.
Virgin is betting that the lack of certain services or offerings from Canada's existing wireless carriers will make them an easy target.
"Like Virgin has done in every other market around the world, it is looking at the market and seeing where the customer is disgruntled in any way," said Virgin Mobile Canada spokesperson Paula Lash. "We'll be consistent with that approach here. Customers will definitely be surprised and pleased with what we offer."
Virgin Mobile has launched youth-focused wireless phone services in the United Kingdom, the United States and Australia, and talks are under way to launch in India and China. Virgin Mobile Canada's website opens with the comment, "The mobile rescue unit is on its way."
Further into the site, the company states: "Bottom line, we're going to shake it up. We've already done it with the Brits, the Aussies and the Yanks and we're ready to do it Canadian-style."
Virgin's advertising tends to be racy and suggestive, and often features pop stars or other celebrities with whom teenagers can connect. The company surpassed five million customers worldwide by adding 417,000 subscribers over the holidays. It's planning an initial public offering in the United States.
John Boynton, vice-president of consumer marketing at Rogers Wireless, dismissed suggestions that Virgin Mobile will have a big impact on the Canadian wireless scene.
"You've got three carriers who aren't going to make the same mistake as the guys south of the border, who didn't take Virgin seriously and got caught by surprise," he said. "This is what Virgin does. They get everybody riled up. In the beginning there will be a lot of noise, and they'll do some pretty crazy things. But like in the U.S., things will go back to normal by the next quarter."
Boynton added that Virgin's focus on pre-paid service means they'll be fighting for 5 per cent of the total market against three major carriers with greater experience. "We've been ready for them for quite a while."
And all is not rosy at Virgin. The company's pace of growth has slowed, causing concern among some analysts. Its churn rate — which measures the number of subscribers who drop the service every quarter — also rose to 16 per cent from 14 per cent, very high compared to churn rates of around 2 to 3 per cent enjoyed by the Canadian wireless industry.
Meanwhile, some newspapers in England are beginning to question Branson's wireless strategy. "Virgin Mobile is losing its love affair with its youthful customers," said the London Daily Star in a recent report.
Ian Angus, president of Angus TeleManagement Group, a telecom consultancy in Ajax, said the pre-paid wireless market, if done right, can be a big money maker if Virgin is effective in tapping the right audience.
"Obviously making the brand is important, and that will be an issue in Canada where the Virgin brand is not well known," said Angus. "If the brand is really attractive, it becomes a thing where people don't want to give up their Virgin phones."
Sharwood said Branson may have bigger plans for Canada and that mobile phone service may be the first step toward re-launching plans for a Virgin airline or Virgin train service.
"We have many more stodgy industries that need to be shaken up," said Sharwood, adding that Andrew Black, hired last year as Virgin Mobile Canada's president and CEO, may be thinking beyond wireless.
"He sees himself as a brand manager for Virgin Canada, overseeing what happens to a Virgin airline or train service or whatever else they want to do."
Additional articles by Tyler Hamilton
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source:
http://www.thestar.com/NASApp/cs/Co...ol=969048863851
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