With landline and TV businesses declining, telcos will scramble to recoup lost revenue.
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In yesterday’s 2017 prediction, we looked at how the streaming market is set to evolve this year and into the future. By and large, it’s good news for consumers since streaming services such as Netflix and Amazon Prime Video offer great value and are significantly cheaper than the typical cable bill.
Alas, there’s a price to be paid for that. With most telecom companies in North America being heavily vertically integrated, what’s good for the consumer in one area inevitably transforms into bad news in another.
Such is going to be the case with wireless bills. All those savings from cutting cable are inevitably going to show up in stiff cellphone rate hikes, the sole area in which such companies are still relatively unfettered by regulation or technologically driven competition.
Canadians are used to regular wireless rate hikes, but it’s going to be even more pronounced this year. With landline businesses continuing their respective nosedives to extinction and TV cord cutting accelerating, telecom companies are going to be scrambling to replace that lost revenue.
Raising home internet prices will be a no-go – and in fact, there’s good news on that front. The CRTC is imposing much lower wholesale rates on network owners, meaning that smaller indie internet providers are going to offer new, faster services at reasonable prices, and/or lower prices on existing services.
It’s already happening with Teksavvy, one of the country’s largest indie ISPs, announcing such plans for January. Big network owners a la Bell, Rogers and Shaw may not explicitly offer cheaper services, but they will have to offer customers sweetheart deals to keep them from defecting to the indies.
Which leaves wireless.
The “fourth carrier” idea – where an independent wireless provider goes up against Bell, Rogers and Telus in each region of the country – espoused by successive federal governments and the CRTC is a fallacy that isn’t delivering the sort of competition desired or needed.
In almost every province, the fabled fourth carrier is now a cable company whose main interest isn’t necessarily to get as many wireless subscribers as possible, but rather to stop existing customers from defecting to a competitor that can in fact offer wireless on top of other services, such as internet and TV.
Moreover, all of those cable companies are operating networks that are comparatively substandard to the Big Three. They don’t have the same depth and breadth of wireless spectrum or infrastructure, so they couldn’t be equal competitors even if they wanted to be.
The exceptions to this rule are SaskTel in Saskatchewan and MTS in Manitoba, which is why they have targets on them. Bell is already trying to take over MTS and, if that’s allowed by government and regulators, SaskTel will certainly be next.
Ultimately, Bell, Rogers and Telus are free to raise wireless prices across most of the country as they see fit. With declining customer numbers in their other lines of business, they certainly will.
As screwed as Canadian consumers are, Americans look to have it worse.
The U.S. wireless market is considerably more competitive than Canada’s thanks to a different market structure. Rather than three carriers with nearly identical market share, the U.S. has two behemoths in Verizon and AT&T defending against two smaller players, Sprint and T-Mobile. Wireless price hikes haven’t been as easy to pull off as a result.
But, with incoming president Donald Trump chumming it up with Sprint owner Softbank, a dark telecom timeline is dawning.
The smart money is on Sprint once again trying to take over T-Mobile. Regulator rejected Sprint’s initial attempt in 2014, but with Trump promising to declaw such watchdogs, merger-mania is going to be firmly on the table again. If Sprint doesn’t grab T-Mobile, someone else will – maybe Comcast.
The U.S. also doesn’t have a wholesale internet regime like Canada, which, in a nutshell, is very bad news for American consumers. Price hikes are coming in wireless and home internet.
As if that wasn’t bad enough, Trump has also promised to end net neutrality. On a long enough timeline, that could enshrine as incumbents the currently emergent online services that are doing so much to lower consumer bills.
In other words, today’s beloved Netflix could be tomorrow’s hated cable company.