BUSINESS

Mobilicity Deal Could Stick Canadians With Expensive Cellphone Plans, Critics Fear

06/26/2015 05:00 EDT | Updated 06/26/2016 05:59 EDT
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A customer waits for a Rogers store to open on Yonge Street in Toronto, Ontario, Canada, on Tuesday, Oct. 26, 2010. Rogers Communications Inc., Canada's largest wireless carrier, said third-quarter profit declined 24 percent as it added fewer subscribers and spent more on current customers' phone upgrades. The stock slumped as net income dropped to C$370 million. Photographer: Norm Betts/Bloomberg via Getty Images
​Rogers has gobbled up troubled small carrier Mobilicity and the federal government is declaring it a victory for consumers.

Almost two years ago, Ottawa launched a glitzy $9-million ad campaign to let Canadians know it was fighting for their right to cheaper cellphone prices and more choice.

But with rising prices for some plans and now one less competitor in the market, critics argue the government is actually losing the battle.

"Canadians may be scratching their heads over why the government just approved a deal that will ultimately mean less choice and higher prices for Canadian cellphone subscribers, despite promises to the contrary," Josh Tabish of telecom critic Open Media said in a statement.

This week, telecom giant Rogers struck a deal to buy cash-strapped Mobilicity, with Industry Canada's approval.

Industry Minister James Moore says the deal "is a win for Canadian consumers" because a chunk of freed-up wireless spectrum will go to another struggling competitor, Wind Mobile, to expand its network.

But Open Media argues the deal also means more control in the hands of Rogers, which, along with the other big three — Telus and Bell — dominate the market.

For some, it can't get worse

Cellphone customer Randy McLean of Brampton, Ont., is also troubled by the latest deal.

"I just see another big company eating up a small company,"says McLean, who believes the buyout will lead to more expensive plans.

"Less competition, it means less of a free market, doesn't it?"

McLean worries because he already struggles with his current cellphone bill. Last September, he shopped around for the cheapest adequate deal he could find and signed up with the Rogers budget brand, Chatr Mobile.

He pays $35 a month for a modest pay-as-you-go plan. But he says sometimes his monthly bills have been higher because of extra unplanned charges.

McLean has a mental health condition and survives mainly on disability payments. He says a few times he's had to live without a phone for up to two weeks because he ran out of cash to continue his plan.

"Bills and food have to be paid first," says McLean. "You feel like you're a lowlife. You can't afford the things that everybody else has."

He believes that wireless phone packages should be more affordable, especially for low income Canadians because it's now a necessity of life.

"Communication is a thing that's necessary in this world in the age of technology and not having a cellphone in your hand leaves you vulnerable."

Prices go up

Just last week, a new government-commissioned report showed that Canadians are still paying among the highest prices in the industrialized world for cellular service.

The 2015 Wall Report, published by Ottawa-based consultancy Wall Communications, found that prices for many cellphone packages, including more modest ones, increased by four to eight per cent compared to last year.

Industry Canada spokesperson Jake Enwright says the report "gave very positive news to Canadians" because it confirmed wireless prices are still down about 20 per cent since 2008.

However, Daniel Bader, a technology analyst with mobile tech resource site MobileSyrup, finds last year's price jump concerning.

"We should worry about the fact that the plans that went up were the most popular plans in Canada, the good, middle-ground plans. 

"These are the ones that should be the most accessible, the ones that low income families should be able to afford. Those should be going down [in price]."

Will Wind somehow save the day?

But Bader has hope that the Rogers deal to buy Mobilicity will actually lead to lower prices.

Because the deal stipulates that Wind gets a significant new share of the wireless spectrum, he says the carrier can build a better network to compete with the Big Three.

Wind already won big blocks of valuable airwaves in March thanks to a government policy favouring smaller players.

The carrier is already promising big things ahead, declaring in a statement that the latest spectrum transfer "will significantly improve our network performance from Ontario to the Pacific" and "further enhance Wind Mobile's position as Canada's fourth national wireless service provider."

But Bader cautions that there's no guarantees that Wind will be successful in its struggle to take on Rogers, Bell and Telus.

"There are so many roadblocks to that actually happening and the time to market is so long that it may be all for naught. They may not be able to properly compete," he says.

"The government is not going to bail out Wind if they fail."

As for McLean, he says for now he has no choice but to stick with his current plan that he struggles to afford.

"Very frustrating, super frustrating, it pisses you off."

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