August 1, 2018 1 year 2 months ago

Freedom (with Will Arnett) set to disrupt Canadian wireless with no overage charges

TORONTO – The Canadian wireless market is about to face disruption akin to what T-Mobile wrought in the U.S., which will come as good news for Canadian consumers looking for much more data at a far lower price. The news likely won’t be so good for the likes of Rogers, Bell and Telus, who will have to respond.

Today, Shaw Communications’ Freedom Mobile will unveil a new ad campaign (TV, radio, outdoor, digital, social…) fronted by Canadian comedy star Will Arnett which takes dead aim at the complaints so many Canadians make daily – that their wireless bills are too high, the amount of allowed data per month is too low and overage charges are unfair.

The key to the push is the company’s continued offer of 10 GB of data for $50 a month, but with a new twist where overage charges are… $0. As well, for up to an additional $15/month, Freedom customers can also get any device in its lineup, for $0 down, meaning customers can have the latest Samsung S9 for a $65/month bill. This comes on the heels of Freedom’s new ultra low-cost plans which undercut the so-called skinny wireless plans the Big Three created when the CRTC demanded them earlier this year.

Of course, you can look at this new campaign created by Freedom’s Toronto based agency of record Rain 43 and say this appears as though data consumption is now unlimited – and essentially it is – but once the customer gets beyond their 10GB of data, their speeds will be throttled back to 128-256 kbps. Carriers Stateside have tended to go to market with an unlimited data marketing message while doing the same thing, but Shaw’s wireless president Paul McAleese (who worked in wireless in the U.S. for 13 years before joining Shaw last year) told reporters during an early look at the campaign Tuesday afternoon that message didn’t seem quite right for the Canadian market.

“We’re cautious around ‘unlimited data’ because we do throttle. We felt it was the more conservative and practical approach not to use that word,” said McAleese (pictured below at the press briefing).

The offer and the strong marketing push also looks to lay waste to something wireless companies here have long hung their hats on – the shared data plan or family plan, which is a clever and lucrative way of making sure an entire household with multiple devices and lines all stayed with the same provider – and for many years.

Who among us with kids hasn’t had a battle, or perhaps you have a monthly battle, over which one chewed through all of our allotted data so fast? With each individual having their own (endless) bucket of data with Freedom’s plan, those family squabbles may be a thing of the past meaning Freedom’s move here may well cause a radical restructuring or repricing of the Big Three’s shared data packages. Those stellar churn numbers posted by each of Rogers, Bell and Telus of late may well take a hit.

“We want to solve for Canadian consumers this ongoing stress that resides in their households,” added McAleese. “The construct of family plans is starting to fracture in this country, much as it did in the United States.”

“The data overage charges in this country are astonishing… I’m surprised there’s not more of a revolt on that.” – Paul McAleese, Shaw Wireless

As for the zero dollars charged for data overages, this, too, will be a serious pain point for the incumbents because, as Freedom showed in its press briefing, those charges make up 6% of the $20 billion in annual revenue earned by the Big Three, according to last year’s CRTC Communications Monitoring Report, and it’s rising. However, since Freedom is primarily concerned with building up its customer base (although churn is down and average revenue per consumer has jumped from $37/month to more than $50 for its newest subs) and data overage fees is a line item Freedom is not losing, offering it for nothing was an easy decision, says McAleese.

“The data overage charges in this country are astonishing… I’m surprised there’s not more of a revolt on that,” he explained, noting that Canadians are sometimes paying $100/Gig to the incumbent providers.

These types of fees are what helps power the “highest gross operating margins in the world” of Rogers, Bell and Telus, whose margins are generally over 40% said McAleese, who added Freedom’s margins are in the low 20% range something closer to the rest of the world, he added.

So offering $0 for data overages (customers can pay for LTE speed overage for $10/Gig) isn’t a matter of affordability, it’s about how you’re willing to run your business as a carrier. “We are prepared to operate gross margin business at a lesser rate than what’s currently being maintained in the Canadian market,” McAleese said. “You’re dealing with an industry here that’s in rarified air for profitability with the incumbents… We’re not coming from a world where we’re trying to maintain 2 Gig for $95.”

The primary drawback for many Canadians who might be tempted to opt for Freedom’s low-priced offer is its network, which is limited to the big cities in Southern Ontario, and Calgary, Edmonton and Vancouver. Customers who take their phones elsewhere in the country will still have to pay to roam. That said, the company has recently doubled the amount of “away data” for customers when they are off network, said McAleese.

An expanded national Freedom network will have to wait until after the next spectrum auction, when the government sells off 600 MHz spectrum in March where, it's assumed by most industry observers, Shaw will look to buy spectrum in Manitoba, Quebec and Atlantic Canada, where it now has none. 

Readers may also recall Freedom already showed its ability to rattle the wireless market here when it launched its Big Gig late last fall in concert with its rollout of the iPhone. That plan was 10 Gigs for $50, but with no $0 overage promise. The Big Three responded with sales of their own nearly matching the Freedom offer and customers were so hungry for a better price, the customer support groups of each of Rogers, Bell and Telus (in-store and online) were overwhelmed by the response.

As we reported back in December, recent research done by Toronto’s Solutions Research Group shows that millions of Canadians regularly exceed their data caps  and have to pay extra – which means they are more than ready for this sort of offer from Freedom. “Of the about 24 million smartphone users in Canada, 29% exceeded their data limit on a six month basis – that’s about 7 million,” SRG president Kaan Yigit told in December. “Add to this the large number of smartphones out there without data plans which we have been tracking… whether younger people, seniors or  second units – we are estimating another 4 million – you have 11 million smartphones basically in a low-cap-data or no data situation. That’s a lot of people who might be looking for cheaper data.”

Finally, with a celebrity the calibre and likeability of Arnett fronting the campaign for the next two months where he plays everyone’s smarter pal who knows how tough Canadian wireless customers have it, Freedom has an excellent chance of punching its way into the Canadian consumers’ consciousnesses during the second half of summer into the back-to-school selling season.