The Big Three (Rogers, Bell, and Telus) in Canada will put up a big fight if Canadian actor Ryan Reynolds tries to bring Mobile Virtual Network Operator (MVNO) Mint Mobile into the country, experts say, adding that anyone who backed a venture like that would likely lose a lot of money in the process.
On Sept. 9, Reynolds tweeted the launch of his telecom company Mint Mobile in the U.S., offering customers a pre-paid service that starts at US$15 per month, as well as an unlimited plan priced at US$30.
Hundreds of people commented on the tweet asking if the service was coming to Canada, to which Reynolds replied “working on it,” and “trying.” Yahoo Finance Canada reached out to Reynolds about his plans, but did not get a response in time for publication.
Mint Mobile offers cellphone plans to customers in the U.S. The MVNO does not own any network infrastructure and has a licencing partnership with T-Mobile’s coverage for its service.
Carriers will use every regulatory, political, traditional lever to stop Reynolds
John Lawford, executive director and general counsel of the Public Interest Advocacy Centre, said in an interview that even if the CRTC mandates network access to MVNOs, he doesn’t think the regulatory environment is stable enough for anyone to launch a company.
“Anyone can give it the old college try and sink a lot of money and lose a lot of money fast,” he said. “The three large providers, if they sense any true threat from the rules from the CRTC on MVNOs, whether or not there is an interesting startup like Mr. Reynolds’ efforts here, will use every regulatory and political and traditional lever to stop it.”
In late February, the Canadian Radio-television and Telecommunications Commission (CRTC) held regulatory hearings on whether to mandate MVNO (wholesale service providers) access to large wireless networks. Views are still divided on whether or not mandating MVNOs would increase competition in Canada and lower cellphone prices.
Lawford added that even if the CRTC mandates MVNO access, it will be met with appeals from the bigger carriers and will result in a long process before a final decision is made.
Telecom and tech expert Peter Nowak said that without a decision from the CRTC, “any such efforts in Canada don’t stand a chance.”
Nowak highlighted compared to the Canadian market the U.S. market is very different and “is more conducive to MVNOs.”
“The difference lies in market share. In the U.S., AT&T and Verizon were giants that dwarfed Sprint and T-Mobile by subscriber numbers, which is why those last two companies were very open to dealing with MVNOs,” he said.
“They figured customers are customers - retail customers are obviously better, but wholesale customers are better than nothing. Now, the merged T-Mobile and Sprint entity is much bigger, but it’s still behind AT&T and Verizon, so it’s still motivated to give MVNOs good terms.”
Verizon is the parent company of Yahoo Finance Canada.
Nowak explained the case is different in Canada because Bell, Rogers, and Telus have carved the market in thirds relatively equally, and aren’t motivated to make serious customer gains through the use of MVNOs.
“They have absolutely zero incentive to offer wholesale deals to MVNOs who in turn could offer cheaper services to consumers. Which is why we’re not likely to see Mint or any other service in Canada anytime soon,” he said.
Reynolds wealth and fame won’t mean carriers will be willing to negotiate
Ben Klass, a telecom expert and PhD candidate at Carleton University, said in an interview that Canadian telecom carriers are also more interested in owning all infrastructure as opposed to selling it off.
“Cellphone companies have, in some cases, sold off their infrastructure [in the U.S.], whereas the companies here appear much more interested in having total control over their networks,” Klass said.
“Try as much as he can and as he wants, you could be rich and famous and it doesn’t matter. [The Big Three] are going to say no until something changes.”
The biggest challenge Reynolds would face is trying to gain access to companies in Canada, and Klass added that carriers simply aren’t willing to negotiate.
Like Lawford, Klass added that the CRTC can make a decision but it’s not like flipping a light switch and changes take place immediately.
“You hope they’ll do it as expeditiously as they possibly can, but these things take time,” he said.
Hanish Bhatia, a senior analyst at Counterpoint Research, said the most important thing to understand is what Reynolds would bring to Canada.
“What is the business model? What are they trying to bring? What is their niche for a business like this in the telecom sector?” he said in an interview.
“You could either be targeting ultra-low-cost wireless plans or you could be targeting the population in some rural areas. If you do that, it brings up different challenges, so one is definitely retail, because if you’re putting a lot of investment in retail then you need big investments and would expect a big return. But for the population size in Canada and how the population is spread out, it may not make business sense because the margins at the same time are very thin.”