Freedom Mobile at Shaw targets shared plans
Sees opportunity for disruption in data usage battle
wireless brand Freedom Mobile has set its sights on shared plans as the next target for disruption in Canada’s mobile market.
Family plans designed to increase the number of lines per account are a staple among the Big Three national carriers, which control roughly 90 per cent of the market share despite the growth of fourth players including Freedom in Ontario, B.C. and Alberta and Quebecor Inc.’s Videotron in Quebec.
But Freedom sees an opportunity to peel off customers from its competitors given constant household battles over managing data usage and the overage fees when people exceed their limits, Shaw’s wireless president Paul McAleese said during a roundtable discussion with reporters Tuesday.
“Sharing is the worst,” is a tag line in Freedom’s new back-to-school marketing campaign — ads featuring Will Arnett will launch Wednesday — that aims to attract students still on their parents’ plans with its 10 gigabytes for $50 plans. These plans don’t charge data overage fees, but throttle speeds when a user goes over their allotment.
“Our belief is that we can continue to amplify the fracturing of these data plans by taking some of the heavier users … we start to have our thin wedge into that household,” said McAleese in his first wide-ranging media interview since taking charge of Freedom in April 2017.
McAleese, a former Rogers executive who launched a private label wireless company in the U.S. before returning to Toronto to run Freedom, was at the helm when Freedom launched its 10 GB plans late last year and sparked five days of price slashing from Rogers Communications Inc., BCE Inc. and Telus Corp. as they matched the 10 GB plan for $60. Outside of promotional periods, the Big Three charge at least $140 for the same plan.
The high cost of data remains a pain point for Canadians, McAleese said, adding that about 6 per cent or $1.2 billion of total wireless revenue stems from data overage fees, according to the Canadian Radio-television and Telecommunications Commission.
“The data overage charges in this country are astonishing,” he said. “I’m surprised there’s not more of a revolt about that.”
Last year, the Big Three raised their overage rates from $50 per gigabyte to $70 per gigabyte for new customers. In July, Bell raised its rates to $100 per gigabyte for new customers. Telus charges $50 for the first extra GB ($10 per 200 MB) then $100 per GB thereafter. Under the CRTC’s Wireless Code, companies can charge a maximum of $50 per month in overage fees unless a consumer explicitly consents to pay more.
While Freedom doesn’t charge overage, McAleese doesn’t consider the plans to be unlimited since it does throttle speeds.
Faced with criticism that Freedom’s network isn’t as good as the incumbents’ networks, he agrees it’s “less mature” but insists the gap is closing rapidly. Last year, Shaw bought 700 MHz spectrum that helps with indoor connections and range from Videotron for $430 million. It plans to deploy the majority by the end of the year, McAleese said, and will aim for 600 MHz spectrum in the upcoming auction.
McAleese said Freedom’s newer network is an advantage when asked how Freedom can afford to charge less than half of the Big Three’s pricing given it contends it’s a comparable service — at least in its home areas in major urban centres. (Customers are charged roaming rates when they’re away from the home network depending on their plan.)
“We’re not burdened with legacy infrastructure that is more expensive to operate,” he said, adding the LTE network is less than three years old.
“I’d also remind you that the Canadian market has some of the highest gross operating margins in the world,” he said.
The Big Three all have wireless operating margins above 40 per cent, whereas Freedom’s wireless margin sits at 26.2 per cent.
“It’s not a matter of how can we afford to, it’s a matter of we are prepared to operate a gross margin business at a lesser rate.”