Rogers Communication Inc. is one of Canada’s best know corporation and also
one of the largest. One of the relatively new divisions of Rogers is Rogers Wireless.
This division that was originally called Rogers Cantel Inc., launched its first cellular
service on July 1, 1985, in Toronto and Montreal. The founder of this company was nonother than Mr. Ted Rogers. In only two years Rogers Cantel Inc. had become the first
wireless phone company to offer a continuous coverage corridor from Windsor to Quebec
City, an area of aproximatly1,200 kilometers. Currently Rogers Wireless has the largest
cellular corridor in North America, an area of nearly 2,000 kilometers. Rogers
Communication has been able to successfully expand its operation and offer wireless
services to most cities and travel corridors in all ten provinces of Canada. The current
coverage of Rogers Wireless is 85% for digital services and 93% for analog (“Investor
Relations”).
The wireless communication industry has a monopolistic competition with
product differentiation. There are a few big firms in this industry that produce similar
products; however they try their best to differentiate their products from the others
offered to the consumers. Rogers Wireless enjoys one of highest revenues received by
wireless carriers in Canada. They receive $12 -per-subscriber per month (Okalow).
During the year 2003 the operating income produced by Rogers Wireless accounted for
49% of the $1,449,000,000 total revenue produces by Rogers Communication Inc.
(“Investor Relations”). Rogers Cable on the other hand only contributed 44% of this
operating income. It is clear to see that Rogers Wireless is a very important part of
Rogers Communication Inc. and as such is vital par of the whole organization.
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Rogers Wireless is Canada's biggest wireless carrier with 5.5 million customers
and controlling 32% of the youth market in Canada (Daniels). The reason behind Rogers
Wireless’s success has been in part due to its many technological advances in the recent
decade. For example in February 1992, Rogers became the first Canadian wireless
carrier to add digital transmission technology to its wireless network from coast to coast.
Thanks to this digital wireless technology, static was no longer heard over the phone
since the voice signal is converted into data and then sent over the air. Also in
November 8, 1996, after being awarded a Personal Communications Services (PCS)
license (in the 2 GHz band) Rogers Wireless became the first wireless company in
Canada to offer Digital PCS to its costumers in Montreal. This service was offered to all
of Canada on May 15, 1997. Currently Rogers is primarily using their GSM/GPRS
(Global System for Mobile Communications / General Packet Radio Service ). The GSM
network is the standard for most of the world except for North America where the market
is shared between GSM and CDMA (Code Division Multiple Access). In Canada only
Rogers Wireless and Microcell Telecommunication (Fido) use the GSM networks, while
Bell Canada and Telus Mobility use CDMA networks.
One of the most important changes in Rogers Wireless took place on November 9,
2004. On this date Rogers Wireless successfully implemented its $1.4 billion takeover of
Microcell Telecommunications or Fido. Due to this takeover Rogers became Canada's
biggest wireless carrier with 5.5 million customers. This change is positive one for all of
the Fido users for two main reasons. First of all, even though this change is very recent
and not much is known of the financial implications of it, it is safe to say “that the Fido
brand will remain and be used to target younger buyers. According to Ted Rogers,
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president of Rogers Communications, "the Fido brand is well known and adds clout to
Rogers Wireless's position in the important youth and young-adult market."” (" Rogers
Outbids Telus For Fido!"). Secondly, it was a well-known fact that although Fido offers
it costumers very innovative and valuable plans, Fido’s network was very small and only
covered the major urban centers. As a result of this take over however, since both Fido
and Rogers use GSM technology for their networks, Fido users now can user the Rogers
Wireless Network whenever Fido is not available. It is important to mention also that the
reverse is true for Rogers Wireless as well and in areas where the Rogers signal is weak
they can use the Fido network instead. It is also possible to view this takeover from
another view as well by using game theory. It is safe to assume that if Rogers Wireless
had not taken over Fido, Telus would have done so in their place. Telus is already a
formidable competitor in the wireless carriers industry, and it is logical to assume that
they would have become even stronger after the takeover. If Telus had been successful in
taking over Fido, Rogers Wireless would have lost its network advantage since Telus
would now have access to a GSM network. Using the basic concepts of game theory it is
easy to see that given the fact mention previously the only course of action open to
Rogers Wireless was to takeover Fido in order stop Telus from reaching a position where
they could offer Rogers a very serious competition.
Rogers Wireless has used many strategies over last few years in order to maintain
its majority market share and to establish it self as the dominate firm in the industry. One
of strategies used is Price Discriminations. Rogers Wireless offers many different
wireless packages to its costumes such as Family, Couple, Pay As You Go, Value Pack,
and many more (" Plans & Essentials"). Each of these different packages are designed to
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fit the needs and lifestyles of many different groups. For example the family plan is ideal
for a family of four where everyone would like to have their own phone and the majority
of calls are made between family members (free Rogers to Rogers phone calls).
However these packages are not the end of this strategy. The Rogers Wireless costumers
who are also costumers of Rogers Cable and Internet Service can take advantage of the
discounts offered to them if they bundle up all of their services in one bill. In such cases
costumers can save $5 to $10 on each service and will no longer need to pay two or three
different bills each time. This is a huge incentive for each Rogers costumer who uses one
the services to acquire their other communication needs from Rogers instead of their
competitors. These different packages and bundles offered by Rogers will allow the
costumers to self-select and only choose the products they need and want.
Another strategy used by Rogers Wireless is to use lock-in switching costs in
order to keep the costumers that they have. Many wireless carriers have decided to cut
the profits that they receive by selling cellular phones. Cellular phones that normally
would cost in excess of a hundred dollars are sold for quarter of their price if the
costumer agrees to sing a contract with the wireless carriers. The duration of these
contracts change depend on how much the price of the cellular phone, the longer the term
the lower the price. This way the costumer will need to stay with the wireless carriers for
the duration of the contract and would have to pay a heavy fine if they decide to get of
the contract before the end and as a result they are locked in with carriers for a period of
time. Another way by which Rogers Wireless and Fido lock in their costumers is by the
use of their GSM network. It is not possible to use a GSM phone in a CDMA network
and as such the individual will require purchasing a new handset designed to operate
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under a CDMA network. This will increase the switching costs for costumers and will in
turn deter them from changing their networks.
Network Effects have always been a major issue in the wireless communication
industry. Today it is common practice that each wireless carrier will provide free calls
between all of it subscribers. This effect is magnified due to the fact that Rogers
Wireless uses a GSM network unlike its competitors. This makes their network even
more exclusive and therefore the more people they have the more people will wish to join
them to take advantage their network and free calls between the member. Rogers
Wireless has played its hand very well in regards to the issues of lock in and network
effects. They have for a number of years offered contracts to their costumers and have
kept their prices as low or at time even lower than competitors. The recent addition of
Fido to Rogers Wireless has successfully increased the number of people who in essence
use Rogers Wireless and has in effect increased their network effect. It is possible to
argue that the types of networks discussed are both Real and Virtual. These networks are
real in the sense that Rogers Wireless has a real network of towers and transmitter that
connects phones together. This network is also virtual since each user does not really see
the real network, however they are connected by it to different users. Consequently
Rogers Wireless’s network has both virtual and real network characteristics.
It is very important that Rogers Wireless attracts as many costumers as it can
since it exists in an environment with Economies of Scale. It has been very expensive for
Rogers Wireless to setup its network in the first place. However now that the network is
operational it will cost them a very small amount of money to add a new member to their
network. Therefore the more people they can persuade to join their network the lower the
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average cost will get and they will be better off. Rogers Wireless has been able to
respond very well to the very competitive nature of the wireless carriers industry. It has
been able to acquire the majority of the market share and keep that position thanks to its
successful strategies and as a result decrease its average costs substantially. It is
important for Rogers Wireless to continue with such trends and to improve on them since
they face strong completion from Telus Communication and it is possible for new
companies to join the industry at any time.
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