Xplore Mobile never really had a chance to connect

Opinion

Hey there, time traveller!
This article was published 20/07/2022 (1145 days ago), so information in it may no longer be current.

Before Bell acquired MTS in 2017, Manitoba was blessed with four solid choices for cellphone service.

At the time, MTS and Rogers dominated the mobile market in Manitoba and Bell and Telus were effectively new entrants into this territory.

To satisfy regulators, the merged Bell-MTS had to divest 25 per cent of its subscriber base to Telus and about 25,000 more to Xplornet Communications (which was subsequently spun off into a separate entity called Xplore Mobile).

Ostensibly, the idea was that Xplore Mobile would assume the role of the fourth competitor in the wireless space in Manitoba.

Late last week, Xplore Mobile announced it was shutting down operations at the end of August and according to a few industry watchers, it never really had a chance.

The original deal allowed Xplore three years of access to the Bell-MTS infrastructure. The company said it had big plans to build out its own infrastructure.

But in its only public comments about the closure, Xplore Mobile said, “We could not overcome the cloud of uncertainty created by regulatory delays, such as those associated with the CRTC’s mobile virtual network operator (MVNO) process and the high roaming rates that significantly exceed retail prices. We tried to hold on but the regulatory delays were just too long.”

Some industry experts have questioned Xplore Mobile’s commitment to the enterprise as it took some time just getting out of the gates in the first place.

Also, subsequent to the Bell-MTS deal, Xplornet was sold to a U.S.-based private equity firm but the small Manitoba wireless operation was not part of the deal. Was that because the private equity firm did not like its chances?

Lawrence Surtees, vice-president of communications research at IDC Canada, said Xplore Mobile was stymied economically because the wholesale prices were so high.

“They were paying more in wholesale fees that what they could recoup in retail,” he said.

As a result, it was hemorrhaging customers rather than broadening the geographic footprint of its new wireless business as was its stated intention at the outset.

An Xplore Mobile spokeswoman confirmed that the company is down to 7,000 paying customers from the 25,000 it originally acquired.

Critics of the Canadian telecom regulatory environment say it is just another example of poor policy when it comes to efforts to create more competition in the wireless business, a marketplace that has become increasingly lucrative and vital to the way society functions.

Ben Klass, a PhD candidate at Carleton University School of Journalism and Communication and a Manitoban who was vocal in his opposition to the Bell-MTS deal, said Xplore Mobile’s demise is another example of a “credulous” regulatory environment in Canada when it comes to telcos.

“Xplore Mobile would have had to move mountains to succeed,” Klass said.

It is irksome to Klass and others that the country’s Competition Bureau approved the Bell-MTS deal, where MTS had a proven track record of successfully providing excellent service and would ostensibly be replaced, as Klass put it, “by an unproven upstart that is handed a bit of the resources and told to go off to the races.”

Klass did a study on behalf of the Manitoba division of the Consumer Association of Canada looking at wireless pricing in five provinces between 2019 and 2021.

“Xplore Mobile’s pricing stood out,” Klass said in an interview with the Free Press. “Other carriers were constantly offering promotions and changing pricing, but Xplore more or less remained static. They were never competitive. It looks to me that this business was essentially anemic and bleeding out over the course of its existence.”

It is not clear what the ownership or management relationship is between Xplore Mobile and Xplornet Communications, although one industry insider said the latter was effectively managing the former, although there was separate ownership.

Since 2017, Xplornet’s profile in Manitoba has grown dramatically. The company’s main business is providing high speed Internet mostly to rural Canada through technology called fixed wireless, a decidedly less excellent service than fibre-to-the-home enjoyed by most urban dwellers in Canada.

Recently the company won a competitive process to manage the assets of Manitoba Hydro Telecom which includes a fibre backbone that will be crucial to the eventual development of high speed internet services to remote communities in Northern Manitoba.

At one time it was reported to be in the running to acquire Freedom Mobile from Shaw Communications to allow Shaw to be acquired by Rogers Communications, in a deal that is currently occupying the attention of the Competition Bureau. (Quebecor is now the favourite to win Freedom.)

Critics are not optimistic that the Rogers-Shaw deal will be a boon for consumers just as the Xplore Mobile experiment to increase competition in Manitoba proved to be a non-starter from the Bell-MTS deal.

martin.cash@freepress.mb.ca