In theory, cable TV is a dead media. We have sufficient technology, today, that we can stream any episode of anything ever recorded, anytime, in real time, and in HD to any broadband household. A few decades from now, this whole idea of only being able to watch pre-selected recorded content at certain hours of the day is going to seem awfully strange and quaint. Not to mention the bizarre ritual of millions of subscribers manually making millions of copies of that content on their PVRs when perfectly good original copy already exist on the cloud.

Now in reality, traditional cable/satelite tv isn’t going away anytime soon. The service is reliable, it offers an important easy/lazy level of usability that pc-based alternatives haven’t nearly matched yet. But clearly the writing is on the wall. And services like netflix streaming, and boxee, and youtube, and many others are closing in.

BUT! great news for endangered cable executives everywhere: guess who controls all of the last-mile internet pipes in North America? It’s like having foxes as the sole provider of the chicken pipelines.

Even Michael Hennessy Telus’ top lobbyist has been sounding the alarm that the real net neutrality issue isn’t net neutrality, it’s vertical integration. This concerns, because Telus doesn’t have the same media assets as Bell and Rogers.

When companies with substantial media assets and huge legacy distribution businesses (a.k.a. cable tv) also own the only pipes into your home, it would be crazy not to expect them to use every available lever to favour their own content stack over any others.

And so on the eve of netflix coming to Canada, Rogers cuts their broadband caps (again).

Rogers “extreme” cable option is advertised as 15 Mbps with an 80GB cap at $60/month before taxes and other fees.

For the record, at full theoretical advertised speed, 80GB would earn you 12.9^* hours of usage a month, or just under 30 minutes of usage a day.

^{80GB = 696,320 megabits / 15 megabits per second / 3600 seconds in an hour = 12.9 hrs}

ps. why would this apply to wireless? Well for one it’s all the same players, for another tv and video streaming can be wireless too, and perhaps most importantly all of this logic could apply to separating voice service from wireless pipes as well.

Now combine that with the Canadian wireless industry. Canadians love to hate their carriers. There’s always an attractively large segment of subscribers ready to switch, churn or sign up for the first time. Meanwhile Canadians know new carriers are launching and have pent up demand for new choices. New choices the entrants thought they were going to have for themselves.

And so the news:

Rogers Communications is launching another wireless discount brand, named Chatr, to compete with new carriers Wind, Mobilicity and Public Mobile, sources say.

Chatr’s main purpose will be to match new entrants with lower prices and cheaper phones without diminishing the quality appearance of Rogers’ core brand, according to a source with Rogers who did not want to be named.

Now with Chatr, Rogers can surgically target the very specific geographies wherever the new entrants launching and undercut, or just out-market the upstarts with their own fake-new brand.

By opening up the industry to new entrants, Industry Canada’s goal was to drive competition. No doubt they were hoping to spur such competition by price, service quality and transparency more so than by marketing spend, general bamboozlement, and geographic discrimination.

Things could get interesting for consumers if Rogers adopts an aggressive enough scortched-earth strategy in key markets. At least for a few years, until the entrants are driven out or bought-up after their five year licenses are up. Building new national brands from scratch won’t be cheap or easy for Rogers^*. However, all incremental consumer acquisition, or just consumer confusion, is a win and drives up the brand-building costs to new entrants as well. Love it or not, Chatr could work. Let’s see what Chatr Rogers has to offer.

LINK BGR: Rogers to launch Chatr, a new low-end brand to compete with WIND
LINK CBC: Rogers launching another wireless brand

^* Though can’t be as expensive as spending a billion dollars on the biggest share of AWS spectrum and then not even turning it on.

These winds of change (so to speak) come blowing not only from the impending entry of new entrants (Tony Clement’s particular Windy conundrum notwithstanding) but even more so from a MUCH more competitive landscape amongst the big boys now that Bell and Telus have gotten their HSPA on.

This next bit will come as some cold consolation to those laid off today. However, a newly competitive telecom sector will, in time, bring broad benefits to nearly every other sector of the Canadian economy. In the new and evermore digital economy, innovation is driven by connectivity. A faster pace of innovation as evidenced by falling prices and much greater availability of leading edge wireless devices and services (as has been a strong trend for the last 1-2 years) is at least one encouraging sign for driving economic growth in the years ahead.

LINK: Rogers laying off 900 as part of cost cuts

Previously on WirelessNorth.ca: Where oh where your wireless bill goes (as with soylent green it’s mostly people. And profits. At least circa 1998 it was)

^{ps. As always, WirelessNorth.ca is hiring aspiring telcom pundits and snarks (or any combination of the two). The pay, not so good though.}

The reason? The iPhone is costing Rogers too much. Apple’s elegant one $199 price doesn’t jibe with Rogers subscriber revenue. Or at least the math doesn’t jibe as well with the kind of margins that Rogers has gotten used to earning off of smartphone subscribers. Rogers is suffering margin compression with the iPhone 3GS. While they love the halo effect of the iPhone, they’d love even more if they could lure you in the store with thoughts of iPhone dancing in your head… and then sell you the exact same voice and data plan but fob you off on, say, a much less subsidized HTC Android for example.

We don’t know if Rogers is revenue sharing on the iPhone with Apple but, apparently, the difference between the actual price of the device and mandated $199 subsidized price is such that Rogers is going so far as to aggressively market the Android down to $79 (and $39 for students).

This is not such a bad story for consumers. The android is a half-decent device, and $39/$79 is the kind of entry point for smartphones that could really start driving penetration of smart phones in Canada (if not, you know, for those whopper monthly bills you’ll still enjoy but we digress). And a few more androids or blackberries in the global marketshare pie chart does help to keep apple honest.

The first thing you need to understand: if you don’t make some changes to your existing plan and you just go about using your phone like you do every day, you’re going to come home to a very nasty surprise in the form of a Rogers bill that will have you immediately applying for a government bailout package. I hear those are actually becoming hard to get, so you might want to keep reading.

Jay points out, Rogers charges standard voice rates of $1.70 a minute, texts at $0.60 each (actually we’ve seen Rogers charge $0.95 texts in the US) and data rates at the astounding $0.03/KB (that means $30/MB, or approximately $150 to transfer one single average MP3 or youtube video). And then there is Roger’s delightful practice of charging you roaming AND long distance on incoming calls while in the U.S.

But there is some hope! Jay recommends a bunch of good ways NOT to use your phone in chargeable ways as well as a few darkly secret Rogers plans that can help bring down the charges.

But the real win (you have an unlocked phone right?) is to leave your Rogers SIM card behind when traveling. Citizen Ziggy recommends:

If you are going to U.S. for SXSW or any other reason and want to use data on iphone at good price.

Once you get over border, get a T-Mobile PREPAID SIM.
Call support number and tell them you want to activate the “sidekick data plan” (1$/day unlimited data). DO NOT TELL THEM YOU HAVE iPhone. (tell them sidekick or HTC smartphone if they persist).

as for phone calls remember that the SIM also has free incoming calls. you can fwd your skype # or cellphone to the new number (charges may apply) or use http://jajah.com that turns outgoing calls into incoming calls for about 2cents/min.

If you are one of the lucky ones who have a http://grandcentral.com account you can use Grand dialer on your iphone to do the same thing that jajah does but for free.

LINK: Traveling to the US with Rogers

We found in the US that average download speeds of 841 Kbit/s compared poorly to Japan with download speeds of 1,213 Kbit/s but compared favorably to the UK where download speeds averaged 663 Kbit/s. Canada stands out at a respectable 1,314 Kbit/s.

Here’s the global averages:

Why we think this is interesting: 3G or 3.5G or whatever you want to call it, is starting to show some impressive bandwidth numbers. Impressive for a lot of media streaming applications. Plenty of data/media bandwidth to fill a small screen. Where 3G is still clearly hurting however is latency. Nearly half a second is not too snappy and maybe why real-time 2-way voice/video/gaming over IP applications are just not quite there yet for mobile.

What we need is LTE (2010 – 2012ish) which should even more bandwidth, but even more importantly, sub 100ms latency (depending on how far you are pinging etc.).

Link: What is the REAL speed of your 3G connection?

These numbers are of course a little disingenuous. You would expect these numbers to climb over time as users adapt their behavior to the new capabilities of the 3G devices and as more useful applications are released to the iPhone store. One also wonders how much higher those figures would be if iPhone supported video or, if the iPhone had any reasonable battery life with 3G actually turned on… limitations that other/future devices will not always have.

So the bad news is Rogers is dropping their caps and raising pricing relative to the 30/6GB deal. The good news is, not by that much and consumers should see data bills that are a LOT more predictable, and the evil days of punitive $50/Megabyte pricing are over.

A Rogers email rep emailed us last night to say:

We’re extending the $30 6GB 3G smartphone plan until the end of September (for the Bold mostly but all 3G smartphones can add it). And we looked at that iPhone usage and thought once the promotion ends, we’d create new plans that are better suited to what we know customers use. These October 1 plans are for data devices consumer pricing (so BlackBerry, smartphones, air cards) and I note, Rogers is one of the few carriers in the world that permit tethering. So a preview of new pricing that goes into effect October 1: $15 for 2MB (essentially an email plan); $25 for 500 MB; $30 for 1GB; $60 for 3GB and $80 for 8GB

On top of this Rogers is introducing a $100 cap for all data bill overage [this is a defacto $100 unlimited plan then? -ed] and free SMS alerts to inform you when you are approaching your limits. Presumably this cap does not apply to roaming data use however, which is still a big scary gap in Rogers service plans for anyone who travels.

Nonetheless, predictable in territory data pricing is very good. Tethering is good. And hopefully all of this pricing will come down further with more competition in 2009.

This new openness as well as the current stop-gap $30/6GB plan is a good sign from Rogers. It’s a sign they are getting better at PR and being responsive to consumer outcry at some of their past practices.

Feels like should be giving our carriers such a hard time more often :)

Can we move on to extortionate roaming charges, long distance rates and per-minute billing then?

Rogers average revenue per user is $75 this quarter. So, for your $75 you spend on your Rogers bill here’s were it goes:

General overhead, shiny offices, salaries etc: $30
Cost of sales (Direct costs, electricity bill for those towers etc.): $7.69
Marketing (You might have seen some): $7.44
Depreciation (Infrastructure cost of the network): $6.06
Debt (interest on loans for past spectrum auctions and investments): $3.55
Profit (before taxes): $27.89

Note that Rogers debt expenses are currently on low side historically, though they did just draw down a billion in Q3 for that new spectrum. All said and done, nearly 90% gross margins before all those fixed costs come in to play is quite a business to be in.

But it was growth as measured by new subscriber additions that missed expectations leading the market to think that penetration growth in Canada is slowing down. Funny how $75 ARPUs will do that.

Could it be that Rogers own high pricing is chocking off their revenue growth prospects. Shareholders and analysts seem to have been disappointed that the outlook won’t let them have it both ways, new adds and ARPUs increasing together forever…

The other side of price elasticity was also suggested by the one bright spot of the wireless numbers. Rogers substantial data revenue growth year over year correlates conspicuously with Rogers dropping their data pricing from a shockingly egregious national travesty just a year ago to merely “among the highest” in comparison to the rest of the world today.

Rogers confirmed (as predicted on this blog) that iPhone subscribers will come in above the existing subscriber base average of $75.

More earnings season coverage to come on WirelessNorth.ca