Rogers’ no-overage plan about data use, churn, 5G: analyst

Rogers Communications Inc.’s reasons for launching a no-overage-fee wireless plan last week — quickly copied across the industry — included driving up data use by its customers and improving its churn and average revenue per user in the future, according to National Bank analyst Adam Shine. He said in a note Thursday, written following meetings with Rogers management, that the plans “address a key pain point and source of frustration among consumers who don’t like being hit by overages for data usage that goes beyond their monthly limits.” BCE Inc. was the first out of the gate to match the Rogers offer of 10 GB for $75. Once customers use up that data, the speed of their service is slowed down. Telus Corp. initially offered a 15 GB for $75 plan that did include data charges, but then on Tuesday announced it would come out with its own no overage plan, which the company is offering on the same pricing terms as Rogers and Bell. Bragg Communications Inc.’s Eastlink and Quebecor Inc.’s Videotron have since came out with their own $75 offers for 15 GB and 17 GB of data respectively, Shine noted. Shine said the Rogers plan had been in the works since the fall of 2018, and that the company hopes to get customers comfortable with using more data. He also noted that most calls to call centres are about billing, and removing overages will lead to lower call centre costs, as well as improved customer satisfaction -- and lower churn. “When considering the revenues derived from overages and the in-bound calls to deal with related consumer queries, it becomes a perverse zero-sum situation that needed to be better addressed,” Shine said. He also said Rogers “wanted to clear up the clutter of its numerous plans in the market and, in so doing, reduce some of the inherent confusion among consumers and salespeople around too many options. Undoubtedly, the same dynamic is at play with several of its peers.” Shine said overage charges account for under five per cent of Rogers’ service revenues. With the majority of Rogers’ subscribers in an average revenue per user (ARPU) range of around $50 to $65, Shine says the company doesn’t need a particularly large number of users to upgrade to its $75 plan “to help make the overall impact to wireless margins in the short term relatively neutral.” This calculation is helped “by anticipated declines in call centre costs and other churn-related benefits,” according to Shine. With the exception of Rogers, all the plans mentioned above are limited-time offers. Eastlink’s offer was no longer listed on its website Friday. Other differences also include the speed to which data downloads are throttled once limits are exceeded by customers. Both Rogers and Bell throttle speeds to 256 Kbps, with Telus offering a slightly more generous throttled speed of 512 Kbps. Users looking for extra high speed data beyond their contract provision will need to buy data passes, which can range from $5 for 3 GB packages from Rogers to the more expensive $22 for 1 GB from Telus. According to analyst Gerry Wall, president of Wall Communications, the similarity of the plans means incumbents are “likely to grab more Freedom subscribers than other incumbents’ subscribers,” he told The Wire Report in an email. Shaw Communication Inc.’s Freedom, which started a price war in 2017 over its ‘Big Gig’ prices and was previously the only one out of Canada’s biggest wireless companies to offer a no-overage plan, also responded to the announcements. The company upped the 4 GB bonus it had been offering since late last year with all plans over $40 a month -- including its 10 GB ‘unlimited’ plan -- to 5 GB, all for $60 a month. Shine said the new plans are also part of the transition to 5G, which will see more data usage and new pricing models. “These future pricing models which will allow for greater speeds and lower latency likely won’t resonate as well among consumers excessively monitoring their mobile data consumption,” he said. — With reporting Vicente Biancardi da Camara at vcamara@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Rogers’ no-overage plan about data use, churn, 5G: analyst

News | June 21, 2019

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