Telecom Giants

I was reading Cindy Fu’s blog and found her post about Bell, Rogers, and Telus quite interesting. The three main wireless network providers are threatened by the potential competition of Verizon in Canada. Michael Porter has provided us with a framework that allows us to understand the industry in which a specific firm operates. He believes that an industry can be influenced by five forces. At the moment, Canada’s telecom giants have market power and are able to charge high rates for their cellular plans. In relation to the five forces, there is a threat of a new entrant. The Canadian government wants Verizon to enter into the market as Canadians have been complaining about high wireless rates. Currently, the three wireless companies have minimal competition and have an understanding between them to keep rates high. Verizon is a big telecom company. Because of its size and the fact that it is a new entrant, it will be motivated to offer low rates. This will force the Canadian companies to lower their rates in order to stay in business. Verizon’s potential entry will force the big three to provide a better value proposition. A big win for consumers.