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Telus Buys Public Mobile: Why That's Bad News for Consumers

Oct. 29, 2013
3 mins
Closeup of a person typing their credit card number into their mobile phone

In a surprise move, Ottawa has approved the acquisition of wireless startup Public Mobile by Telus. Although this is good news for Public Mobile shareholders, it’s hard to paint a rosy picture for consumers.

This is just the latest bump in the road for the federal government’s plan to have four major wireless competitors across Canada, with the goal of better service and lower prices. Let’s take a look what this means for Public Mobile subscribers, why the government approved this deal, and how it could delay affordable mobile options for Canadian consumers.

Consumers to migrate as Telus buys Public Mobile

In what seems like only a formality, once the Competition Bureau gives its approval for the Public Mobile acquisition, the struggling startup’s 280,000 customers will be integrated onto Telus’ network. Public Mobile has a closed network of sorts, as only mobile phones sold by the company can be used on it.

This means its customers have a very limited selection in the way of devices. This all changes with the acquisition – Public Mobile subscribers will be integrated onto Telus’ faster 4G LTE network.

Why was this deal approved?

There have been no shortage of mobile acquisition headlines this year; speculation that Verizon would enter the market along with a denied deal attempt between Telus and Mobilicy have been hot topics over the past few months. So why did this deal get the green light?

It all comes down to type of spectrum owned by the mobile providers. While Public Mobile owns G-block spectrum, fellow startup Mobilicity owns AWS (Advanced Wireless Services). There is an important distinction between the two, according to the government. When the AWS spectrum auction was held in 2008, there was a five-year restriction put in place to help protect the three new wireless players -- Public, Mobilicity, and Wind Mobile -- from being acquired by the big three carriers, Rogers, Bell, and Telus. The government sent a clear message that it wasn't willing to lift this ban, even with Mobilicity under creditor protection.

“Our government will continue to enforce the moratorium on the transfer of set-aside AWS spectrum to incumbents,” said Industry Minister James Moore. “We will not approve any spectrum transfer request that decreases competition in our wireless sector to the detriment of consumers.”

G-block spectrum open for business

G-block frequency is fair game and has no such ban barring its sale. However, while AWS spectrum is considered the cream of the crop, G-block isn’t considered quite as desirable.

Public Mobile spent a reported $52.4 million acquiring the spectrum for its Ontario and Quebec subscribers in the 2008 wireless auction. Public Mobile seems to have suffered a similar fate as BlackBerry; both underestimated the rising popularity of smartphones. Although very few headsets work with G-block spectrum, newly-launched iPhone 5C and 5S apparently work on the frequency, which is good news for Public Mobile subscribers.

The future looks bleak for discounted rates

The government’s pipe dream of a fourth competitor in every major market went up in smoke with the failure of Public Mobile. This just means there will be one fewer bidder in the upcoming 700 MHz spectrum auction in January 2014. Although mobile service rates have come down in recent months, don’t look for this trend to continue.

Unless we see the government lift its restriction on foreign ownership and a major foreign player like Verizon or AT&T enters the market to put some downward pressure on prices, it looks the status quo will continue. Canadians will continue to have among the highest mobile phone rates in the world, while the big three continue their stranglehold on the wireless market.  

Sean Cooper

Sean Cooper is the author of the new book, Burn Your Mortgage. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Financial Journalist, Speaker and Money Coach, his articles and blogs have been featured in publications such as The Toronto Star, Globe and Mail, Financial Post, Tangerine: Forward Thinking blog and TheDot. You can follow him on Twitter @SeanCooperWrite.

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