Videotron Roaming Agreement

Roaming arrangements between the new Canadian wireless providers and the incumbents are expected because they are necessary. It is therefore no surprise that Videotron would enter a roaming arrangement with Rogers. If they do not do this, the value of their wireless service is compromised: subscribers' phones would become an expensive burden out of the Videotron's limited home territory of Quebec and Eastern Ontario. Even for new entrants with a more national footprint, they will still build their network in stages, and so will need a way for their subscribers to travel economically.

Most interestingly is the question: what's in it for Rogers? If they and the other incumbents simply refuse to enter roaming agreements with Videotron and the other new entrants, they retain a critical differentiator - national service, without roaming surcharges. After all, Rogers is already selling wireless services in Quebec. Further, Videotron subscribers would still be able to use Rogers' and the others' networks on an ad hoc basis when they travel, but at a higher rate. This, too, benefits Rogers and the other incumbents. In a limited sense, Rogers is consigning Videotron to becoming an MVNO outside of their home territory, or even within their territory where Rogers has towers and Videotron does not.

By concluding this agreement, they lock out Bell and Telus from any revenue sharing with Videotron. This favours Rogers since every incumbent will lose a portion of their subscribers to Videotron, but now only Rogers can claw back some of the lost revenue.

Rogers is already at a marketing disadvantage in Quebec since it is less able to sell bundles - Videotron is the regionally-dominant company for cable TV and broadband. With this agreement, they are also compensating for the subscribers they are bound to lose to takers of Videotron bundles. While they are enhancing Videotron's offerings, they know Videotron is only a modest threat because it is regional.

It would be more telling if Rogers, Bell or Telus enter a similar agreement with a new entrant with national aspirations, such as Bitove, which are more direct competitors. Agreements with those companies are unlikely. It is not impossible, but it will strongly depend on circumstances and pricing, with the incumbents in the strongest negotiating position.