Sugar Mobile could shake up cellphone oligopoly in Canada

Sugar Mobile, an upstart provider offering wireless plans for as little as $19 a month, appears to have found a backdoor into the Canadian cellphone market, which has long been largely closed to new entrants who don't own their own networks.

And if it's successful, some analysts say, it could lead to more competition and lower prices for Canadian consumers.

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"I think this is the future," says Samer Bishay, president and CEO of Sugar Mobile. 

Bishay says a telcom oligopoly has prevented the mobile market from flourishing. "With our technology and our position in the Canadian market, we feel that we can penetrate that barrier and push through."

Sugar Mobile's service is run using an app designed to work on both Wi-Fi and 3G networks. 

You'll need an unlocked phone, but for a one-time startup fee of $29 and a monthly cost of $19, Sugar Mobile customers get unlimited talk, text, and data over Wi-Fi and 200 MB of non-Wi-Fi data. 

The non-Wi-Fi data may not sound like much, but Sugar Mobile says it's Wi-Fi's ubiquity that allows its model to work.

"Most people are in a Wi-Fi hotspot 85 to 90 per cent of the time," says Bishay.

"During the time you're in that zone, we allow you to do all your calls on the Wi-Fi network, so it connects you to the mobility network without having to incur the cost of keeping a cell tower engaged all the time. And then once you leave that Wi-Fi hotspot … we still allow you to do your voice and SMS, but through a 3G network."

Google does it too

While new to Canada, this type of service has been around in the U.S. for a while now.

Google's Project Fi is a similar service that prioritizes calls and texts over Wi-Fi. 

Fi automatically connects to open Wi-Fi networks (locked Wi-Fi networks will require previous log-in) and when Wi-Fi isn't available, Fi switches to the local cellular network in the area. 

Google is able to do this by acting as an MVNO, or mobile virtual network operator.

MVNOs are wireless providers that don't own their own network. Instead, they lease network access at wholesale rates and then turn around and sell that access to customers at retail prices.

Others countries have it

"If you want to see what fair MVNO rules can do for your pocketbook, look to the U.K., look to the U.S., look to providers like Ting," says Josh Tabish of Open Media.

For the equivalent of about $30 per month, Tabish says, an MVNO like the U.K.'s GiffGaff offers 1,000 minutes of talk time, unlimited texts and 4 GB of data.

In comparison, the Rogers Share Everything plan with 2.5 GB of data is $85 per month. 

Bell's Share Plus plan with 2.5 GB of data is $100 per month. 

But there aren't any operators like GiffGaff in Canada.

"In the U.S., there are 250 MVNOs. In Canada there are zero that are owned independently by anyone outside of the Big Three," says Sugar Mobile's Bishay.

Open Media's Josh Tabish says it's not clear whether that's because the big players in Canada who own the cell networks are unwilling to sell access to MVNOs, or if it's because they set the access rates so high that the MVNO has no hope of being competitive.

Ting is a Canadian MVNO with offices and a call centre in Toronto but with only American customers. It buys network access from Sprint. Two years ago, Ting's Elliot Noss told CBC News that "we would love to be in Canada. Nobody will — at least at this juncture — sell us network [access]."

So how is Sugar Mobile able to operate in Canada?

By acting like an MVNO even though it isn't one.

Invaders from the North

Sugar Mobile is owned by Ice Wireless, which owns a mobile network in Canada's North.

As the owner of a mobile network, Ice Wireless has reciprocal roaming agreements with the big Canadian telcos, whose customers roam on the Ice Wireless network in cities like Whitehorse, Yellowknife and Inuvik.

So Ice Wireless, through the Sugar Mobile brand, is essentially selling the network access that it has through roaming agreements in Southern Canada to retail customers. 

"Because [Ice Wireless/Sugar Mobile] have existing relationships [with the big telcos] they're obliged to sell them access to their network," says tech writer Daniel Bader of Mobile Syrup.

"What's interesting is it seems like those rates that they are being sold data [at] are significantly lower than another company that would be coming in with no physical infrastructure. As a result they can offer this sort of hybrid Wi-Fi and 3G service in a way that no other operator in Canada can," he says.

Bader doesn't see Sugar Mobile as revolutionizing the Canadian cellphone market just yet.

He points out you need an unlocked phone to use the service, which means the initial cost can be expensive. Also, most Canadians have locked phones and are tied to one- or two-year contracts with the big providers. 

The Sugar Mobile app operates over the top of the existing phone software and can be a bit clunky. There is also a slight lag when a call moves from Wi-Fi to 3G, although the call is maintained. 

But the concept sure is intriguing.

The question is, what happens if the big telcos decide they don't like the clever end run Sugar Mobile is using to buy network access? 

"We feel like we're in a position that if there was any issue with it, it would go to the CRTC," says Bishay. "And I think [we'd be successful] there."