Startups Race Rogers to Solve Shocking U.S. Roaming Bills

Michele Shephard travels to the U.S. from Toronto every few weeks for her job as a corporate-event organizer, one of the 4.4 million treks that Canadians make each month. She’s also among the millions who’ve been stuck with massive charges for using her mobile phone south of the border.

Once, a series of calls to close out a contract for her business cost about C$800 ($700). “It was insane,” said Shephard, 47. Now, she keeps her phone off while traveling, hopping between Wi-Fi hotspots and using Skype to call home.

“It’s not convenient when you need to phone and text,” she said in a phone interview.

Canada’s telecommunications regulator estimates that wireless carriers brought in more than C$1 billion in revenue last year from roaming charges -- fees for using the network of other operators. Now, a group of startups has emerged to offer plans that are cheaper or don’t require swapping SIM cards between countries. Rogers Communications Inc., Canada’s biggest carrier, is even joining in, despite industry margins on roaming that top 90 percent.

“The bulk of roaming revenues that the Canadian carriers were getting was coming out of the U.S.,” said Emir Aboulhosn, chief executive officer of Vancouver-based Roam Mobility. “For them it was highly profitable, highly lucrative as well. That being said, roaming was one of the biggest pain points.”

Roam Mobility, which sells wireless service to people going to the U.S., is marketed to Canadians and uses T-Mobile US Inc.’s network. For C$3.95 a day, users can switch their SIM cards for one from Roam Mobility and talk, text and use data in cities across the U.S. The price goes down for long-term use.

Large Canadian carriers typically charge about C$1.50 a minute for calls and 75 Canadians cents for text messages. Data can cost as much as C$6 per megabyte.

Roam Mobility

Roam Mobility estimates that Canadians like Shephard rack up C$450 million a year in roaming charges. The service, started in 2009, expects to have 200,000 regular users by the end of 2015, up from more than 100,000 now, Aboulhosn said. SIM cards are chips used to identify individual phone users and help devices connect to networks.

For her next trip, Shephard said she plans to try out Roam Mobility, after hearing about the company on Twitter.

Rogers is also entering the fray, offering its 9.5 million subscribers its own reduced rates. Rogers announced last month that it’s charging C$5 a day, with a cap of C$50 a month, for customers to use their phone just like they do at home by roaming on AT&T Inc.’s network while in the U.S. “Roam Like Home,” as Rogers calls it, is available to premium customers. Without a roaming plan, the company charges C$7.99 a day for 50 megabytes of data.

Customer Complaints

“We’ve been out listening to our customers, they’ve got a number of irritants, this was in the top three, and we set out to address it,” Guy Laurence, who took over as CEO of Rogers a year ago, said at an event last month to introduce the new feature.

Roaming fees have risen as people spend more time texting and streaming videos and music on their smartphones. Operating revenues specifically from data roaming are expected to reach more than $42 billion globally by 2018, representing about 47 percent of total mobile-roaming fees, according to Juniper Research, a firm that analyzes the telecommunications industry.

In Canada, regulators tried to address the skyrocketing roaming charges in June 2013 as part of a new wireless code of conduct for carriers. It required wireless carriers to tell customers when they’re roaming and limit charges to C$100 a month unless the user agrees to pay more.

Roaming Startup

Last month, Toronto-based KnowRoaming Ltd. debuted its own service to help alleviate the burden of roaming fees on customers. KnowRoaming sells an electronic sticker that users attach to their SIM cards, which means customers don’t have to switch out their existing cards when they cross the border like they would with Roam Mobility or a U.S. carrier. The startup has agreements with carriers in more than 50 countries and gives users unlimited data for $7.99 a day.

Rogers isn’t the only established carrier to spot the trend. In the U.S., T-Mobile introduced an unlimited international data service last year that lets users access the Internet and send texts in more than 120 countries at no extra cost. Upstart Canadian carrier Wind Mobile began offering unlimited U.S. roaming for C$15 a month in January 2014.

T-Mobile CEO John Legere has estimated that profit margins on international roaming fees can be about 90 percent.

Rogers is sacrificing some of the fat margins on roaming charges that Canadian carriers, including BCE Inc. and Telus Corp., have long enjoyed, said David Heger, an analyst with Edward Jones & Co. in St. Louis who covers both the Canadian and U.S. markets.

Sacrificing Margins

“They just decided to suck it up and take a hit,” Heger said, “with the thought that over time they’ll make up for it with the number of people who take advantage of a lower roaming rate.”

Rogers shares have fallen 5.5 percent this year, while BCE and Telus have gained 15 percent. Roam Mobility and KnowRoaming are closely held.

Rogers, based in Toronto, has traditionally been a leader in grabbing roaming revenue, having been the first Canadian carrier to offer devices like the iPhone, said Dvai Ghose, an analyst with Canaccord Genuity Group Inc.

“In part, this is a recognition of the fact that Rogers is losing roaming revenue in general and so has to price down,” Ghose said. “I don’t think that the margins are going to be that thin, but they’re certainly not going to be as solid as they used to be.”

The carrier has won over at least one fan so far. Mark Neustaedter, who lives in Calgary, had been using a T-Mobile SIM card after a family trip to Florida racked up a C$1,200 bill. He switched to Rogers’s new feature because the T-Mobile card cut him off from the phone he used for work.

“I would always have to be calling in to my voicemail, so that’s why this solution from Rogers is just so much better,” Neustaedter, 45, said in a phone interview.

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