Why the Fido-Spotify deal matters

Wireless companies are straining to differentiate as data consumption rates soar

Woman holding phone playing Spotify

(Jonathan Nackstrand/AFP/Getty)

Wireless provider Fido unveiled a new set of wireless plans yesterday aimed at luring in younger customers with the promise of free music and a daily Vice-branded video show. It’s also a new twist in a long-running scramble by Canada’s telecom giants to keep customers inside their networks and reduce turnover as data—lots of data—becomes the primary consumer demand.

Fido parent Rogers Communications—which also owns Canadian Business—is in the midst of a company-wide overhaul by CEO Guy Laurence, and the repositioning of the Fido brand is one early result. The company is seeking both to appeal to the generation of Millennial consumers now entering their prime spending years, and to simplify its product lines, which had become overcomplicated and confusing for consumers (for instance, the company recently trimmed its Internet service offering from 17 different plans to five).

The new Fido “Pulse” plans, as they’re called, aim to satisfy both criteria by adding two things to the mix: a Spotify Plus streaming music account, and a daily streaming video news show made by Vice Media that will only be available to Fido subscribers.

The Spotify deal is what matters most here. A Spotify subscription, which costs around $10 per month bought directly from the London-based company, would seem to be a clear draw for younger shoppers, who are both big consumers of music and more likely to be price-sensitive.

It’s the first time a Canadian wireless provider has struck such a deal—although not the first attempt. In January, the Canadian Radio-Television and Telecommunications Commission scuttled a similar offering from wireless providers Bell and Videotron, in which subscribers would have been able to stream video from each company’s own media divisions without it counting against their data caps. The CRTC found that the practice, called “zero rating,” violated network neutrality regulations that prevent ISPs from privileging certain types of Internet traffic. In Fido’s case, Spotify data will not be zero-rated and counts toward the standard data cap, even if the bundled access is available only to Fido customers.

It remains to be seen whether the CRTC will see that as a hard enough distinction. But there’s reason to believe it will. The Fido deal comes only weeks after a CRTC finding that Rogers’ GamePlus app—a streaming video service that provides additional camera angles during NHL games and is available only to Rogers cable subscribers—was not in violation of equal-access regulations. Though the Fido deal would have already been extremely advanced by the time that decision was made, it provides a clear road map of the competitive landscape for Rogers and Bell in the coming years: a growing move to sign content deals that will add value to their telecom offerings. (Third national operator Telus has largely sat out of this land rush and has not bought any media properties).

Bundling of this type is common in Europe—including at Vodafone UK, where Guy Laurence was previously CEO. Vodafone’s “Red” plans, for instance, include the customer’s choice of subscription to services including Spotify, streaming video provider Now TV, or Sky Sports. If such a deal works at Fido, expect to see it spread quickly.