Wirelessnorth.ca

We’re at a very interesting time for the wireless industry in Canada. We’re on the eve of new entrants into the industry but already the landscape looks a lot different and already a lot more competitive than just a few years ago. Here’s a snapshot, form our perspective [your perspective may vary] of the state of wireless in Canada. Stay tuned for where we go from here….

Originally presented at FITC Mobile 2009 in Toronto.

A recent trip to Italy really drove home the point of how useless our fancy mobile phone are the minute we step across a border. At the going rates from our carriers of $2/min, $1/sms, $12-$30/MB + GST/PST etc. you really have to want to use that phone to make it worthwhile. Or your company is paying the charges which in turn works out to a hell of a productivity tax on Canadian companies trying to do business globally.

But just think of mobile apps for a minute. LBA or location based apps have been hyped as some kind of a big deal. The problem is, and a lot of people seem to miss this point, if you are anywhere near home you probably already have a fairly good idea of things around you. At least the interesting things. And you know how to read the signs and how to find your way around.

It’s when you are out of your home range however that mobile location-based-apps can be enormously valuable. Google maps are a lifesaver when trying to find directions abroad. On top of maps there’s a wealth of apps that can help you find good restaurants, interesting sights, hotel deals etc. In an ancient city like Rome, the place is absolutely soaking in history and it absolutely cries out for augmented reality applications to let you visualize or at least understand more about the history and architecture of almost anyplace you might be standing.

As it stands now, this market, for Canadians doesn’t exist. At current roaming rates it’s quite literally cheaper to buy your phone a seat on AirCanada and fly it return back to Canada than it is to share or stream a mere 25MB of data to your friends (say 10 digital pictures or a couple minutes of streaming qik video). And buying a local SIM is little help when the vast majority of phones are sold locked (or CDMA for that matter).

For services this valuable it makes sense to charge a little for it. We pay $30 for a month of data in Canada, it wouldn’t be unreasonable to charge another $30/week for the convenience of data on the road. In reality though, actual roaming rates are a thousand times higher than this.

It’s time for this to change.

addendum: How do we fix it? Well at best Canadian carrier policies or anything Canadian regulators could do covers only half the problem. It may take cross-border co-operation or regulation (as in the EU), or perhaps competition from other technologies (global standards on open spectrum anyone?).

In what can only be described as a game of high-stakes legal douchebaggery, Bell and Telus have forced Globalive to review their foreign ownership before a public CRTC hearing. Telus in particular has been throwing every legal means they can at Globalive to try and hold up the upstart’s launch date. Needless to say, Globaliver are eating their livers over this latest development. And probably you should be too. There’s little in this antiquated idea of nationalistic telecom protectionism that helps Canadians in this context. In fact, one could probably point to the long coddling of Canada’s domestic telco industry for our current oligopolic-ish sort of situation.

From Today’s NationalPost:

Globalive Wireless has been racing to bring its offering to market as quickly as possible. By next summer, without the delays occasioned by the CRTC review, Globalive Wireless would have launched its services in many Canadian markets, employed an estimated 2,000 people and spent over $1 billion building its network.

The incumbents responded to the threat of new competition in predictable ways: they cut prices and suggested they would provide better customer service. Fair enough although one wonders whether that would have happened without the threat of more competition. Somewhat more cynically, they sought to game the regulatory system in a way that could delay and seriously complicate the introduction of wireless competition.

LINK: Wireless Wars: Barriers to new providers -Ken Campbell CEO Globalive Wireless
Funny that Rogers doth not protest. It’s almost like they know that as the one carrier selling out iphones, blackberries, and rocket sticks faster than they can back up the trucks, that they are the least of whose lunch will be eaten by the upstarts.

You’ll notice that Bell has primarily hung on to market share in recent years only thanks it’s acquisition of Aliant. Telus is has been aggressive at growing share, while Rogers iPhone bump is less than you might expect. Not less than you might expect however if we plotted revenue share of market instead of subscribers (postpaid+prepaid) which is what this diagram illustrates. Rogers ARPU (average revenue per user) is substantially higher. Rogers advantage of being the only carrier with the latest GSM handsets has helped them maintain the industry highest prices and the highest market share.

These totals include virtual operators (e.g. Virgin counts as Bell) and all of the big guy’s familiar wanker flanker brands.

In all cases every carrier has been adding significant subscriber numbers in every quarter over the last 4 years. But there’s a ways to go yet. Canada is still sadly behind the world in penetration. Previously: Mobile penetration ekes up to 70% in Canada, still sucks

source: CWTA (the horse’s mouth)

Sorry we’re a few days late on the news, but here you are, some more good news on a new wireless entrant in Canada. Taking our catchprase “great wireless north” very seriously is RuralCom:

The proposed Alaska Highway Network will provide nearly contiguous coverage along 1,685 km. (1,047 mi.) of the Alaska Highway from Wonowon, BC to Beaver Creek, YT on the Alaska-Yukon Territory border. Communities to be served will include Fort Nelson, BC, Watson Lake, YT and Whitehorse, YT.

RuralCom’s proposed network along the BC North Coast will provide nearly contiguous coverage along the BC Inside Passage waterway from just north ofVancouver Island to the Alaska-BC border. BC communities served will include Bella Bella, Masset, Queen Charlotte City and Prince Rupert . The area served will also provide service to the 1.8 million cruise ship passengers traveling to and from Alaska during the May-October season.

From a policy perspective, you could count this one as a win for feds, as far as using the auction to encourage some mobile services in some hensewise underserved places. On the flip side though, the PR so far seems to suggest (now becoming a familiar refrain) an emphasis on talk and text service.

So your life-long dream and drop everything, buy a young malamute and hit the road streaming mobile broadband from the sidecar of your motor-bike the whole way up the yukon trail, may have to wait a little longer.

From a business perspective the model seems like a clever way for Ruralcom to also scoop some lucrative roaming revenues from tourists and Americans to and from Alaska as so forth. We do have a few questions though, drop us a note if you have more info: Does Ruralcom have any spectrum outside of AWS, or will only new AWS handsets get coverage? It must be a neat trick to provision basestation power and backhaul that far up the Yukon’s wazoo, there must be some interesting/clever stories there?

Protip: North of sixty, remote alternatives like solar power have some serious drawbacks some parts of the year…

Link: RuralCom Corporation to provide cell phone service to the Alaska Highway and the BC North Coast

With full page ads in this weekend’s papers and a press conference earlier this week, Videotron (Quebecor) has announced their new Wireless network to be built on the Spectrum they purchased earlier this year. It’s not exactly a surprise that they will be putting the spectrum to use, but it is good to hear it announced officially (of the new entrants, only Videotron and Globalive have announced rollout plans so far). The network will be HSPA like everybody else (not waiting for LTE) and these HSPA signals should start wiggling their way across Quebecor’s airwaves by mid 2010. The bad news (or not good yet news) for Ontarians is that Videotron has said anything yet about expanding beyond Quebec (though they do hold a bunch of spectrum in southern and eastern Ontario.

Videotron already has about 55k cellphone subscribers in Quebec under an MNVO arrangement with Rogers which they will be migrating over to the new network.

Link: Quebecor launching new cellphone network

Ever wonder when that fat telco bill lands every month, where exactly all that money goes? How much does it cost to run a wireless network anyway? Never fear friends a little forensic finance plotting reveals all. Lets use the nation’s largest carrier Rogers for an example. All figures drawn from Rogers Communications Inc. wireless division Q2 2008 published results.

Rogers average revenue per user is $75 this quarter. So, for your $75 you spend on your Rogers bill here’s were it goes:

General overhead, shiny offices, salaries etc: $30
Cost of sales (Direct costs, electricity bill for those towers etc.): $7.69
Marketing (You might have seen some): $7.44
Depreciation (Infrastructure cost of the network): $6.06
Debt (interest on loans for past spectrum auctions and investments): $3.55
Profit (before taxes): $27.89

Note that Rogers debt expenses are currently on low side historically, though they did just draw down a billion in Q3 for that new spectrum. All said and done, nearly 90% gross margins before all those fixed costs come in to play is quite a business to be in.

This is huge news for the wireless industry in Canada. We are hearing strong rumours than both Bell and Telus will be switching (or at least launching) an HSPA (GSM) network in Canada by 2010. You heard it here first. Rumours and speculation about the switch have been swirling for a while, but this time it looks like it’s for real.

Ever since they purchased FIDO and became Canada’s only GSM carrier, Rogers has been holding it over and winning customer and revenue share from Bell and Telus. GSM phones are increasingly becoming the world standard with only Bell, Telus, some of the larger US carriers and a few others internationally are the last significant holdouts. Increasingly high end phones are coming out only on GSM (like the nokia n-series or the iPhone) or the CDMA equivalents may come out only 6 months later.

GSM also has the handy feature of the SIM card, making it much easier to buy and sell unlocked phones or move devices between carriers.

We had thought that Bell/Telus would try to coast it out for 4G aka LTE sometime in 2012. LTE is the global industry’s plan to finally converge on a “single” 4G wireless standard. It seems though that Telus/Bell couldn’t wait and they will be migrating to LTE by way of HSPA.

Suddenly, that 30MHz or so of combined national spectrum that the two are bidding on seems like it could become an awfully handy way of switching horses.

In addition to the new entrants, having two more incumbents move to GSM inevitably will create more competition through better access to high-end devices, as well an easier ability for subscribers to switch carriers (if not for those 3year contracts).

We at WirelessNorth.ca welcome all our new GSM overlords. We love the smell of competition in the morning.

^{All links to wikipedia, invariably useful if ever you need help decoding the acronym soup of wireless standards.}

I may have given Rogers a hard time about confusing pricing earlier, but they hardly deserve all of the blame. Bell didn’t want to let me go in to the weekend disappointed, so they delivered a treat right to my mailbox after lunch. This isn’t wireless, but you know where they got their inspiration from.

While you were still getting used to your 80GB bandwidth cap, Bell has a special treat on your Home DSL connection.

Lets have a look!

$73.95 per month for Cable TV, Home Phone AND Basic Internet. Not bad is it?

Lets take a look at the fine print. There is a lot of it, so how bad can it be?

Oh no! Got me! 2GB per month. How much will extra GB cost? They won’t say, just “extra”

So there you have it. Bell is introducing 2GB usages caps on Home Internet, and you pay-per-use after that. This isn’t 3G, or EVDO,. no. This is DSL.

So, for a special WirelessNorth prize, lets have an essay contest. What would you do with your 2GB of internet per month? Check your email? Perhaps online banking a couple times a week? Most creative response gets a prize. (must be picked up in Toronto, no 3-year contracts required. Promise)

And then there were 3. Quebecor is the third major player to announce, officially, their participation in Canada’s spectrum auction. The shocker is that they too have set down enough funds to bid on all licences nationally. Quebecor has announced today probably in response to MTS and Yak jumping the gun back on Monday and one day before Industry Canada announces the full official list tomorrow. We could get more.

How the process works is that each spectrum applicant needs to place a deposit to qualify to bid on each geographic piece of spectrum and region of canada. The deposit effectively represents a minimum openening bid on each of these licences.

The game is on for national spectrum. In reality we don’t expect each of the entrants to bid aggresively on every licence, but placing a deposit to cover the whole thing does maximise options. I’m sure the game theory wheels are spinning furiously for both new and old entrants. In reality there is enough new spectrum for, at a stretch, 3 new national carriers, but taking more of the spectrum and sharing less is always best for the business model if the competing bidders can be scared off and you can get it for the right price.

Wider spectrum means you can serve more voice and data to more customers with fewer towers, less roaming and less competition. What’s more the extent to which spectrum can be concentrated or monopolized can bring high economic returns for carriers relative to a more open competitive market. This explains in part why a big chunk of spectrum was “set aside” in this auction as new entrants might never have had a shot at it otherwise, and the land rush (air rush?) to take advantage of it. Said Quebecor’s CEO Pierre Karl Peladeau today:

“However, exceptionally favourable conditions for new entrants, which may never occur again, persuaded us it is in the interest of our shareholders that we try to extend our deployment across Canada. We will see at the conclusion of the auction if such a deployment is possible.”

Previously: Everything you needed to know about the Canadian Spectrum Auction but were afraid to ask