in Canada

Finally, Wireless Competition Explodes in Canada

The 3 stoogesShove over Rogers, Bell and Telus. In announcing the rules to the upcoming (May 2008) advanced spectrum auction, industry minister Jim Prentice has blasted open the doors to new wireless competition in Canada. Here is a quick overview of the new rules:

  • 40 of the 105 available megahertz will be set aside for new entrants
  • Incumbents will be required to allow roaming on their networks at reasonable rates (this is crucial as any new entrant may start regionally and take up to a few years to establish full national coverage)
  • Incumbents will be required to share towers with new entrants (significantly reducing startup costs and redundant infrastructure)

The government has given the would-be entrants (and pretty much everyone except for the existing telcos and their bankers) everything they were asking for. The game is on for startups and new entrants in the Canadian wireless space. So get to it. The crew here at StartupNorth are just this minute back at the orbiting headquarters, scrambling beneath couch cushions for the mere few hundred million in change needed to finance a spectrum bid and national roll out.

Even if launching a whole new wireless carrier is a little out of your league, this is great news for tech entrepreneurs in Canada. Despite recent improvements, Canada has long lagged the world in terms of mobile adoption, open access to networks and affordable data rates. With wireless rapidly becoming ?the new last mile? of the internet, our ability to innovate is going to depend on the emergence of a competitive wireless market. Assuming the new rules bring real competition to Canada, this announcement is the best thing tech entrepreneurs could hope for.

If you want a hint of where the wind is blowing for open and competitive wireless markets, look no further than Google?s recent announcement of the Android API and Verizon?s move to open their network to non-Verizon devices (even non-phone devices). Time to get out that whiteboard, and dust off those pitch decks.

As if this weren?t big enough news itself… The other reason that we?re bringing you this story on StartupNorth.ca is to announce that, starting Monday, the North family is getting a little bigger. WirelessNorth.ca will be launching and joins the StartupNorth family as a partner site. Tune in for more coverage of mobile startups, industry trends, device reviews, and everything awesome yet to come from the Great Wireless North.

24 Comments

  1. c’mon, keep dreaming. We all can make a prediction how this will play out. Quebecor or some other semi-major (regional like MTS or Aliant) player will get it, and no change prices will occur. As much as I hate to say this, we need to open it up to a major US player (telco or google) – who’s not afraid to operate at a loss to stir up some shit.

  2. c’mon, keep dreaming. We all can make a prediction how this will play out. Quebecor or some other semi-major (regional like MTS or Aliant) player will get it, and no change prices will occur. As much as I hate to say this, we need to open it up to a major US player (telco or google) – who’s not afraid to operate at a loss to stir up some shit.

  3. Certainly there are risks that any new entrant may behave no differently than their predecessors. A competitor like Quebecor does have their own entrenched media interests to look out for as well before they get too disruptive.

    Notheless, I don’t think we’ve heard the last of who will be bidding on the spectrum. As well, a little game theory suggests any new entrant has a lot less to lose in terms cannibalizing revenues from an existing install base, and lot to gain from attempting to differentiate themselves from the entrenched incumbents.

    Lastly, tacit price collusion is harder to maintain with a larger number of players than fewer which is hopeful (not that the big Canadian banks haven’t generally succeeded in this amongst the 5 of them).

    We didn’t get anything like Google’s 4 principles of open services, networks, devices etc. but what we did get, at least should be interesting.

    And it represents a show of strength by the government that they are willing to step in if they don’t perceive the market as behaving in the best interest of Canadians. Sometimes just the credible threat of greater regulation is as good as the real thing in terms of keeping a market operating orderly.

    Anyway I am optimistically optimistic at this moment in history. The possibility space for the wireless industry in Canada just got a lot bigger. It’s back to a newly opened market now to see what happens next.

    My biggest fear is that a regional carrier may buy up the spectrum but under-utilize it outside of a narrow geography. Looking at Quebecor’s balance sheet lately, this could be a genuine concern.

  4. Certainly there are risks that any new entrant may behave no differently than their predecessors. A competitor like Quebecor does have their own entrenched media interests to look out for as well before they get too disruptive.

    Notheless, I don’t think we’ve heard the last of who will be bidding on the spectrum. As well, a little game theory suggests any new entrant has a lot less to lose in terms cannibalizing revenues from an existing install base, and lot to gain from attempting to differentiate themselves from the entrenched incumbents.

    Lastly, tacit price collusion is harder to maintain with a larger number of players than fewer which is hopeful (not that the big Canadian banks haven’t generally succeeded in this amongst the 5 of them).

    We didn’t get anything like Google’s 4 principles of open services, networks, devices etc. but what we did get, at least should be interesting.

    And it represents a show of strength by the government that they are willing to step in if they don’t perceive the market as behaving in the best interest of Canadians. Sometimes just the credible threat of greater regulation is as good as the real thing in terms of keeping a market operating orderly.

    Anyway I am optimistically optimistic at this moment in history. The possibility space for the wireless industry in Canada just got a lot bigger. It’s back to a newly opened market now to see what happens next.

    My biggest fear is that a regional carrier may buy up the spectrum but under-utilize it outside of a narrow geography. Looking at Quebecor’s balance sheet lately, this could be a genuine concern.

  5. Thomas, sounds like you are excited about the possibility of candy bar prices coming down too? :)

    Like the price fixing allegations/investigation in the confectionary industry, this decision will have little affect on the wireless prices unless we get some risk takers. I feel it is more centered on public perception than anything else. Canadians paying through the nose for outdated wireless technology is ridiculous! I say provide me choice…I want my clarkbar,er, I mean an i-phone!

  6. Thomas, sounds like you are excited about the possibility of candy bar prices coming down too? :)

    Like the price fixing allegations/investigation in the confectionary industry, this decision will have little affect on the wireless prices unless we get some risk takers. I feel it is more centered on public perception than anything else. Canadians paying through the nose for outdated wireless technology is ridiculous! I say provide me choice…I want my clarkbar,er, I mean an i-phone!

  7. John,

    A new entrant (even a member of the current telco/cableco club, like Videotron or MTS) will have an impact on the market, both pricing and innovation.

    The current incumbents can maintain oligopolistic (sorry, “rational”) pricing because they are all of similar size and perceive the risks of a price war as outweighing the benefits of gaining a little market share.

    For a new entrant — any new entrant — it is necessary to take significant market share to be viable. (There is a critical mass of subscribers required to make the economics work given the fixed costs of spectrum and building the network.) That will likely require both better prices and service improvements (new services or better customer service). The entrance of Fido/Clearnet had a similar effect and drove a significant decline in prices.

    Eventually, the new entrants will reach a level they are happy with and become more interested in profitability than market share, but that will take time and will, at a minimum, produce a new, better equilibrium.

  8. John,

    A new entrant (even a member of the current telco/cableco club, like Videotron or MTS) will have an impact on the market, both pricing and innovation.

    The current incumbents can maintain oligopolistic (sorry, “rational”) pricing because they are all of similar size and perceive the risks of a price war as outweighing the benefits of gaining a little market share.

    For a new entrant — any new entrant — it is necessary to take significant market share to be viable. (There is a critical mass of subscribers required to make the economics work given the fixed costs of spectrum and building the network.) That will likely require both better prices and service improvements (new services or better customer service). The entrance of Fido/Clearnet had a similar effect and drove a significant decline in prices.

    Eventually, the new entrants will reach a level they are happy with and become more interested in profitability than market share, but that will take time and will, at a minimum, produce a new, better equilibrium.

  9. Bruce,

    I made that statement and the few stories I heard on the news pretty much said the same thing. Videotron is only concerned with the Quebec market and maybe Ontario. Previous entrants such as Microcell and another startegy was to run at a lose until they were acquired. Are you telling me this play will not happen again? Short term gain is not what the wireless industry in Canada needs.

  10. Bruce,

    I made that statement and the few stories I heard on the news pretty much said the same thing. Videotron is only concerned with the Quebec market and maybe Ontario. Previous entrants such as Microcell and another startegy was to run at a lose until they were acquired. Are you telling me this play will not happen again? Short term gain is not what the wireless industry in Canada needs.

  11. hey! the Canadian gov. should let T mobile to start providing services to canada! T mobile is able to start out big in canada and bring down price! they should have not let rogers buy fido couple years ago!

  12. hey! the Canadian gov. should let T mobile to start providing services to canada! T mobile is able to start out big in canada and bring down price! they should have not let rogers buy fido couple years ago!

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  15. As all the developed and developing countries are opening the doors to new wireless competition in their countries, canada is the exception still now.. so this is a great news for them to celebrate.. and i hope this bring them all to work together and to let the t mobile services in canada..
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  17. Finally the price wars are just starting. These wireless contracts were purchased well over a year ago and the new entrants are just getting they *hit together. Look for the cable companies like Shaw to offer some great incentives. Globalilative, will offer deep discounts on wireless to gain market share and then sell off to the big 4 later. I wrote an article on my site a month ago about this, listing all the new companies.

    Startupnorth looks great!

    http://www.investingincanada.info

  18. Finally the price wars are just starting. These wireless contracts were purchased well over a year ago and the new entrants are just getting they *hit together. Look for the cable companies like Shaw to offer some great incentives. Globalilative, will offer deep discounts on wireless to gain market share and then sell off to the big 4 later. I wrote an article on my site a month ago about this, listing all the new companies.

    Startupnorth looks great!

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