Challenges facing the Canadian wireless industry: a Q&A Part III

Canada’s mobile wireless industry will face a number of challenges in the coming years as it struggles to maximize investment in infrastructure to generate profitable operations. In the previous issue of Report on Wireless, the heads of Canada’s national mobile wireless operators talked about the evolution of the competitive landscape, regulatory issues and third-generation wireless. In the third and final installment of this comprehensive question and answer, the CEOs of Microcell Telecommunications Inc., Bell Mobility, Telus Mobility and Rogers Wireless Inc. talk candidly about the future of wireless data services and the impact of Wi-Fi on their businesses. As was the case in Part I (RoW, July 22/03) and Part II (RoW, July 31/03) of the Q&A, the order of the answers reflect the order in which the interviews were conducted. Questions and answers have been edited for clarity and length. RoW: How do you see wireless content evolving over the next few years and what are your expectations for that in the future? André Tremblay, Microcell: I’ve been pushing those ideas and concepts in the past. Today, I’m still very confident in that but with a fast-follower approach. I like SMS, but I believe much more in GPRS and what you can do with full capabilities, such as text, video, access to the Internet and access to email. I believe SMS had great success in Europe because it was the only game in town. At the same time that SMS is becoming attractive for us, we have GPRS and 1X with faster speeds and no text limitation. I’m a believer in that kind of evolution. But I’m still holding my breath to expect sophisticated, affordable handsets with colour screens, with email capability for business people and gaming for the youth market. Microcell would like to push that, but Microcell is not going to subsidize every product. We will push it at the right price. I strongly believe that it’s going to work. What percentage of revenue is it going to represent? I don’t know. We will launch a few products this year, but we’re not going to spend $20 million this year to launch a sophisticated portal, for example. What we’re going to do is work on the platforms and work on establishing our products for our customers as their primary product. Michael Neuman, Bell Mobility: The content that we’re tapping has for the most part existed for some time. But as the network and to some extent the devices evolve, the value of the content grows. A good illustration of that would be Java. As the graphics become better it enables the user to become more excited about the content simply by virtue of being able to see it better as the screens become larger. I think as handsets, graphics technology and speeds evolve, you’re going to see content which is repurposed for mobile applications really begin to take off. George Cope, Telus Mobility: First of all, adoption will just continue to increase. Adoption is what drives an affinity to the product. The product is becoming more and more a part of everyone’s daily lives. We’re continuing to see rapid growth there in the SMS/text messaging world. I’m bullish on camera phones. I think people are going to find the best way to use it, and we’re all going to learn something as carriers about this new business. The handset price at first will be expensive so it won’t necessarily be a mass product, but if you look out over a 24-month period this product has the opportunity to do something that’s significant. In a way, everybody will be carrying access to video with them and the amount of use of that will be phenomenal. Nadir Mohamed, Rogers Wireless: Our thrust at Rogers Wireless is very much around how we deliver the most robust, easy-to-use connectivity solutions. For a corporate business customer, it’s about getting messaging/email right whether it’s a RIM (Research in Motion) product, a Treo, a Microsoft smartphone or a Sierra Wireless AirCard. The important thing is whatever the customer wants we have it and we can deliver seamless connectivity for messaging. On the consumer thrust, it means getting SMS up and running and drive it through some core marketing programs. I think those two are our bread and butter in terms of addressing a demand that’s there and it can be a real revenue driver early. It’s also a matter of getting wireless carriers to make it easy for the customer. RoW: When do you believe that wireless data services (SMS and wireless content) will begin to make a noticeable contribution to average revenue per user? AT: I have to say the fact that we have inter-carrier interoperability is interesting and we’ve seen increases from that. Year after year over a couple of years we’ll start to see some SMS impact on ARPU. I think people will continue pushing it. Pushing it means designing products around it and making it more attractive. It’s not only integrating with TV, but linking with MSN Instant Messenger, linking with AOL, linking with types of products where you start to create a buzz. I believe that the newer handsets may help. MN: I think content is already having a small impact on revenue per user, but has been held back by devices and network capabilities. I think from now on that you’re going to start seeing a liftoff in data around the confluence of high-speed Internet, high-functioning low-cost devices and software that’s purposed for the devices that customers are willing to buy. But the real killer app for our industry is still going to be what has always been the killer app on the PC, and that’s electronic mail. For the same reason, as phones come out that lend themselves to better receipt reading and response to electronic mail, you’re going to see the adoption of electronic mail on a mobile basis take off. GC: You have the introduction of data services, which in total in an industry our size are not yet enormous, but in terms of impacting ARPU there’s no doubt in my mind that it can add $1 or $2 of incremental ARPU throughout this year and into next year. It starts to be material when you get into an industry. If you think of the industry with 12 million subscribers, the entire industry is getting $1 - that’s a $150-million business. That’s not the $6-billion industry we are today on voice, but in 1985 we had to start somewhere on voice. NM: I think it is now. I think the large players are approaching somewhere in the $1 million of revenue per month out of SMS for each player, give or take. That’s talking industry level. It’s a great new source of revenue and it was about $1.67 quarterly last year. It’s not a huge amount in the context of mid-$40 blended ARPU. But if you look at it differently and say ‘what’s the growth in ARPU of revenue and what per cent is coming from data?’ it’s pretty significant and it will be a bigger piece of growth going forward. RoW: What kind of impact will Wi-Fi have on the wireless carriers and how do you see it evolving? AT: Wi-Fi is still an emerging technology, but we see it as an interesting complement to the existing wireless services. It is a natural and positive evolution of wireless technology. In the end, it’s all about offering customers the tools that they see value in using. In that sense, Wi-Fi represents one more way to enhance consumers’ wireless experience. This is all good for the development of the wireless sector as a whole, because it contributes to making the wireless category of services even more appealing to people. This technology also offers all kinds of opportunities to wireless carriers and I’m sure we’ll see more and more commercial initiatives linked to it in the future. MN: I subscribe to the view that Wi-Fi can act as a collection point for wireless. The next point is that Wi-Fi hotspots are by their nature little islands and little islands need joining together. How do you join them together? If the user can have a seamless connection moving between Wi-Fi and 1X, then he’s just wireless forever. I think our challenge as the wireless industry is to arrive at a scenario where regardless of which wireless carrier you subscribe to each of those subscribers wants to be able to go into a hotspot, be it at the airport or somewhere else, do your business and as you’re in between two different hotspots, do your business still on the digital cellular network without missing a heartbeat. That’s the ideal scenario and that the hotspots should be agnostic insomuch as it doesn’t care whether you’re a Rogers or Bell Mobility customer. GC: I think because it is going to be here as a service, it’s our job to figure out how to utilize that service to the benefit of our clients. We’ll want to develop complementary services that allow people to use our high-speed mobility network in conjunction with some Wi-Fi services where you may need high data throughput. So you’d have both capabilities integrated into the service. It is going to be one of the more interesting segments of our industry to follow that I’ve seen in years. We are involved both directly and through Spotnik Mobile. I’m not sure anyone quite knows how this is exactly going to evolve. I think one of the issues as a large carrier is ensuring that if our name is attached to a client service that it has the type of quality of service to expect from a carrier such as Telus. Those are the sorts of things we’ve got to wrestle with as we understand and start to implement different Wi-Fi services. NM: To be quite frank and upfront, we don’t know how to make money out of this. So we’re looking at it to see if there are patterns and to see if there’s a way that we can get in. It’s not dissimilar to what happened in the Internet world when Internet became a mass phenomenon 10 to 15 years ago. We’re in that exploratory phase where a lot of smaller companies are playing, the bigger players are starting to come in, and in the next little while there will emerge a pattern. At the moment we haven’t declared an explicit set of initiatives. We’d love to have open roaming between players so that customers of Bell, Rogers, Telus and Microcell or whoever it is can seamlessly go from location to location, use higher bandwidth where it makes sense, and migrate from a network perspective between the WLAN network and the ubiquitous cellular network, but without the customer having to do weird stuff. This concludes our Q&A series with the leaders of Canada’s national wireless operators. Let us know what you thought of this special feature. Email your comments to Report on Wireless Editor Perry Hoffman at phoffman@decima.com. To purchase additional copies of the RoW issues containing the Q&A or to order the full Q&A series in one document, please contact Ryan O’Neill at (613) 230-1984 or via email at roneill@decima.com.

Challenges facing the Canadian wireless industry: a Q&A Part III

News | 08/26/2003 4:00 am EDT

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