Bell and Rogers set aside differences,join forces on Inukshuk Internet network rollout

Inukshuk Internet Inc. is finally a go. After a couple of false starts over the past five years since it was licensed (RoW, April 3/00), a plan by Bell Canada and Rogers Wireless Inc. to revive the broadband wireless access provider and roll out its network could bring what many in rural and remotes parts of the country have been asking for: affordable broadband access. The two companies will invest $200 million over three years to expand Inukshuk’s network to more than 50 rural areas and 40 cities. Specific areas have yet to be revealed. They will pool their considerable spectrum holdings in the 2.3 GHz, 2.5 GHz and 3.5 GHz bands within the Inukshuk joint venture. Inukshuk will operate on a cost-recovery basis and will act as a network wholesaler to both Bell and Rogers, which will compete at the retail level. What is now such a promising enterprise could have found itself stalled in the courts with Bell and Rogers fighting for control of Inukshuk. Rogers gained Inukshuk when it acquired Microcell Telecommunications Inc. last year (RoW, Sept. 22/04). But last March, Bell invested in equipment provider NR Communications LLC, a company controlled by Craig McCaw, which also had a stake in Inukshuk (RoW, March 23/05). Cooler heads prevailed with the two companies setting aside their differences, deciding instead to cooperate on a joint network build out. In interviews with Report on Wireless, representatives from both companies say it was in their best interest to get a deal done and move forward. David Robinson, VP of business implementation at Rogers Wireless, says initially it was a blow when news of Bell’s investment became public, but after careful consideration it became evident that it would be better if the two companies worked together. "We thought maybe there was a different way of slicing this, and this is the concept of getting NR out as an equity partner - turning them into an equipment supplier, and then joining up with Bell," he explains. There were questions on how this joint venture was going to be run, but Robinson notes those were solved by deciding to operate Inukshuk on a cost-recovery basis. "It’s intended to be a cost centre, not a profit centre. That’s a fundamental difference between what we have today and what we had in the past," he says. Existing infrastructure is also a key element of this deal. There are considerable cost savings realized by not having to build additional infrastructure in the urban areas where the two companies already offer service. These savings will then be used to invest in building out the network in the rural areas where neither partner has a presence. Trevor Anderson, senior VP at Bell Canada, says there are two elements driving this initiative. "One is it makes absolute sense from an economic perspective to have a joint venture whereby we jointly construct the infrastructure and then compete at the retail level. It also makes a lot of sense for Canada in that you’ll get broadband Internet capability in areas much sooner than you otherwise would because if you’re building just one infrastructure and competing at the retail level it certainly improves your ability to drive the rollout particularly beyond the urban centres," he explains, adding, "We’re able to leverage the large infrastructure that Rogers and ourselves have, both in terms of towers and backhaul." By combing all the spectrum resources of both companies into the joint venture, Inukshuk has all the wireless pieces it needs to nearly blanket the country with local access and backhaul facilities. Anderson says the bands serve different purposes. "I would see us predominantly using the 2.5 GHz band for last mile I would see us using the other frequencies more likely in terms of providing backhaul to get to some of the rural areas," he adds. Both companies say it’s too early to discuss specific cities and rural regions that will receive the service over the next three years. Robinson adds, however, that it’s probably pretty easy to identify the 40 cities. Increased competitionThe Bell-Rogers partnership is poised to increased competitive options, but could also spell disaster for the country’s small wireless ISPs, primarily located in rural parts of the country. Shaw Communications Inc. and TELUS Communications Inc. will also feel the effects of increased competition in Western Canada. The small WISPs could find it increasingly difficult to secure new customers or keep existing ones when going head-to-head with a venture backed by the country’s largest telephone company and cable operator. Independent ISPs may find it necessary to consolidate if they are to present any competitive option to the larger players. Both Shaw and TELUS will also find themselves vulnerable to the marketing power of both companies. Bell and Rogers have mobility presences in the western provinces upon which to leverage their future fixed wireless broadband Internet services. They also have everything to gain in terms of subscriber growth, while Shaw and TELUS already have considerable market share - customers they could lose. In addition, TELUS doesn’t hold spectrum for the lucrative Calgary, Edmonton and Vancouver markets. These cities won’t cost as much to cover with wireless infrastructure; money that will go towards the network rollout in rural regions. Analysis of both Bell’s and Rogers’ spectrum resources in these bands illustrates the market dominance that Inukshuk will be able exercise on a near-national basis. In the 2.5 GHz band, the joint venture owns the rights to licences in all regions with the exception of Saskatchewan, where SaskTel has the MCS licence, and in Manitoba, where the 2.5 GHz band was previously licensed in 1999 for an interactive instructional television service. With respect to the 2.3 GHz and 3.5 GHz bands, both companies hold considerable spectrum resources, enough to blanket the country.

Bell and Rogers set aside differences,join forces on Inukshuk Internet network rollout

News | 09/23/2005 4:00 am EDT

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