A fourth national wireless player in Canada: Part I – The Opportunity

There has been a lot of discussion lately about whether Canada needs a fourth national wireless operator with incumbent carriers saying new entrants shouldn't get special treatment from the government regarding the upcoming spectrum auction. Potential new players argue on the other hand that a new entrant is required to improve the competitive intensity of the sector. With first round comments on Industry Canada's proposed spectrum auction rules due on May 25, Report on Wireless thought it appropriate to consider whether an opportunity exists for a fourth national wireless operator. Part I of a series of articles on the auction to be published over the next two weeks strives to answer the question: Is there an opportunity for a fourth national wireless carrier? The short answer is yes. And one of the main reasons is next-generation wireless network equipment can serve as a great equalizer. New versions of WiMAX are on the horizon and a few years from now Long Term Evolution gear, or LTE, offers a new entrant a cost-effective path to next-generation services such as mobile VoIP, video calling and a whole host of bandwidth intensive entertainment applications. LTE trials are expected to begin in the 2008/2009 time frame with commercial deployments in 2010. A new entrant won't have to worry about legacy infrastructure, it can "simply" jump to mobile WiMAX, for example, which will be ready for commercial deployments at the end of this year. Consumer devices such as PCMCIA wireless modems and laptops with embedded modems will begin to roll out in 2008.John Hoadley, wireless CTO at Nortel Networks Corp., says both LTE and WiMAX offer opportunities for a new player to enter the market. "I think WiMAX in the short term does ," he tells Report on Wireless. "If you look at an operator like Clearwire in the US they've made a good start at doing something that's a pre-WiMAX system and they're evolving to WiMAX." These wireless network protocols also offer significant spectral efficiency over current 3.5G architectures, EvDO and HSDPA. WiMAX and LTE can use spectrum three to four times more efficiently. Hoadley says this means an operator can offer a lot more services to a lot more customers and it doesn't "have to be quite as cautious about offering things like video and high-speed data." Higher-power WiMAX systems that are now in testing will improve on previous WiMAX networks' shortcomings of lower throughput and smaller coverage areas. Hoadley says the new high-powered WiMAX networks allow for much more bandwidth and broader coverage areas. While the confluence of next-generation equipment and the licensing of new spectrum open the door for a new entrant, the cost of deploying a network could weigh heavily on a new player. Desjardins Securities recently estimated that a Quebec network would cost between $400 and $450 million with a national network being substantially more. Asked to compare the costs of getting into the wireless game in the early 1990s using CDMA and GSM technologies with the cost of deploying a 4G network, Hoadley says that would be a hard, if not impossible, exercise. The amount of throughput generated from a high-power small WiMAX base station is in the range of 60 Mbps to 70 Mbps and to accomplish that with the older technologies would require "significant racks of equipment" and would use a lot of spectrum, he explains. There are other factors to consider when assessing the opportunities for a fourth national carrier. Hoadley points to backhaul as a cost that needs to be factored in. "So how do you get all that traffic back to your switching and router networks?" he asks.It is without question that there are challenges ahead for any potential new national wireless carrier, but technological advancements in networks are sure to ease the pain of entry, especially if the would-be entrant focuses on bandwidth-hogging multimedia applications. Part II of this series will evaluate the proposed rules to determine the chances of success of a new entrant in the spectrum auction.

A fourth national wireless player in Canada: Part I – The Opportunity

News | May 24, 2007

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