Vendors to battle on bundles as wireless surpasses landlines

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The level of competition between wireless operators is expected to step up a few notches as cell phone users surpass landline holdouts in 2007, according to IDC Canada.

In a study, dubbed ‘Predictions 2007 – Competitive Realities Increasing’, the Toronto-based IT consulting firm reported that wireless users are expected to surge to 20.1 million this year up from 18.7 million in 2006.

Traditional phone service users will slip to around 19.4 million down from 20 million in 2006.

The growth rate of wireless subscription is around six to seven per cent per year, while landline subscriptions are declining by three per cent every year, according to Lawrence Surtees, vice-president and principal analyst for communication research at IDC Canada Ltd.

Surtees downplayed the possibility of a price war but said the growth will trigger a new wave of competition that will see operators trucking out various service and feature combinations to attract customers. “A price war would be self-destructive. Instead, operators will concentrate on offering customers more services and features for their money.”

Another Toronto-based analyst agrees with IDC’s prediction of a looming bundle contest.

“To some extent that’s true. Bundling will always be going on in the market,” said Brian Sharwood, telecommunications expert at SeaBoard Group. Sharwood foresees a move towards “more enticing” data transmission offerings. “If there are any price cuts it could be in the area of roaming and long distance charges.”

Sharwood said another incentive would be increased minutes and additional features for current bundle fees.

While major wireless operators such as Bell, Telus and Rogers had a great year in 2006, the IDC report indicates that they may now have a struggle on their hands.

“We are coming to the end of the honeymoon phase in the Canadian mobile wireless sector,” the report notes, adding that the profile of the customer is changing.

According to Surtees, consumers will be looking for more entertainment and multi-service packages for their cell phones, such as Internet and TV programming access, games and flexible payment arrangements.

He said mobile music and other music-related products such as ring tones, ring back tones and video ring back will be the main mobile entertainment services in 2007.

The IDC report suggests business users will also get increasingly fastidious, looking for more effective wireless communication and collaboration technology.

It says more third generation (3G) handsets will become available and the first high-speed downlink packet access (HSPDA) units will appear in the Canadian market.

The HSPDA telephony protocol enables higher data transfer speeds of 1.8 – 3.6 Mbits/sec.

These speeds could be increased to 14.4 Mbits/sec. in the future.

Wireless device manufacturers and service providers have to change the way they approach the market, according to IDC.

The report said tech-savvy innovators and early adopters who tend to have high disposable incomes were traditionally favoured by vendors. Today, vendors have to focus on the market majority. “The traditional approach of over-engineering products and creating a ‘feature bloat’ will have to be curbed.”

IDC observed that the Apple iPhone’s debut recently at the MacWorld Expo in San Francisco focused on ease of use, better user experience, simplified design and more thoughtful introduction of new features.

The most successful vendors will be those that create seamless interoperability across products or services.

Buyers will be looking for products that make it easy to hand off calls from the cell network to the WiFi network; simplify transfer of videos from PC to the TV; or make backing up photo, music and video effortless.

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