For the past 12 months the fledgling cellular companies that won licences at last year's spectrum auction have tried to say nice things about each other in public before they launch service. In part that’s because they may need to work together to fight the major carriers.
But that changed Wednesday at a Canadian Telecom Summit panel discussion with three of the newcomers when the spectrum of one was belittled.
It was a claim that suddenly turned the tame debate into a heated fight.
The claim was made by David Dobbin, president of Toronto-based DAVE Wireless against Public Mobile, which surprised onlookers for buying spectrum in the G band of the PCS spectrum.
Many in the industry thought there weren't any handsets on the market that could operate in that band without expensive modification. That may explain why Public Mobile paid only $52 million for relatively uncontested spectrum covering much of Ontario and Quebec, while most of the bidders, including DAVE Wireless and Globalive Wireless, spent hundreds of millions for spectrum in the safer AWS bands.
In February, Public Mobile demonstrated a working handset that it said had easily been converted to its spectrum, proof its business would be sustainable.
But at Wednesday's panel discussion for the three new entrants Dobbin announced his company, had a consultant's report that suggested Public Mobile's spectrum might be troublesome.
"We see some issues around deployment of those blocks," he said, without giving details from the report. "It's spectrum that has not been deployed anywhere else on the planet ... There are issues that are going to be a challenge to overcome and may impede the long-term value of anybody deploying it."
[The report by Montreal telecom consultants Lemay-Yates Associates was e-mailed by DAVE Wireless to the media shortly before the panel started. It said in part that there has been no implementation of service using either the G or the I block of spectrum that and there is no commercialized technology. "Based on information obtained via the FCC (the U.S. Federal Communications Commission), no handsets are presently certified to work in the G Block or the I Block in the US – there is no “ecosystem” or standardization activity to support economies of scale, feature development, roaming, etc.
" 'Custom' sets could be developed for G Block or I Block," the report added, "but would need vendor commitment, new equipment certifications, as well as standardization activities to develop protocols for hand-off, roaming and interworking with other bands. Otherwise the set would be a “Canada-only” with no roaming capabilities and limited commercial value."]
Until then, the debate between Dobbin, Public Mobile president Alex Krstajic and Globalive Wireless co-chair Anthony Lacavera had been civil, and at times merry. Suddenly the atmosphere was anything but.
Krstajic insisted that "spectrum is spectrum" to all cellphones using the CDMA standard Public Mobile is adopting. "That’s like saying land is land," retorted Dobbin, pointing out that land in downtown Toronto is more valuable than land in a rural area.
They sparred for several minutes, with Krstajic daring Dobbin to contact CDMA chipmaker Qualcomm for proof it has chipsets for handsets using the G band. Why else would major handset makers such as Samsung, LG and Motorola be offering to sell their handsets to Public Mobile at the same discount they offer other, he asked.
"If I’m wrong, I think you might want to get your money back for that report," Krstajic said, because Public Mobile would be out of business. "It’s a bit of a lame move to try to re-open this thing," he told Dobbin about G band allegations, "because here's the reality: We have our dough. We raised hundreds of millions of dollars ... How many pension funds have given you $50 million?" he asked, referring to the investment in Public Mobile by OMERS, the Ontario Municipal Employees Retirement System.
He accused Dobbin of getting the report to pit the new wireless companies against each other. "No," replied Dobbin, it was a matter of due diligence. "We commissioned the report because we at some point in the future expect to need more spectrum ... We could either get it at the next spectrum auction, or buy you," he said.
"Ì’ll make an offer right now,” replied Krstajic. "I’ll offer to buy his (Dobbin`s) spectrum right now at 50 cents on the dollar, because I think he overpaid by double." DAVE Wireless paid $243 million for its spectrum. “I feel badly for you because you’ve got this noose around your neck."
"We don’t want you to feel sorry for us,” retorted Dobbin.
For his part, Lacavera believes there will be no problem with Public Mobile’s spectrum.
The battle could be significant because more than one industry expert has said the newcomers must work together if they want to survive against Bell Mobility, Rogers Communications and Telus Corp.
Some, like Globalive and DAVE Wireless, lack Quebec coverage that they could gain by using Public Mobile's spectrum if they could get affordable handsets. However, Globalive and DAVE will be using GMS/HSPA-based handsets, so to take advantage of Public Mobile's spectrum the providers would have to offer dual-mode cellphones.
Earlier in the session Krstajic, who used to head Bell Mobility, warned how tough it will be to fight the incumbents.
"The reality is two of the three panelists will not be here for the next summit," he said, a bold statement that perhaps designed to create a few sparks and drew laughs from the audience. The trio plan to launch service either late this year or early next year, which would mean they’d be out of business six months after opening their doors. "I may not be one of them," Krstajic admitted.
But Krstajic maintained that he'll win because Public Mobile won`t go head to head against the incumbents. He`s targeting "working class" consumers who have never had a cellphone with a $40 a month unlimted voice and text service. He maintained that Globalive, which wants to build the country`s fourth national cellular service, and DAVE Wireless, with its urban spectrum, will offer upscale products similar to the incumbents.
Going further to paint his fellow panelists as the same as the incumbents, he teased that Lacavera and Dobbin even dress the same - they were wearing ties and he wasn`t. His advantage, he claimed, is that Bell, Rogers and Telus won`t cut prices too deeply without risking losing revenue, which would imperil their stock prices.
"I think they`d be better off waiting a couple of years, letting me consolidate the lower end of the market and then buying us for a few billion." The statement came to the surprise and delight of the audience, who howled with laughter. It was seemingly an admission of what many industry observers have suspected: that some entrants are willing to be bought by the incumbents.
Krstajic added he isn`t planning on being bought, but that it`s up to his shareholders.