Analysis: Behind the spat between the wireless newcomers

The two main antagonists at last week’s heated drama at a Toronto telecom conference are avoiding the media, which suggests they are trying to cool off.

Neither David Dobbin, president of DAVE Wireless nor Alek Krstajic, CEO of Public Mobile, were available for interviews to go deeper into their spat during a panel discussion. So we are unable to ask Dobbin why he raised allegations that Public Mobile’s spectrum has challenges, or Krstajic’s claim that his fledgling service will have no trouble getting handsets or customers.

Which raises – at least – two questions: Was verbal sniping a sign of things to come between the new wireless entrants, or was this a contretemps over nothing?

The answer is yes to both.

First, a little background. Last summer the backers of Public Mobile and DAVE Wireless – whose name is unrelated to its president and will change shortly – were among the new entrants that spent over $1.5 billion for licences at the wireless spectrum auction. So far, only Public Mobile, DAVE, Quebecor-Videotron and Globalive Wireless

have announced plans to start service either late this year or early next year.

Up for grabs at the auction was

–AWS spectrum in the 1.7/21.Ghz bands, highly-prized for its ability to handle large volumes of data wireless users are increasingly consuming;

–PCS spectrum in the 1.9Ghz Ghz band, less desirable because it can hold less capacity and because bidders didn’t believe there were handsets that could interoperate between the AWS and PCS bands. As a result, wrote one analyst, the likely didn’t want to own mixed spectrum;

— and one chunk in the even less desirable 1670-1675 MHz band.

For bidding purposes, all were carved into alphabetical blocks, with the PCS band called the G-block and the third band called the I-block. Almost all of the spectrum bought by the new entrants is AWS. All of DAVE’s spectrum is AWS, for which it spent $243 million covering many of the country’s largest cities except Montreal. All of Public Mobile’s spectrum is G-block, for which it spent $52 million to cover much of Ontario and Quebec including Toronto and Montreal.

Many industry observers weren’t sure what G- and I-block winners were going to do with their spectrum – perhaps, some speculated, it would be sold off for backhaul. Among those who thought otherwise was respected Montreal telecom consultant Iain Grant of the SeaBoard Group, who in a report last October wrote that the bidders might have got “the deal of the century.” It was Grant who pointed out that chipmakers Qualcomm and Avago have the chips to cover the AWS/PCS spectrum, and that with some encouragement handset makers would come up with models to include them.

Then in February, Public Mobile demonstrated a modified CDMA handset made by China’s ZTE could use its spectrum, proof the company could be in the cellular business. Ever since Krstajic has been crowing about the company’s potential to offer affordable service in Canada’s two largest cities in part because it paid relatively little for its spectrum.

He was at it again Wednesday at the Canadian Telecom Summit panel for new wireless entrants, where – perhaps to grab media attention as well as impress the assembled industry leaders – he began by dramatically declaring that come this time next year DAVE and fellow panellist Anthony Lacavera of Globalive Wireless would be out of business.

Krstajic repeatedly said that his strategy of targeting “working-class” Ontarians and Quebecers who didn’t believe they could afford cellphones with a low-cost plan made him different from any other wireless carrier. And having a different strategy was the way to survive the expected brutal onslaught from the evil Bell/Telus/Rogers. No matter how much Dobbin and Lacavera agreed that the evil trio would do their best to wipe the rookies off the map, Krastajic insisted his company had the right strategy.

On the surface it seemed that eventually got into the craw of Dobbin, for after 20 minutes he suddenly announced DAVE had hired respected Montreal telecom consultants Lemay-Yates Associates to look at the Krstajic’s spectrum and found “some issues with deployment in the G band.”

However, Dobbin was apparently prepared, for two hours before the panel was to start DAVE Wireless e-mailed a copy of the report to the press.

Why go into attack mode? First, obviously, Krastajic had been doing it. Second, none of the new entrants are willing to give up any subscribers. Dobbin, for example, without detailing his pricing, says his company’s strategy will be to offer value and flexibility, which could include Public Mobile’s target audience.

Industry experts have warned that to stand up to the incumbents, the new entrants had better co-operate with each other – perhaps buying or sharing their spectrum or sharing the costs of building a network. It seems that isn’t going to happen.

Or will it? Dobbin said his purpose in commissioning the Lemay-Yates study was to get a feel for the value of the G- and I-block spectrum for possible purchase. Releasing it now sends a signal: Your stuff isn’t worth as much as you think, guys.

At this point we pause to delve deeper into the Lemay-Yates study. It argues that the industry is moving away from the PCS spectrum (first distributed in Canada in 1996) and towards the more advanced AWS bands. “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 U.S. – there is no “ecosystem” or standardization activity to support economies of scale, feature development, roaming, etc.” The only owner of G-block spectrum in the U.S., Sprint-Nextel, will start using it next year, the report acknowledged. However, it added Sprint is using WiMAX for its next-generation data network. The only reason why bidders went after the G- and I-blocks, the study argued, was because the bidding had gone too high for them in the AWS blocks.

“Success in wireless businesses in the Canadian market has typically hinged on tracking the U.S. market in terms of bands and technologies,” the Lemay-Yates study concluded. “In an integrated North American market, Canadian and American carriers rely on common technical standards and licensing. This maximizes the potential for consumers in Canada to benefit from lower costs and new services. Of the bands auctioned, only AWS provides this opportunity. The G Block and I Block licenses do not share the global characteristics and technology potential. This limits their commercial potential and creates the risk that they would be “Canada-only”; too small a market in an industry that is increasingly global and mass market and that needs economies of scale.” In other words, Public Mobile won’t go far.

But Public Mobile has already said it won’t be selling leading-edge handsets but ones based on the CDMA standard. It doesn’t want subscribers clamouring for pricy GSM/HSPA cellphones that can receive live video. It’s going after people who want basic voice and text service and not roaming capability to the U.S. Arguably, it can get by with offering only one handset.

At the risk of this degene

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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