Wireless data rates in Canada may be higher than those in Rwanda, but the fact remains: It can still cost $150,000 or more to install a single tower. In the second week of our Blogging Idol competition, tech experts from across Canada have tackled the issue of wireless pricing.
Yes, you read that title correctly. The price of mobile data access is higher in Canada than it is in Rwanda. In fact when I first looked into this in April of 2007, some mobility providers in Canada were charging rates almost 21 times higher than Terracom in Rwanda. Mobile data rates are also significantly cheaper than Canada in Egypt, Botswana, Vietnam and Bolivia. In fact, why limit comparisons to things terrestrial? Sending data using a Canadian mobility provider costs more than sending the same amount of data from the Hubble Space Telescope! Canadian rates are so high that I almost have to wonder if mobility providers in Canada are deliberately attempting to grab a big chunk of cash at the expense of killing off their own market and taking down one of IT’s hottest growth areas at the same time.
The use of mobile devices for applications is currently exploding. Even enterprise software giants such as SAP are committing themselves to adding mobile functionality to their offerings now or in the very near future. Internet domains within the .MOBI TLD are being registered at the rate of tens of thousands per week and Google, a company that seems to know what it’s talking about, has declared that growth in mobile data services is so important that it has developed its own platform (Android) to take advantage of the huge opportunities out there.
Canada, as a nation, can be described as large, wealthy, and technologically advanced. We have a long history of excellence in communications technology, perhaps borne out of necessity. Canadian research powerhouses such as Nortel Networks and Research In Motion continue to advance our national state-of-the-art, as well as the world’s. Mobile communication today, along with the network engineering and security they require, is quite possibly developing faster than any other part of IT.
We develop incredibly advanced technology in this country, technology that much of the country cannot afford to use due to greedy and short sighted price gouging by mobile service providers. Bell, Rogers and Telus all should be helping Canada to stay on the leading edge of mobile application delivery, but instead, they have chosen to make fat profits even if it means crippling the industry and destroying its promise.
This is, plainly put, a national disgrace. In my posts later on this week I’ll discuss specific cases where Canadian data rates have shut homegrown companies out of our own markets, and I’ll have suggestions about what individual Canadians can do until mobile data pricing is reduced to sane levels. I’ll also look at how the CRTC (which is governed by the Canadian Telecommunications Act) has failed to address these issues.
Mobile data offers opportunities that should be Canada’s for the taking. We have to prevent corporate greed from doing this much damage to our future.
Okay, I’m going to admit I’m not a heavy duty wireless user. I don’t have my cellphone glued to my ear. I don’t use the Internet when I’m walking down the street (I tend to bump into things and can’t see the screens anyway). I don’t watch television on a 2 inch screen. I do play with my Blackberry GPS a little bit, and I do have periods where I’m text messaging all the time. I don’t use special devices like the couriers use, and so far I haven’t tried to use wireless devices in really remote corners of the world.
And….I don’t really keep track of how much it costs me to be wireless! So, the Blogging Idol topic is: Is wireless too expensive? Perhaps this question should be re-stated more simply as: Is wireless expensive? From a consumer point of view, it probably doesn’t really matter how Canadian costs compare against other countries. After all, do we really compare the costs of telephones from country to country (I’m sure someone does, but is it newsworthy)? And what would we do if they were indeed higher? I wouldn’t move just to cut telephone costs.
Next, how expensive is too expensive? What would it take to make people stop using wireless? Hasn’t wireless phones become part of the culture, too late to be killed by cost alone? If wireless was ridiculously cheap (lets say free!), then would we all convert completely to wireless for all communications? My guess is no.
Next, from an economic point of view, I will concede that lower wireless costs would reduce the cost of doing business and hence make Canadian companies more competitive, leading to more sales. Lower costs would also stimulate conversion of older systems to take advantage of wireless. I do think it is useful to track parcels as they are being delivered almost in real time – due in large measure to hand held wireless terminals.
It might be interesting to postulate what a total conversion to wireless would mean. Can prices be kept low if all the wired infrastructure had to be written off? Should the target be that wireless telephony costs no more than a normal telephone does? From a innovator/manufacturer’s perspective, reducing the cost of wireless in Canada would help make Canada a world-class showplace for wireless products and services.
This can only be good – for jobs, for exports, and for general business productivity. So, what is the bottom line? Wireless is probably more expensive than we would like it to be, and as others have noted is more expensive than in other countries, but its certainly not too expensive for a large number of Canadian businesses and consumers.
Let’s focus less on current costs and more on how we can benefit from wireless. What can do to quickly exploit the opportunities that wireless offers?
What is your favourite excuse for being wireless and paying the cost?
May 27th was supposed to be the day that wireless data rates would potentially fall. It is now longer the case. MTS dissolved a consortium formed to bid in an upcoming auction of Canadian wireless spectrum. This is very good news for the three heavy-weights: BCE, Telus, and Rogers. When the auction was announced, Telus fell from the high $50’s to $41.05 on the stock market. Rogers bottomed to $32.92 from $50. It is clear that Canada is in major need for another viable wireless competitor. Canada needs a new company that will offer wireless data access at a rate comparable to other countries. Otherwise, there is really no incentive for the big telcos to reduce rates.
What will happen to data prices with the arrival of the iPhone in June? Rogers announced last year that it will release the faster iPhone to Canada in June. That’s great. More data consumption from more users should mean lower rates, right? Wrong! Rogers is the only network with 3G. 3G is fast for data transfer, and is something that the newer iPhones will need. So, until there is another wireless entrant emerging from the auction (we’ll know 3 months from now who it is), high data rates will stick around for a while longer. Incidentally, when Rogers made the iPhone announcement, the stock rallied $1.60 to $44.50. Perhaps the best way to subsidize high data rate plans is to buy shares in Rogers.
I happen to agree with my fellow bloggers here. The real questions isn’t one of if the cost of wireless is too expensive, it is, but the bigger question of why and what if anything can be done about it. The fundamental problem in my opinion is one of market competitiveness and basic economics.
Canada is a big country. It is also relatively sparsely populated. That means you need deep pockets to finance a cross country network. Steven Nikkel has a great Google map mashup of all the known cell towers at his site to give you a feel of the number of towers required to provide coverage to even a portion of the country. I had the opportunity last year to deal directly with Rogers on the installation of a cell tower at one of our facilities. Even with us as a “willing” site for a tower, it still took close to 9 months of contract negotiations, legal reviews etc before we could get the tower put installed. That tower was a relatively simple build out for Rogers but it never the less cost them well over $150,000. Now assume that the cost of every cell tower is roughly the same and that for a Canada wide build out you need to deploy 10-15,000 towers to establish your network. That’s upwards of 1.5 billion in up front capital costs alone. For a complete build out a new company is looking at upwards of 10 billion dollars in start-up financing to cover your first 5 years of operations without the guarantee of a single customer or a slice of the relatively meagre $16 billion per year in revenues generated by the wireless industry in Canada. The economics for allowing a new wireless operator to establish themselves in the marketplace at this point are basically impossible..
The only option would be to have CRTC actively take action in some way, notwithstanding the Honourable Jim Prentice’s statements yesterday about opening up the Canadian market place to addition competition. The simple fact is that less than 40% of the new spectrum under the Advanced Wireless Services (AWS) spectrum auction is actually being reserved for new providers. The incumbents will be able to bid and drive up the costs on the other 60%. Worst yet the auction rules preclude the ability to negotiate or have discussion regarding roaming agreements till after the auction is completed. For new players the risks go up as a result. What if you can’t get the right to use spectrum in an area like Toronto because another company out-bids you for that geographical area? Without the ability to negotiate a roaming or partnership agreement with that competitor, you may decide not to even bid on the other areas. That leaves us with only one hope, direct government intervention on pricing. Yet the CRTC’s own mandate clearly states that it does not include this level of oversight to the Canadian market place. The bottom line is costs for wireless services in Canada are very high, and the current round of spectrum auctions are not about to drive those prices any lower.
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Jim Love, Chief Content Officer, IT World Canada