Consumer wireless spending to soar

Wireless spending by Canadian consumers will grow the fastest of all money they shell out on communications over the next five years, according to a recent report aimed at network service providers.

In a forecast of spending on voice, Internet, TV and wireless services, IDC Canada sees cash put out for wireless jumping from $8.4 billion last year to $11.9 billion by the end of 2011. Consumer spending on wireless data services alone is expected to grow from just over $1 billion at the end of last year to $2.75 billion in five years. By then the penetration of cellular will hit more than 76 per cent of the population.

“Canada may be behind other countries [in cellphone adoption], but growth continues to be very strong,” said report co-author Tony Olvet, who is IDC Canada’s vice-president for communications and segment research.

Some of that growth will be propelled by the May 27 auction of wireless spectrum, for which Ottawa has reserved special space for new entrants, an event Olvet predicts “will shake up the market.”

Between them, Bell Canada, Telus and Rogers Communications hold about 95 per cent of the cellphone market. “I believe a fourth [national] player will not take a ‘me-too’ approach,” Olvet said. “They will try to stand out and take advantage of some of the pent-up interest in having a new competitor” by offering new types of services or new pricing schemes.

IDC Canada estimates consumers outnumber business cellphone users by two to one.

The growth of wireless as well as VoIP and cable telephony highlights the ongoing decline of landline phones, the report says. In fact it believes that by 2011 the differences between cable and telecom operators will essentially have vanished. Spending by consumers on VoIP and cable telephony services will hit $1 billion — a compound annual growth rate of 17.6 per cent – representing 4.5 million line equivalents. Over the same period spending on TDM voice services will drop 3.6 per cent on a compound annual basis. To fight this and retain as many subscribers as possible, IDC advises telcos to make quality and reliability of phone service their number one priority.

As cable companies move into the phone markets, telcos are moving into television by offering IPTV.

IDC forecasts the number of IPTV subscribers to jump from 160,000 today to 690,000 by the end of 2011. However, Olvet noted that some players – notably, MTS Allstream in Manitoba and SaskTel – are moving faster than the rest.

MTS, for example, charges $29.99 a month for the first six months, or $24.99 a month for subscribers already on a bundle of high speed services, which includes basic TV channels and up to nine themed channel packages. After six months the pricing is based on the channel packages the subscriber wants. According to Kelvin Shepherd, president of MTS’ consumer markets division, service began in 2003, but is offered only in Winnipeg.

Telus has been rolling out its IPTV product in Calgary, Edmonton and the Vancouver area since 2005 in partnership with gear from Nortel Networks. Packages start at $22 a month plus a high speed phone line. But in Quebec and Ontario, where Bell Canada reigns, IPTV is still in the pilot phase. In October, 2003 Bell announced an IPTV partnership with Microsoft using a software platform called Microsoft TV.

However, rather than roll out full service the utility seems to be in a “wait and see mode” said Olvet. A decision may be stalled by the move early last year by Bell to sell itself to private equity companies. Bell hopes regulatory approvals will be completed by the spring, paving the way for the new owners to make a host of decisions on the company’s future strategy.

Olvet noted management has to consider that not only will IPTV need an expensive infrastructure upgrade, but also that the service has the potential to conflict with Bell ExpressVu satellite TV. But IDC believes Bell will give IPTV the green light.

A Bell spokesman said Monday the company remains committed to launching IPTV, but couldn’t say when or explain the delay.

In Internet broadband access, the IDC report said DSL will continue to lag cable. By the end of 2011 high speed cable will have 5.2 million subscribers, 200,000 more than DSL.

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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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