When Rogers Communications, Canada’s biggest cable company, and Bell Canada, the nation’s largest phone company joined forces last month to build a national wireless broadband network, the news was met with some mixed feelings from industry analysts.
“It is strange bed follows, no question about that,” said Elroy Jopling research director with the Canadian offices of Gartner Inc. “I think any type of joint venture more often than not fails more than succeeds. When you have two aggressive competitors in a partnership, chances of failure are even larger,” he added.
The $200 million agreement will see the two companies pool their wireless broadband spectrum to build and operate a network through an existing company called Inukshuk Internet Inc. Initially, Inukshuk was owned by Microcell Telecommunications (which Rogers bought in 2004) and NR Communications, which Bell mad an investment in six months ago. Rogers is also an NR shareholder. Bell will buy the 50 per cent of NR that it doesn’t own.
It is that common bond between the two companies that Jopling said was what makes it an interesting partnership.
“Circumstances created the agreement [between Bell and Rogers],” he said. “It’s probably fair to say that neither one of them were enthralled with dealing with each other where they used to be fighting each other,” he said.
Roberta Fox, senior consultant with Fox Group Consulting in Markham, Ont., said if it means two competitors coming together in order for Inukshuk to be implemented quickly, then it is a good thing for Canada.
“Rogers is highly leveraged financing-wise, so having a solid financial partner like Bell gives them credibility with banks from a financial perspective and it means they can truly get [Inukshuk] built,” she said. Inukshuk, Jopling said, gives Bell and Rogers a proprietary broadband wireless solution that will use eventually use Wi-Max when that technology becomes a standard.
A benefit of that, he added, is it gives both companies a national broadband network first.
“By having this first to market they will have the beginnings of market dominance. Secondly this gives them out-of-territory play. You will see them very much looking at Alberta and B.C. Telus and Shaw are in their sights because they will be able to go into those markets,” he said.
However, if the agreement doesn’t work, it leaves the door open for someone else to dive into the national broadband wireless market and that will come back to haunt Bell and Rogers, said Jopling.
The Inukshuk network will cover more than 40 cities and 50 rural and remote communities.
“It is a good move for the second and third tier cities as a way to get broadband access. Wireless is faster to put in (than wireline) and most cases cost less than traditional fibre-copper combos,” said Fox.
However, she and Jopling question exactly who will be operating the network as Bell and Rogers were not clear on that subject.
“Someone has to manage the equipment that does the broadcast. You don’t just put it in and it runs forever,” said Fox.
Jopling said if the network is successful there is a possibility that either Bell will buy out Rogers’ share or Rogers buys out Bell’s share sometime down the road.
Overall, the biggest winners of this whole agreement, both analysts said, are the people of Canada, especially the remote and rural communities.
“They will be getting broadband earlier than they might have got it before. We are very much a broadband nation now. This only helps us more that you have broadband going out further and further to the total population,” said Jopling.