Instead of resulting in a “who’s who” roster of new LMCS service providers, Industry Canada’s first-ever spectrum auction of broadband wireless licences ended up being more a case of “who’s that?”
Unfamiliar names such as AirWaves, Dolphin Communications and Wispra Networks were among the list of 12 companies announced on Nov. 22 as provisional winners of licences for the 24GHz and 38GHz frequency bands. Of the companies who won licences, only two can arguably be described as household names — AT&T Canada Telecom Services Co. and BC Tel Mobility Cellular Inc.
The remaining 10 successful applicants are relatively unknown in the Canadian telecom industry, although many of them boast partial ownership or financial backing by prominent U.S. telecom players and venture capitalists.
Wispra Networks Inc. of Montreal falls into that category. Its parent company, Wispra Holdings, is one-third owned by NextLink Communications Inc., a Seattle-based service provider founded by U.S. telecom pioneer Craig McCaw.
Wispra Networks was the big spender in Canada’s spectrum auction, paying more than $74 million in total to secure licences in six major urban centres — Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal. Each of Wispra’s six licences is for 400MHz of spectrum in the 24GHz frequency band.
By comparison, emerging Toronto CLEC player Stream Intelligent Networks Corp. paid roughly $22.5 million for 92 licences, with an average spectrum width of 250MHz, in the 38GHz band. Another new CLEC, Norigen Communications Inc., also chose to focus on 38GHz licences, shelling out almost $40 million for 37 licences averaging 300MHz of spectrum each.
Considering the first round of LMCS licensing in 1996 has still failed to generate commercial availability of services, it’s somewhat surprising the recent spectrum auction garnered more than $170 million in total licence bids, according to George Karidis, research director at The Yankee Group in Canada, based in Brockville, Ont.
“You watched the original (LMCS) licensees essentially walk away from that [market] to the point that MaxLink (Communications Inc.) has consolidated all of it and still hasn’t launched a commercial product three years later. That suggests maybe there is no value (in LMCS services).”
However, Karidis said each of the 24/38GHz licence winners appears to have a solid business case for deploying fixed wireless services.
“From the point of view of the CLECs, like Stream and Norigen, [fixed wireless] is a cheap alternative to building out fibre. AT&T Canada needs a fill-in strategy as well to extend the reach of its fibre assets. From Wispra’s point of view, it’s part of a North American play and that makes sense,” Karidis said.
According to Wispra Networks president Joe Church, his company will leverage U.S. partner NextLink’s expertise and position in the U.S. market as it rolls out fixed wireless services to small- and medium-sized businesses in the six urban Canadian markets in which it is now licensed.
Church defended the high price his company paid for a relatively small number of licences.
“We set our target markets and we set our target pricing of what we thought would work in relationship to our business plan, and we basically stuck to the plan,” Church said.
Stream’s vice-president of operations and technology, Bob MacCallum, is equalling pleased with how his company fared in the spectrum auction.
“We felt there was an opportunity to deploy this technology in many smaller communities that perhaps didn’t meet the normal paradigm,” MacCallum said. “We saw it as a unique opportunity to become a national provider.”
Stream plans to use its new wireless licences to extend its existing fibre network outside the greater Toronto area, on a point-to-point basis, MacCallum said. Apart from offering services to enterprise customers, Stream expects to become a carrier’s carrier, MacCallum said.
Eric Adams, Norigen’s vice-president of information services, said his company is still finalizing its plans for rolling out fixed wireless services. The CLEC’s strategy was to obtain licences in relatively large cities across the country “to allow us to deploy services quickly and flexibly, and to reach our customers in a more cost-effective way,” Adams said.
According to Yankee Group’s Karidis, the new wireless providers will probably not roll out services for 12 to 18 months. In addition, some of the licensees may not be looking to actually build or manage their own networks, he said.
“I think that might be the game plan for a number of the participants here, that they aren’t necessarily looking at building a long-term product,” Karidis said. “They’re looking at getting in here and making a quick turnaround and cashing out.”