West coast wireless startup willing to be patient

Vancouver developer Terence Hui says he’s in no rush to launch startup Novus Wireless with the spectrum he bought two and a half years ago.

Instead, he’s gambling that network equipment makers will soon upgrade their gear to run the next-generation LTE (for Long Term Evolution) technology on his less-than-mainstream frequencies.

“We are not in a hurry to deploy,” Hui said in an interview, “but we want to deploy in the next one or two years. Within the next 12 months we expect some pretty exciting equipment coming out.”

“We might,” he added, “be going all the way to a full LTE network.”

[EDITOR’S NOTE: Novus sold its spectrum to Telus in June, 2013]

There is a risk in waiting: Vancouver and Edmonton are already served by five wireless carriers: BCE Inc.’s Bell Mobility, Telus Corp., Rogers Communications Inc. and startups Wind Mobile and Mobilicity. Mobilicity will add service shortly in Calgary. A sixth carrier, cableco Shaw Communications Inc., promises to launch its new wireless service in at least one of those cities by the end of 2011.

If Hui waits too long, Novus Wireless will be the seventh carrier in crowded markets.

But Hui, president and CEO of Concord Pacific, which has built high rise condominiums across Vancouver, Calgary and Toronto, shrugged. “There’s always competition,” he said, “even if we launched now.”

Hui is taking a gamble. Here’s why:

Novus Wireless paid a mere $17.9 million for spectrum covering B.C. and Alberta in Industry Canada’s 2008 auction of what the industry calls PCS (for Personal Communications Service) spectrum in what Industry Canada calls the G-block of 1900 Mhz frequencies.

Hui paid so little because these frequencies are so little-used in North America few handset makers had phones for them. Even today there are no iPhones or Blackberrys for the G-block.

On the other hand the AWS (for Advanced Wireless Services) spectrum auctioned at the same time attracted bids of hundreds of millions of dollars because these frequencies, in the 1900 and 2100 Mhz bands, are better suited for advanced uses like fast broadband for viewing Internet sites and video on mobile devices. So today network equipment and handset makers are tailoring their latest gear for AWS and the even more efficient 700 Mhz spectrum, not PCS.

Novus Wireless wasn’t alone in buying G-block spectrum. Toronto-based Public Mobile also bought frequencies covering Toronto and Montreal. It launched service over the summer using an older – and therefore relatively inexpensive – wireless technology called CDMA, which Telus and Bell have been using for years on their more broadly-used PCS spectrum. At the moment, CDMA’s data technology, EV-DO, allows maximum data speeds of 3.5 Mbps.

By comparison, Telus and Bell jointly built a new network last year that uses the AWS spectrum they bought in 2008 to take advantage of a wireless data technology called HSPA. Their data networks (and Rogers’) now run at 21 Mpbs, and are starting to be boosted to 42 Mbps.

However, Public Mobile is aiming at first-time cellular buyers who don’t want broadband handsets, so CDMA is a good fit. For now.

Where LTE fits in is its promise of download speeds of at least 100 megabits per second under ideal conditions, especially if used over 800 Mhz and 700 Mhz frequencies which penetrate buildings and carry over greater distances than the higher frequencies. A number of carriers are starting to roll out LTE-enabled networks, including MetroPCS Wireless Inc. and Verizon Wireless in the U.S.

More importantly to carriers, the next version of LTE, called LTE Advanced, will be a true fourth generation (4G) wireless technology which uses Internet Protocol for both voice and data over the same signal with an all IP network infrastructure . For other 3G technologies such as CDMA/EV-DO and HSPA, only the data is IP-based.

Some carriers around the world – including those in Canada – are holding off upgrading to LTE because of the cost and the scarcity of mobile devices capable of running LTE. Another reason is 700 Mhz spectrum has yet to be auctioned off in Canada. But there’s no doubt that an increasing number of subscribers will be willing to pay for advanced capabilities with LTE-enabled devices, which is why some carriers aren’t waiting.

Hui believes it’s better to enter the market with a network able to run the latest equipment rather than one that runs older gear.

Iain Grant, managing director of SeaBoard Group, a Montreal-based telecommunications consultancy admitted to a “touch of disbelief” over Hui’s strategy. Over time network equipment makers will extend their gear so LTE runs over PCS frequencies, he acknowledged, but the G-block spectrum won’t be first. Looking after mainstream PCS spectrum will take priority, he believes, after the 800 and 700 Mhz spectrum are taken care of.

On the other hand, he said, Nokia’s N8 smart phone is supposed to be able to run on all frequencies, a capability more handsets in the future will carry.

So the question is how patient can Hui afford to be. He says he’s working with two China-based equipment makers, ZTE Corp. and Huawei Technologies Co. Ltd., on specifications for a Novus Wireless network. “But every time we review our budget, something cheaper comes out,” he said.

“It’s really about LTE,” Hui says of Novus Wireless’ future, “the maturing of the integration of the voice over IP [and data] and the availability of handsets.”

One last thing to remember: According to the rules laid down by Industry Canada, incumbent carriers like Bell, Rogers and Telus can’t buy new AWS spectrum winners like Wind Mobile or Mobilicty until five years after they got their licences, which works out to the spring of 2014. But there are no restrictions on PCS spectrum holders like Public Mobile and Novus Wireless. If equipment makers extend LTE capabilities to the G-block spectrum, that only increases their value.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including ITBusiness.ca 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 [@] soloreporter.com

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