Wind Mobile marks first anniversary

Decembers are chilly in Canada, but for Anthony Lacavera a year ago in Toronto it was decidedly hot.

It was Dec. 16, 2009 and despite a brisk breeze whipping off Lake Ontario, the chairman of wireless startup Wind Mobile was beaming as he stood outside the company’s first store in front of a sizeable crowd and TV cameras. He then pulled a cloth to unveil a plastic statue of a man holding a mobile handset and gazing to the future.

A bit hokey, but it signaled the start of a new era of wireless competition – the first facilities-based carrier in the country since Rogers Communications Inc. took over competitor Microcell Telecommunications and its Fido brand in 2004

A year later Lacavera is sitting in another of Wind’s Toronto stores, a small replica of that statue peering over his shoulder, as he chats to a reporter about what Wind has accomplished.

“Getting Wind out the gate in the five markets we have launched is obviously amazing and bringing the first real competition in those markets in over a decade has been great,” he says.

“We still have a long way to go, we still have a lot of work to do but we’ve made a lot of progress.”

That includes starting service in Toronto, Ottawa, Vancouver, Calgary and Edmonton, hiring 1,100 staffers and establishing over 400 sales outlets.

Lacavera wouldn’t give subscriber numbers, but a quarterly financial report from Wind’s partner and financier, Egyptian-based Orascom Telecom Holding, said the Canadian unit had 140,000 subscribers at the end of September.

The past 12 months also saw three more new carriers launch: Toronto-based Mobilicity and Public Mobile in May, and Quebec-based cable operator Videotron Ltee in September.

Earlier this year SeaBoard Group predicted that by Sept. 1, Mobilicity would have had 36,000 subscribers and Public Mobile 24,000. Since then Mobilicity has started service in Ottawa, Vancouver and Edmonton, while Public Mobile has been expanding in Toronto and Montreal. Videotron says it signed over 21,000 subscribers to its new network in the first three weeks of its service, although that includes 11,000 who transfered from its legacy wireless network.
[After this story was released Mobilicity announced it had signed 50,000 subscribers since the begining of October. It didn’t reveal how many total subscribers it has.]

“The word ‘unlimited’ is now in everyone’s vocabulary,” said Iain Grant, managing director of SeaBoard Group, a Montreal-based telecommunications consultancy. “The words ‘system access fee’ seem to be disappearing. The four [startups] are making a difference.”

Dvai Ghose, a telecom and cable financial analyst at Canaccord Genuity, notes the big three incumbent carriers, Rogers, BCE Inc.’s Bell Canada and Telus Corp., have “fundamentally changed their rate plans.” In past wireless data was “expensive, complicated, difficult to discern,” he said. Less so now.

Meanwhile, Bell torqued its Solo entry brand to meet the newcomers and Rogers started a new flanker brand, Chatr. For its part, Telus has just announced it make it easier for contract holders to upgrade to a new handset before their term runs out.

Defending their turf also led the leading carriers to spirited marketing, which temporarily landed Rogers in the Competition Bureau’s doghouse.

Competition has also brought new business to wireless equipment makers: China’s ZTE Corp. found its first North American customer in Public Mobile; another Chinese manufacturer, Huawei Technologies Co., became a co-supplier to Telus Corp.’s new HSPA data network, Ericsson Canada equips and manages Mobilicity’s network; and after co-building the new HSPA networks of BCE Inc’s Bell Mobility and Telus, Nokia Siemens Networks, won the right to be Wind’s network equipment supplier to Wind.

Unexpectedly, after a confrontation with the Canadian Radio-television and Telecommunications Commission (CRTC) Wind’s entry has also forced Ottawa to consider overhauling the foreign investment restrictions in the Telecommunications Act.

The CRTC said Orascom had controlling influence over the startup, prompting some furious lobbying by Lacavera before the cabinet over-ruled the commission. That led the Harper government to propose three options for changing the act. It has put off a decision until the spring.

While Wind has arguably garnered the most publicity of the new wireless companies, its start was not problem-free. There were complaints in the early months about the network’s reliability, leading Grant to speculate the cause was a rush to turn the network on after the cabinet’s green light before another government body changed its mind.

Lacavera complains his roaming partners are dropping Wind subscriber calls when users cross into their territory, forcing them to dial in again. [Mobilicity agrees this happens, but doesn’t mind, saying this protects its subscribers from unwanted roaming fees.]

Within days of the launch Lacavera also had to say goodbye to two senior officials, saying they weren’t a perfect fit.

The next year is sure to bring more upheaval in the wireless industry.

Lacavera says Wind will continue to expand its network, expand the number of handsets it offers and add more sales outlets. Bruce Kirby, Public Mobile’s vice-president of strategy and business development, says the carrier, which targets “value-conscious” customers, will add data services such as instant messaging and e-mail. Mobilicity CEO Dave Dobbin says his company will start service in Calgary as well as new products and services. He also predicts the amount of what he calls “greasy marketing shtick” will continue to rise.

But the new entrants will also have to confront two major issues: Money and co-operating with each other.

For the time being, Wind, Mobilicity, Public Mobile and Videotron have funds to operate. But they will need more to expand their networks, particularly Wind because it paid $442 million for spectrum across all of the country except southern Quebec. Lacavera has yet to put antennas in Northern Ontario, the Maritimes, Yukon, Nunavut the Northwest Territories or major cities in Manitoba and Saskatchewan. He has until roughly three more years to do it.

All the new entrants will need even more cash from Canadian or foreign sources to participate in the 700 MHz spectrum auction set for 2012.

Frustratingly, despite having first mover advantage, Lacavera hasn’t been able to find investors here as easily as Mobilicity and Public Mobile have.

“Our [national] business plan, you could argue has more risk, or is more aggressive than some of these guys,” he says. “From a Canadian investor’s perspective maybe that’s a concern. But we are here and we are here to stay.”

Lacavera will also have to deal next year with a new owner: Orascom is selling the bulk of its assets to Amsterdam-based telecom giant VimpelCom. While Orascom head Naquib Sawiris will be on its board, it isn’t clear if VimpelCom sees Wind Mobile as a core asset. It’s strength is in Russia and former Soviet countries.

On the other hand hand, Wind would be VimpelCom’s first North American presence.

Lacavera notes that Orascom has already sunk around $800 million into his company. “It’s up to us to demonstrate to any investor that what we have in Canada is a very exciting opportunity, that we’re growing, that we’re gaining market share.”

Industry observers also worry the four rookies have squandered money building own networks instead of sharing towers, equipment or even backhaul facilities. “I find that quite ridiculous,” says Ghose.

The startups protest, noting it has been virtually impossible for them to get Bell, Rogers and Telus to agree to share space on their towers. “For something that was mandated by the government, it’s surprising that two and a half years later it isn’t happening,” says Mobilicity’s Dobbin. “Clearly it’s a failure of policy.”

Industry Minister Tony Clement has asked his staff to look into the problem and will likely report in a few months.

As for co-operating with his fellow startups, Lacavera insists he’s been willing to deal, as does Dobbin. Public Mobile’s Kirby argues says that because the initial networks have gone up in cities – where antennas go on rooftops — there hasn’t been much of an opportunity to co-operate on towers and infrastructure.

SeaBoard’s Grant suspects that as the networks extend into suburban and rural areas such co-operation is more likely.

Meanwhile, 2011 will see the entry of Shaw Communications Inc.’s new wireless network in the west late in the year, and possibly that of Eastlink Communications Inc. in the Maritimes and Novus Wireless in B.C. and Alberta. Like Videotron, as cable companies they can offer high speed Internet, IPTV and home phone service that pure plays like Wind, Mobilicity and Public Mobile can’t. And they’re better funded. On the other hand, Ghose argues that Shaw, Videotron and Eastlink will remain regional players, tied to their cable networks.

Most observers feel there’s room for one more national wireless carrier, either Wind or Mobilicity. Regionally, only one new carrier will survive. Someone is going to be bought out. [By the way, Ghose believes Bell and Telus will merge, eventually.]

Be patient, advises Dawood Khan, principal of Toronto’s Red Mobile Consulting, which has advised governments around the world on wireless strategy. It will take at least three years for the new entrants to reach what he calls “critical mass.”

But keep in mind that in the spring of 2014 Industry Canada’s ban on incumbents buying new entrants who bought AWS spectrum in 2008 (the cablecos, Wind and Mobilicity) expires.

At that point Bell, Rogers and Telus will be free to make shareholders an offer they can’t refuse.


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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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