The ongoing saga at the CRTC wireless spectrum auction needs a little more explanation as to why this will ultimately have little effect on prices.
Mark Goldberg over at Telecom Trends has a good post about the growth of the wireless telecom industry in Canada. the key fact is that last quarter there were only about 200,000 new customers here in Canada to enter the wireless market.
Slow growth numbers leaves any new player with fewer options to be viable; carve out a piece of the action from the existing players. If they are lucky they may capture a small percentage of the new growth, but there is not much growth in the marketplace to sustain a new player.
In my opinion the main option for any new player is to create churn, the movement from one carrier to another. Overall consumers and business switch from one carrier to another for one of 3 reasons, price product and service.
As a new player in any market place, the easiest option is going to be to compete on price alone. The challenge is that you can only do that if you aren’t saddled with too much debt. Loosing money for the first few years is a given, but at some point both the banks and investors are going to want to see some equity.
As for competing on product, if you can land a hot handset (Apple IPhone, latest BlackBerry device or UMA capable handset), then you might be able to sway some users over. This is tough, as the handset makers are not going to go exclusive in a given marketplace unless the numbers are there. You might also be able to bundle add-on services such as voice-mail, unlimited texting, integrated voice-nav GPS or something similar.
The product angle unfortunately only give you a fleeting competitive advantage. Next month there will be a newer handset, better product and now you are tied in contractually to carry what you have and meet certain sales figures. Basically you tie your own hands.
Additionally product rarely sways the corporate or government accounts. They are too slow to react and IT managers usually have TCO and fleet management issues on the mind.
That leaves service. Service is both the coverage of your network and the intangibles like customer service. This is one reason why developing a national network and signing decent roaming agreements nationally and internationally is so important. Developing a good support organization is also vital. Both cost money however, so we are back to needing deep pockets.
About the only competitive advantage I can really see for any new entrant would be to avoid the subsidization and long term contracts that the big 3 carriers currently use to lock their customers in.
Alternatively, if we saw a “carrier to carriers” approach to the wireless market, something might be possible. The idea here would be for a new GSM carrier to introduce themselves into the market place and then strictly limit themselves to developing the network but not market to consumers. They would sell the network access to 3rd parties who would “roam” on their network. In that way you can get a number of smaller companies who can emerge into the market place without the capital overhead. They basically revenue share with this new carrier. Being without the staggering debt these smaller carriers can be much more nimble and compete on cost. For the network owner, they can focus on developing the network and live off the roaming fees. As Bell and Telus have both indicated a long term desire to move to GSM, being able to grab a portion of their traffic while they transition, and target markets where they have not established a foot print might be enough to carry a new player through.
The Financial Post has a similar view of how the market place might shake out.