IHS Global Insight Perspective | |
Significance | The launch of Bell Canada and Telus' HSPA network next month is set to shake up the dynamics of the Canadian mobile market. |
Implications | Rogers will lose several advantages inherent in the GSM/HSPA-based network: internal roaming revenues, international roaming availability as a marketing strength, and access to a broader range of advanced devices. |
Outlook | Telus and Bell Canada wil hope that this will help to even the market out in order to catch up to Rogers' stronger growth profile. However, new entrants set to come to market will add to pressures on pricing. |
Bell Canada has announced that it is to launch the HSPA network overlay to the existing CDMA-based network next month (November 2009). This was first announced just over a year ago with the target of getting it up and running before the February 2010 winter games in Vancouver, for which Bell Canada is the telecommunications partner (see Canada: 13 October 2008: Nokia Siemens Tapped for Telus and Bell Canada HSPA Overlay and 2 September 2008: Bell Canada and Telus Plan W-CDMA Overlay). Bell Canada reports that the HSPA network will deliver peak speeds up to 21 Mbps and will cover 93% of Canadians at launch, with networks deployed in 20,000 cities and towns covering over 1 million sq. kilometres. Bell has noted that services will also cover many rural and remote locations, as well as urban islands. The wireless deployment is backed by Bell and Telus' extensive fibre deployment for backhaul, which should provide sufficient bandwidth for backhaul of data, while the all-internet protocol architecture should simplify and improve network reliability. The network was built using infrastructure from Nokia Siemens and Huawei, and was designed to be easily upgradeable to '4G' LTE technology.
Outlook and Implications
The international nature of the winter games, sponsored by Bell Canada, would have highlighted one of the key problems with the CDMA network currently used by the carrier. There are around 4 billion subscribers to GSM-based services while there are only around 500 million subscribers to CDMA networks, mainly in Asia-Pacific (270 million) and North America (156 million), including the 6.3 million on the Telus network and 6.5 million on the Bell Mobility network (see Canada: 10 August 2009: Tough Times for Telcos as BCE, Telus, and MTS See Q2 Revenues Fall). This would have forced many of the international competitors and spectators to roam on the Rogers network, which has been gaining subscribers the most rapidly out of the top three networks, hitting 8.2 million in the second quarter thanks to global scale advantages. Rogers would also have stood to benefit from the entry of new players to the market as they have opted for GSM networks, but will require roaming in many areas as they build out their networks (see Canada: 18 June 2008: Telus Executive Hits Out as Spectrum Costs Grow; 29 November 2007: Government Sets Scene for New Entrants to Canadian Mobile Market; and 13 March 2009: BCE Appeals Fixed Network-Sharing Rules as Accusations Fly of Cell-Site Sharing Go-Slow).
In addition to internal and external roaming, the difference in scale of use has made many global handset vendors focus on the GSM standard, particularly with the Asia-Pacific market having relatively strong local handset suppliers feeding local market demand. This has been most notable with the availability of the iPhone for GSM-based networks only. Rogers gained the iconic handset by default and, having waited for nearly a year after the U.S. launch by AT&T, likely cut better terms than Apple was used to, having cut notoriously tough deals in other territories where competing carriers undercut each other to gain exclusive rights. The Globe and Mail reports that, with the end of the exclusive-by-default situation, Bell and Telus are also set to launch the handset next month. This has not been confirmed by the carriers, although they noted that "several new devices" would be in the launch line-up. This would likely also include Nokia's handset line-up, including the N-Series devices, and the Google Android-based devices, which did not support CDMA until the last update (see World: 16 September 2009: Google Updates Android to "Donut" v1.6).
Data from the CDMA Development Group (CDG) and the GSM Suppliers Association (GSA) highlights this issue. There are a total of 2,276 CDMA-based devices on the market, but of these, 1,521 are based on 2G CDMA 1X technology, 541 on EV-DO Release 0 and 214 based on Revision A, which provides speeds up to 3.1 Mbps. The GSA reports that there are 1,739 HSPA-based user devices, with 51% supporting peak speeds of 7.2 Mbps or higher and the latest HSPA+ products just announced supporting speeds up to 28 Mbps as further development efforts have focused on the GSM-based network evolution. Most CDMA operators are moving in the longer term to the GSM-based Long-Term Evolution (LTE) for future network upgrades and the CDMA standard is essentially entering a long sunset period (see World: 20 September 2007: Verizon and Vodafone Target Convergence in Evolution of CDMA and GSM Standards and United States: 30 November 2007: Verizon Wireless Confirms Move to LTE).
This deployment has involved a large amount of co-operation between Bell and Telus as they cut costs by sharing the network build-out costs. Both carriers are the fixed-line incumbents in their own region, but largely compete nationally in the wireless market. While rumours of a potential merger effort circulated last year in the wake of the failed privatisation of BCE (Bell Canada), such a large consolidation would likely be difficult to pass through regulatory approvals, although the two have also struck some co-operation on TV services as competition from cable operators (such as Rogers) has intensified (see Canada: 17 December 2008: Telus Says No Plans to Acquire BCE and 1 July 2009: Telus Tightens Co-Operation with Bell for Satellite TV Launch).