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It's a new wireless world now

Telcos scramble to meet demand

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The federal government is sending out about $5.3 billion in invoices for new wireless radio bandwidth sold in its latest wireless-spectrum auction that finished in February.

That seems to have ended the little dust-up the Harper government waged briefly against the large incumbent telecommunications companies in Canada.

Late last year, the federal government launched a $9-million advertising campaign for greater competition in the wireless sector, claiming Canadian consumers "pay some of the highest wireless rates in the developed world."

That was just after Ottawa rejected a bid by Accelero Capital Holdings, backed by an Egyptian billionaire, to acquire MTS's Allstream division.

But Ottawa continued to publicly agitate for more competition in the wireless space. It opened up the auction to U.S. bidders and was prepared to give those new entrants -- which were generally expected to include the large U.S. carrier Verizon -- the chance to buy more spectrum than Canadian incumbents such as Bell, Telus, Rogers and even MTS could buy.

As it turned out, Verizon did not enter the market, Canadian telco bidders paid far more than had been forecast and the federal government's anti-Big Telco advertising campaign ended.

Now it's time for the wireless industry to start winning back the hearts and minds of consumers in a softer-sell environment.

Cue Bernard Lord, the former premier of New Brunswick and, for the past five years, the CEO of the Canadian Wireless Telecommunications Association. On Thursday, Lord made his first public appearance in Winnipeg on behalf of the CWTA.

In an interview, Lord suggested the industry was never "at war" with Ottawa and whatever disagreements there were have been over for six months.

"The latest government report showed that prices in Canada have come down 20 per cent from the previous five years and that our prices are lower on average than (in) the U.S.," he said. "It's all part of the public dialogue. We live in a democratic society and we're able to have robust discussions."

Now the spitting match is over, the wireless industry can more calmly talk about where it's at. In all sorts of ways, it's quite a story.

Smartphone penetration in Canada has gone up from 34 per cent five years ago and is expected to hit 80 per cent by the end of this year.

With such huge growth in usage, the industry now represents about $40 billion in its direct and indirect annual contribution to the GDP, including about 300,000 jobs across the country. Moreover, between 1987 and 2012, the industry invested more than $40 billion to build the networks.

Of course it's self-serving to the members of the CWTA, but Lord's message is valid in that the Canadian wireless networks and service are now as robust as anywhere else in the world.

After all that squabbling, even prices are now in the ballpark with other developed countries.

Iain Grant, a veteran industry analyst with the Seaboard Group, does not disagree with those general claims.

But he said the Canadian companies might not have built the networks they did were it not for government encouragement of new entrants into the sector, most recently including Wind and Mobilicity.

"In 1995-96, there was no competition and Canada was a whole generation behind (in telco technology)," Grant said. "When competition was announced (in 2009), Bell and Telus put in a whole new network and then upgraded it to LTE. They never would have done it without someone breathing down their necks."

But it's a new reality now. The carriers get it, at least to a far greater extent than they did in the past.

"Fifteen to 20 years ago, when we made investments, we expected it to last 10 years," said Kelvin Shepherd, CEO of MTS's Manitoba operations. "Now the cycle times and how quickly you have to reinvest in technology to keep up with customer demand is really astounding."

But the payoff to the telcos is becoming more apparent.

While their home-phone and long-distance revenues are dramatically declining, as is the increase in wireless subscriber numbers, those subscribers are using smartphones in ways not even imagined five years ago.

Lord said in the next five years, demand for wireless-data usage is expected to grow 900 per cent.

That's where the telcos' future revenue growth is going to come from.

Republished from the Winnipeg Free Press print edition May 23, 2014 B4

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