Yesterday Industry Minister Christian Paradis emerged from the secret invisible fortress he’s been hiding in since his appointment to announce the new rules that will govern the upcoming auctions of wireless spectrum. He revealed a number of conditions designed to foster competition and extend services to rural areas, chief among them being the welcoming of foreign capital into our newer, smaller wireless providers. Let’s hope the measures achieve these goals, and more. If ever there was an industry in need of disruption, it’s Canada’s wireless sector.
It’s not that we pay too much (although we do). It’s not that our services are lagging behind international standards in speed and coverage (although they are). The real problem is that we’re getting left behind. Wireless networks are getting so fast in other parts of the world that they are rendering moot the infamous “last mile” problem of networking. First, each and every home needed its own telephone line. Then cable. It looked like fibre would be next, and the costs would be enormous, especially in a country like Canada where we’re all so darned spread out.
But while we’ve been wringing our hands over this problem, countries unlucky (read: poor) enough to have skipped telephone and cable networking have entered the wireless era with guns blazing. Foreign mobile firms have entered 2nd and even 3rd world economies in South American, Eastern Europe and Africa, investing hundreds of millions of dollars in state-of-the-art wireless infrastructure and then charging whatever the people can afford for access. Eventually the investment is returned and almost all new income is profit. Governments have eagerly welcomed these companies, as they connect entire populations in a handful of years. The benefit to these economies has been incredible. After decades of digital isolation, entire populations are rapidly getting online, joining the information economy, performing digital services and starting businesses.
And then there’s Canada.
If wireless service here were comparable in price and speeds to wired service, Canadians would quickly grow uncomfortable with the many bills we pay for our data. Why pay a cable TV bill, a phone bill, a broadband Internet bill, a cellphone bill and a datastick bill when all of these services boil down to zeros and ones we send and receive through the air? It would be like having to pay one bus ticket if you’re only wearing pants, another if you wear a shirt and another for your shoes. The bus doesn’t know or care what you’re wearing, and zeros and ones don’t know or care if they add up to a Skype call, an episode of 30 Rock or an MP3 download.
But our incumbents do. If we leave wireless innovation to our handful of massive telecom firms, we can expect to remain a digital ghetto. Sure, they have and will invest in next generation wireless networks, but they can be counted on to mete out these services in drips and drabs, charging us through the nose for every minor incremental improvement in speed. Worst of all, they will fight tooth and nail to segregate our data, resisting the natural convergence I’ve described. If they don’t, they know that wireless will cannibalize their incredibly lucrative “last gen” services. They know this will happen eventually, but they want the process to take as long as possible. We can’t afford that.
Ottawa’s last wireless spectrum auction, with its set-asides for new entrants brought us WIND, Mobilicity and Public – bargain providers who largely piggyback the incumbent networks in order to offer us reasonably priced cell phone service (CORRECTION: since launching, the new carriers have built out their own networks and only “piggyback” for roaming services. Thx Jamie). In just a few years, they have succeeded in driving prices down across the board. They have challenged the fictions of “system access” fees and domestic long-distance charges. But all together, they only comprise 4% of the market.
We need more than for these providers to simply stick around. We need them to disrupt. We need foreign firms to pump money into them, build out their own networks, and offer services that are not only faster than anything we’ve seen, but cheaper and use-neutral.
I’m still parsing the difference between set-asides and caps, but let’s hope Ottawa’s new terms for the next two spectrum auctions will bring revolution to our market- not evolution.
To put it bluntly, the first company to offer Canadians all the high-speed wireless data we can eat, however we care to eat it, for under $100 a month, will win this market. And it’s a plum.