SO FAR, SO GOOD for wireless number portability, says Canadian Wireless Telecommunications Association president and CEO Peter Barnes.
There have been few issues the association has had to solve since March 14, the day Canadians could take their phone number with them, no matter which telephony carrier they chose to acquire service.
A more contentious, far less decided matter, is the upcoming Industry Canada wireless spectrum auction. The association’s majority want a free, unfettered auction but certain factions want constraints on the existing players so that newcomers may bid for spectrum and win. The CWTA is even holding a one-day symposium on the issue on April 23, in advance of the ministry’s deadline for comments to be submitted.
A week before that, Quebecor CEO Pierre Karl Peladeau will speak to the Canadian Club of Ottawa on the lack of wireless competition in Canada, since he would like a regulatory leg up when it comes to the auction.
Barnes (pictured) recently chatted with Cartt.ca editor and publisher on these and other issues facing his members and the industry as a whole.
Greg O’Brien: With the wireless number portability date having come and gone, from your point of view, how did it go? Was it smooth? Were there any big hiccups that you saw?
Peter Barnes: I would say it was very successful. The approach here was that the industry got together about two years ago and said to government and to customers that we would launch WNP, so we worked together through the members of the industry and through the industry association. We had some good advice from our consultants and we set upon a course of carrying out the introduction of the service. Now, the CRTC asked us to do it quicker than our consultants told us we should do it.
GOB: And there were a few others who complained as well, most notably Virgin and other consumer groups.
PB: Right. And so the Commission said that we could take 18 months for most of the country and then we could take 24 for the balance of the country. But we decided we don’t want to have two classes of Canadians, so we did everything within the 18-month period. And frankly, by the time we got going and the Commission had looked at things, it was more like 15 months.
It was the fastest introduction in the world of full intermodal phone number of portability because we now have wireline to wireless. Wireless to wireless and so on.
GOB: That’s the main difference between Canada and most of the rest of the world.
PB: That’s right. It’s quite an achievement for the industry and I think it’s certainly attractive from a customer perspective.
GOB: Now, the CWTA has been the point organization for consumers with questions and opinions. Have you found consumer confusion out there over what WNP is, what it means and what they can do?
PB: Not in a significant way. We created a web site with a number of questions and answers that we thought would be useful which got a lot of activity in the weeks and days leading up to the launch on March 14th. And we did a fair bit of work with both the written and electronic media answering their questions. So, I think there’s a lot of information out there and if you get into some of the issues it can be a bit complex, but I think the basics are fairly straightforward: That you deal with the company that you’re thinking of going to, and don’t disconnect your phone number.
Of course, the details vary from customer to customer depending on what kind of arrangement they have with their existing provider. So, I think with the volume of customers out there, I think it’s quite a success.
GOB: How do you think its going to affect the wireless part of the industry? Is it a positive, negative, neutral?
PB: The effect I see is it’s really another layer of competitiveness added to the industry. We already have a very competitive industry, which we see particularly in the fourth quarter every year when the ads and the promos get fast and furious… We’ve seen customers interested in it; we’ve seen some companies highlight the fact that number portability gives them an opportunity to be the provider. So, I think it’s just another facet in the competitive marketplace.
GOB: Speaking of the competitive marketplace, one which has a chance to perhaps get more competitive with the wireless spectrum auction that’s coming: What has been CWTA’s position on that, given the speculation as to how the incumbent carriers might be held back or that there might be something in the auction to somehow spur a fourth national competitor?
PB: There are a couple of things. One is we see ourselves as having a role in getting as much of the facts and as much as the debate out in the public – and that’s why we’re going to be holding a one-day seminar in Ottawa in just three weeks from now where we will have both Industry Canada explaining what their process is, and we will have opposing views that will be put forth – Some from our membership and some from outside our membership.
The association’s position is that competition for an auction is good – and the majority position of the association membership is that an unfettered auction is the way to go. In other words, there should not be any particular incentives or assistance to new entrants. Certainly, we think universally across the association everybody’s in favor of a competitive marketplace.
But, we do have a minority who are not supportive of the position for a fully unfettered auction, but the position of the association is more in favor of an unfettered one.
GOB: Now, you’re in Ottawa and talk to all the right people. Do you have any sort of sense as to which way they’re leaning?
PB: I’ve spoken to a lot of the people involved in the decision-making process and frankly the unanimous position I’m getting from them, whether its officials in the minister’s office or senior officials within the department, is that this is early days. They are asking the questions and they want to hear the answers, but they have not made up their mind one way or the other. I’ve heard that from a number of people.
So, I think we’ll have a very interesting debate over the next few months because the first comments are due on the actual process on May 25th, but I’m sure we’ll get a sprinkling or an indication of some of those comments at our session on April 23rd.
GOB: I will have somebody there, possibly me. I want take you back a few weeks to that SeaBoard Group report that came out recently. I don’t know if you saw it, but I had a different take on it than some of the other media.
PB: Yes, I did see that.
GOB: I thought it was sort of a ridiculous comparison…
PB: So do I.
GOB: But buried in the rhetoric the report had a couple of salient points. Carrying that forward, why do you think here in Canada we are behind in wireless penetration when compared to the U.S. or Europe or — not necessarily Gabon — or others?
PB: You have to look at a number of factors. I think the Canada-U.S. one is an important one, certainly because they are our biggest and closest neighbor. But I think the important thing there is that they launched cellular service about a year and a half before we did.
So, when you track the growth historically and average things out based on that start difference, you come up pretty close together. And indeed in the last five years, the average annual growth both in Canada and the U.S. has been 17% year over year. We’re tracking quite close.
Canada-U.S. I don’t think is a big issue, if it’s an issue at all. And then when you talk about Canada-Europe, one of the things you’ve got to look at is the alternatives for a communications customer in Europe in wireline service. Depending on the country, the pricing of that or the availability of that or the level of service is generally poor – and in some cases much poorer than what’s available in Canada. So, the relative attractiveness for wireless is greater in Europe.
GOB: And the penetration numbers are skewed a little bit over there because of the way the market is different. I mean you’ve got people with multiple SIM cards…
PB: That was my next point, exactly.
GOB: Okay, I’ll let you make it.
PB: The second point is exactly what you pointed out: the SIM card, where because of the very high rates for customers when they roam from one country to another – and since the countries are smaller in Europe you do a lot more of intercountry travel – it’s quite common for people to have two, three or even four SIM cards.
These cards, of course, go into the handsets and handle all the building of the relationship with the carrier. So, you could have a customer counting for three or four customers. That, of course, drives the numbers up. I think that’s another big factor that brings (comparisons with) Canada more into line.
GOB: What about the prices in Canada, should they be lower?
PB: Well, prices can always be lower, but you’re always talking about a tension, if you will, paying the piper, i.e. your investors, your employees and your shareholders and paying the bills, your suppliers, and attracting customers. The beauty of a competitive marketplace is that it does find an equilibrium because if there are multiple providers in the marketplace and if one of them feels there is a market opportunity to get more customers by lowering their prices, they do – and we see that with new pricing points fairly frequently in Canada.
GOB: I guess I get on those conference calls (with the big publicly trade wireless companies) and I hear a lot of talk about disciplined pricing and that type of thing. If I was a shareholder in those companies, you know, that’d be a good thing. But as a customer, I’d rather maybe see a little less discipline.
PB: Yes, and that’s the tension which exists. A study that we had commissioned a little while back by a group called Wall of Communications looked at the cash flows from the industry over the past 20 years which said "you know the wireless industry is now profitable, but it still has yet to recover its losses for the first call it 17 or 18 years."
PB: There is an expectation from the investors, from the shareholders, the bond holders that they will recover their capital.
Then of course through the discipline brought by the competitive marketplace where customers will walk – and whether it was before or after wireless number portability, customers will walk or choose somebody else. And you see that as new handsets come on and new pricing plans come on. In any market there’s that tension and companies make their decisions on pricing, trying to find that optimal point. And the market is getting more competitive with mobile virtual network operators.
We have a number of those…
GOB: Like Amp’d. Virgin and…
PB: Videotron, President’s Choice and a number of others. So, these are companies that buy their nets on a bulk basis and they can then price how they feel they can maximize their involvement in the marketplace. Again, another layer of competition.
GOB: Do you envision more players coming to the market? It’s a growing space but it’s not a slam dunk. ESPN has a very strong brand, but they pulled back on their mobile phone launch in the states.
PB: Well, we had a board meeting just last Friday of the association and clearly all of the people around the table, there is no objection, no concern about an auction that allows new companies to come in. I think that if somebody wants to do — as happened in 2001, there was a new company that was formed then and got some new spectrum in a particular auction that was held at that time.
GOB: Which one was that?
PB: It was a numbered company. Now, the capital costs of the auction can be significant – some of the deposits are hundreds of millions of dollars, but they’re just part of the cost, because then you’ve got to build your network, hire people. This is a capital-intensive industry, one that requires you to invest hundreds of millions if not a billion for starters… not an industry where many people can enter.
GOB: Like the guy in his garage starting up Google or YouTube.
PB: Exactly. It’s a very different business model. There may well be somebody else who participates in the auction and gets the license and begins to operate. And you know that’s just a fact of life in a competitive marketplace… which is what we have today, and I think that’s just fine.
GOB: What about the regulatory aspect? The CRTC has always been hands off when it came to the wireless market. There are the odd rumblings here and there that, you know, regulation maybe is required, when it comes to mobile video, perhaps. What are your thoughts on regulation?
PB: The forbearance of the Commission deciding they don’t need to regulate pricing on cellular rates has stood the test of time. Every year they look at the wireless industry as they do all the telecommunications sector and they make a new finding as to whether that industry is sufficiently competitive to maintain that deregulation, and every year they’ve reached that finding.
Obviously, I can’t prejudge what they’ll come up with in the future years, but I think it’s certainly my view that the market is just as, if not more, competitive than it was last year and the year before.
The mobile TV issue is one that the Commission dealt with – the matter of television being delivered to handsets via the Internet – and exempted that. I think that they’re now dealing with – if there were to be other technologies that came to Canada that used broadcast like technologies…
GOB: Because those technologies are out there.
PB: And have been launched in a number of countries but not yet in Canada. So we’ll see what happens there. There, of course, we get into not just the economic regulation issues, but,
GOB: Cultural.
PB: … Which, of course adds a layer of complexity. But certainly from an economic regulation point of view, from a competition point of view, I’m confident we have an industry that’s just as if not more competitive than it was in the years that they’ve made decisions that we were sufficiently competitive and there was no requirement for pricing regulation.
GOB: I’ve got two more questions. Text messaging is the fastest growing one in the industry and has been for a while. But what’s your opinion on what’s the next big thing after text? Is it video, is it sharing? Is it the video calling that Rogers unveiled this week?
PB: If we turn to text, I’d like to point out that it’s not only the fastest growing but the growth level is increasing. In the first four years since Canada has a platform which allows text messaging across carriers, the market grew 100% or more every year.
GOB: And Canada was one of the earlier countries to do that, if I remember right.
PB: We really broke ground there because we were ahead of the U.S. in that regard while with the countries in Europe, there wasn’t the issue because they were all working on the same technology.
They were all on GSM technology, whereas in Canada at the time we had GSM, we had CDMA, we had TDMA… the alphabet soup continues. But, we didn’t have a platform that would allow people to text message from one platform to the other, from one technology to the other. So, the association was involved with its members and helped in the selection of a platform. And that’s been a phenomenal success. Not only doubling in the first 3 to 4 years, last year, the volume’s tripled.
The next growth market is always a tough one to predict. That’s the one where millions can be made or lost. I think what we are seeing, however, is there’s a couple things happening. The networks are getting quicker.
GOB: EV-DO and HSDPA – more acronyms.
PB: More of the alphabet soup, but the important thing is that they are all increasingly providing the kind of speeds on your handset that you can get on your PC. Just a few years back, the kind of speeds we’re seeing on handsets were difficult to reach on PCs. So, handsets are getting better able to handle the traffic, the network’s getting better able to handle the traffic.
There is a richness of content that is going to appear and I think we could probably look to what happened on PCs for a bit of the story there, because at first for PCs – e-mail was the thing.
Now we’re seeing more and more richer content. And we’re seeing some of that on handsets today with ringtones which have gone from monophonic to polyphonic to true tones. So, the quality of the music that’s downloaded whether it’s a ringtone or a full song is increasing.
GOB: Oh yeah, I mean it sounds so much better.
PB: The same thing is true with video. A little while back it had very slow cut frames that would stagger across the screen — and now you’ve got, almost broadcast quality.
GOB: The Telus handset I’m testing right now with Mobi TV is far and away a much better product than it used to be. And, I recently tested a Bell phone, with its full movie service. I was shocked at how good the video was.
PB: There are lessons in the PC world as to the types of services that will be the growth opportunities. Clearly there’s a difference between a 5-cm screen and a 19-inch screen, but there are a lot of people – and there are times – when that 5-cm screen is the thing you want. Whether it’s the winning goal or the latest news clip and you’re waiting for a train or whatever. There’s certainly a market there for those kinds of applications. And we’re also seeing some interesting movement which I think is being driven by text messaging and that is the increasing use of short codes where marketers and others are using, instead of a 10 digit phone number to text message to them for a coupon or voting for your favorite artist, you’re texting to a five or six digit phone number.
And we handle that for the industry at the association. We coordinate it, so somebody who wants to text a short code doesn’t have to go to 8 or 10 or 12 different companies, they come to us and we’ll do the leg work. We’re seeing some considerable growth there and some neat applications, whether it’s a combination of information and advertising and marketing. So, there’s an increasing use of the text messaging vehicle as a mobile marketing tool.
GOB: E-mail’s the old fart’s way to communicate, right?
PB: Well, you know I think both have their place but I find it difficult to put my PC in my pocket and carry that along with me. They both have their strengths.
GOB: The last question I have is cell phone etiquette, which your site talks about. How do I convince the guy who’s yacking at 95 decibels in the middle of the restaurant that perhaps he should put his phone away?
PB: A tough one. We’ve done some work as an industry: published brochures. We’ve got stuff on our web site.
We’ve been involved with electronic media trying to get the message across. It’s a continuing challenge. I think even with 19 million cell phones out there, the people who do think at 95 decibels, thank God, are in the minority.
GOB: I don’t even bother trying to silence mine anymore. I just shut the sucker right off when I’m in a restaurant, for example.
PB: As an industry we have and will continue to take steps to educate people. Unfortunately, there are some people who may not listen or really think that that call is just so important that they’ve gotta make it. But, I think that’s a challenge every new technology has.
We’re gonna keep at it, but there are a lot of people who could stand to read our etiquette brochure and follow the advice – and we’ll keep trying to convince them.
GOB: I think you should have to produce a doctor’s ID before you go into any restaurant or church or movie theatre with a cell phone on because that’s the only profession I can think of where the person truly has to take a call. But that’s just me.
