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(Sept 2009) The state of Wireless in Canada

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(Sept 2009) The state of Wireless in Canada

  1. 1. FITC Mobile 2009, Toronto Led by: Thomas Purves [email_address] Twitter: @tpurves
  2. 2. <ul><li>Ubiquitous broadband connectivity wired and wireless </li></ul><ul><li>Bandwidth seen as free by users </li></ul><ul><li>Consistent un-fragmented mobile platforms </li></ul><ul><li>Mature/Useful options for monetizing content </li></ul><ul><li>High common-denominator of devices </li></ul><ul><li>Ubiquity of mobile phones and of smartphones </li></ul><ul><ul><li>It’s great if many Canadians have access to smartphones , much better if/when you could someday assume that everyone does. </li></ul></ul>
  3. 3. Canada
  4. 4. HIGH LOW Canada 2007 Canada 2009 Availability of leading devices and network speed Canada in Global Comparison
  5. 5. Ouch Circa April 2007: Some of worst data rates in the developed world. A country of Blackberry addicts, but low accessibility to most advanced devices. Dominated by On-deck content, low accessibility to open content, open services. High pricing to consumers, lagging wireless penetration, lagging adoption behaviours
  6. 6. <ul><li>This was the icebreaker </li></ul><ul><li>June 2008, Rogers gets the iPhone </li></ul><ul><li>Canada (belatedly) gets 3G </li></ul><ul><li>Thanks to public outcry, Canada gets 6GB/$30 data plan </li></ul>
  7. 7. <ul><li>New spectrum Auction rules </li></ul><ul><ul><li>40% of new spectrum set aside for new entrants </li></ul></ul><ul><ul><li>Mandated tower sharing and in-country roaming </li></ul></ul><ul><ul><li>Attempt by Government to improve wireless services and accessibility by encouraging increased competition </li></ul></ul>
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  9. 9. <ul><li>Canadian mobile share is dominated by post-paid </li></ul><ul><li>Prepaid share is slowly shrinking </li></ul><ul><li>Typical ARPU (fees/month) </li></ul><ul><ul><li>Prepaid <$20 </li></ul></ul><ul><ul><li>Postpaid >$70 </li></ul></ul><ul><li>Smartphones, data plans only come with postpaid </li></ul><ul><li>There are no prepaid plans with data or data-only in Canada (grr) </li></ul>Canada Q2 2009 (CTWA)
  10. 10. <ul><li>Just under half of new subscriptions are smartphones (Telus, Q2 2009) </li></ul><ul><li>Only about 20% of installed base is smartphone equiped </li></ul><ul><li>Caveat: some smart phones are smarter than others </li></ul>
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  14. 14. <ul><li>EXAMPLE COUNTRIES WITH HIGHER MOBILE PENETRATION THAN CANADA </li></ul><ul><li>United States </li></ul><ul><li>Australia </li></ul><ul><li>New Zealand </li></ul><ul><li>UK </li></ul><ul><li>Malaysia </li></ul><ul><li>Jamaica </li></ul><ul><li>Algeria </li></ul><ul><li>Uruguay </li></ul><ul><li>Vietnam </li></ul><ul><li>Spain </li></ul><ul><li>More… </li></ul><ul><li>EXAMPLE COUNTRIES WITH LOWER PENETRATION THAN CANADA </li></ul><ul><li>Egypt </li></ul><ul><li>Iran </li></ul><ul><li>Lebanon </li></ul><ul><li>Cook Islands </li></ul><ul><li>Angola </li></ul><ul><li>North Korea </li></ul><ul><li>Liberia </li></ul><ul><li>Indonesia </li></ul><ul><li>Somalia </li></ul>
  15. 15. <ul><li>Nokia/LECG global connectivity scorecard for Canada </li></ul><ul><li>Commentary: </li></ul><ul><li>Good basic broadband </li></ul><ul><li>Low 3G penetration </li></ul><ul><li>Low fibre/ultrabroadband penetration </li></ul><ul><li>Business and Consumer usage patterns lag U.S. and other peers </li></ul>
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  17. 17. What’s amazing is the huge orders of magnitude in effective pricing per bit depending on the channel and the service being offered. How long is this sustainable? How long until consumers figure out ways to arbitrage more expensive bits for much, much cheaper ones?
  18. 18. <ul><li>We value backwards compatibility </li></ul><ul><li>Reliability </li></ul><ul><li>Network effects </li></ul><ul><li>Spectrum regulations and monopolies </li></ul><ul><li>Limited competition </li></ul><ul><li>Cunning marketing </li></ul><ul><li>We value some types of bits or messages more than others </li></ul><ul><li>Others? </li></ul>But relax…
  19. 19. As a very simple communication channel, DeBeers has every telco beat.
  20. 20. Example high-value per bit: Engagement ring $3,500 This product delivers 1 bit of information (yes or no) value: $29,360,128,000 / MB
  21. 21. Example low-value per bit $32.99CAD Amazon.ca 3-disc special edition 25 GB per disc = 75GB “ value”: $0.00042 / MB Example high-value per bit: Engagement ring $3,500 This product delivers 1 bit of information value: $29,360,128,000 / MB
  22. 22. Source CISCO forecasts 2009 Rogers just announced 21MBps service in Canada (cool!) A standard GSM voice band requires only 12.2 kpps Notionally, that’s now less than 0.01% of your phone’s available bandwidth How long can this traditional but tiny little bit-stream continue to support 80% of the carrier’s revenue?
  23. 23. <ul><li>Gap between network traffic and service revenue widening </li></ul><ul><li>Inevitable dumbification of the pipe </li></ul><ul><li>Challenges of cross-subsidization an commoditization, the demands and value of bandwidth exceed what carriers can easily bill for </li></ul>
  24. 24. <ul><li>Cell phones as we know them will come and go in a relatively short period of time </li></ul><ul><li>Think of cell phones like the video rental industry </li></ul><ul><li>Carriers know this and are trying to </li></ul><ul><ul><li>Invest in new business models (e.g. Rogers Venture Fund) </li></ul></ul><ul><ul><li>Make hay while the sun shines </li></ul></ul><ul><ul><li>Forestall the future where possible </li></ul></ul>
  25. 25. <ul><li>Some new entrants: </li></ul><ul><li>However, new entrants focusing on talk/text </li></ul><ul><ul><li>New spectrum highly fragmented </li></ul></ul><ul><ul><li>Most entrants paid a lot for thin amounts of spectrum </li></ul></ul><ul><ul><li>Not a lot of capacity for data until future spectrum allocations </li></ul></ul><ul><ul><li>Don’t expect new entrants to be promoting smart phones </li></ul></ul><ul><ul><li>Think cell phoning like it’s 1999 </li></ul></ul><ul><ul><li>As mobile developers, this doesn’t really help you </li></ul></ul>
  26. 26. <ul><li>Canada’s 2008 spectrum auction exceeded expectations, raising $4 for the government </li></ul><ul><li>In retrospect, charging the industry a $4B tax on expansion feels like a strange way to help lower your cell phone bill </li></ul><ul><li>How could Canada invest that $4B? Some ideas: </li></ul><ul><ul><li>Reimburse carriers as tax credits on mobile capital expenditures </li></ul></ul><ul><ul><li>Fund mobile content creation </li></ul></ul><ul><ul><li>Fund mobile startups and innovation in Canada </li></ul></ul>
  27. 27. <ul><li>Leapfrog potential </li></ul><ul><ul><li>Can we turn lagging adoption into an advantage </li></ul></ul><ul><li>Unlike 2007, we have leading technology </li></ul><ul><ul><li>Fast networks </li></ul></ul><ul><ul><li>The best devices (Iphone, bberry, palm, rocket sticks) </li></ul></ul><ul><li>Game changing technology (starting with the iphone) has stoked competition </li></ul><ul><li>Rogers has shown that competing on technology (not just marketing) Canadians have voted with their wallets </li></ul><ul><li>HSPA competition coming soon </li></ul><ul><li>Canada has a great mobile development and startup community near very large global markets </li></ul>
  28. 28. <ul><li>Devices (our addiction to handset subsidies is a problem) </li></ul><ul><ul><li>Floods of cheap Chinese android knockoffs? </li></ul></ul><ul><ul><li>Invasion of non-phone devices, mids, nettops, who knows whats </li></ul></ul><ul><li>Spectrum </li></ul><ul><ul><li>Openspectrum – whitespaces </li></ul></ul><ul><ul><li>Mobile wimax (hasn’t worked yet) </li></ul></ul><ul><ul><li>Foreign competition </li></ul></ul><ul><li>Voip </li></ul><ul><ul><li>Googlevoice </li></ul></ul><ul><ul><li>New management at Skype (3 rd time is the charm? </li></ul></ul><ul><li>Others? </li></ul>
  29. 29. <ul><li>High costs remain </li></ul><ul><li>Roaming pricing is outrageous </li></ul><ul><li>Network neutrality </li></ul><ul><li>Pricing transparency </li></ul><ul><li>Limit length of contracts </li></ul><ul><li>More spectrum </li></ul><ul><li>Deregulate foreign ownership </li></ul>
  30. 30. <ul><li>Can we predict the death of: </li></ul><ul><ul><li>Area codes and long distance? </li></ul></ul><ul><ul><li>Numeric phone numbers </li></ul></ul><ul><ul><li>3 year contracts </li></ul></ul><ul><ul><li>SMS messaging </li></ul></ul><ul><li>Or not? </li></ul><ul><ul><li>A century and a half after they first thought up the idea deBeers is still selling diamonds </li></ul></ul>