Canadian consumers should wait another year for new entrants to join Canada's wireless market before signing any new cellphone contracts, a telecommunications report said Tuesday.
While many companies that won spectrum from last year's auction of wireless airwaves have yet to announce launch dates and pricing plans, telecom consultancy SeaBoard Group said the new offerings should bring more competition and lead to better value for consumers.
"Friends don't let friends sign wireless contracts — at least for a year or so," said the SeaBoard Group in its report, entitled The Shape of the Market to Come.
In particular, the report cites the announcements of two of the new carriers: Public Mobile — formerly BMV Holdings — and Globalive Communications Inc.
Both companies have made public statements suggesting they will launch discount brands with unlimited talk-and-text for $40 a month.
Public Mobile, backed by several private equity firms, has said it plans to launch a $40 unlimited talk-and-text service in Ontario and Quebec late in the third quarter of 2009.
Toronto-based Globalive has said it plans to launch two brands, a discount phone under the Yak brand with a price target of $40 a month and a yet to be named core brand, but has only said it plans to launch a countrywide network — with the exception of Quebec — by the end of 2009.
The SeaBoard report said the $40 monthly price is similar to the plans offered by Fido, Solo and Koodo, the incumbent discount brands of Rogers Communications Inc., Bell Canada Inc. and Telus Corp., respectively.
New entrants talk up unlimited minutes
But what separates the new plans is the unlimited talk minutes, the report said.
"What is different is what is included. 'Everything' is rather a compelling mantra," said authors Iain Grant, Amit Kaminer, Cynthia Lee and Anna Mazur.
"SeaBoard expects that Canadians will be delighted by the fruits of the new competition. As the months unfold, we expect more announcements."
Montreal-based Quebecor Inc. has said it plans to launch its own network in Quebec by the end of 2009, though in February president and CEO Pierre Karl Peladeau complained incumbent wireless companies were delaying the approval of agreements to share towers and roaming services.
Toronto-based DAVE Wireless, owned by entrepreneur John Bitove, who owns XM Satellite Canada and a host of fast-food restaurants, has not made any formal announcements about its plans, but is expected to launch its own cellphone service. The auction of 292 wireless airwave licences last year raised $4.2 billion for the federal government. The auction reserved 40 per cent of the 105 megahertz of airwaves up for sale for new entrants to encourage competition to established giants Rogers, Bell and Telus.
Since the auction, Rogers and Bell lowered their prices and dropped their system access fees on their Fido and Solo brands, following the lead of Telus discount brand Koodo earlier in 2008 and in anticipation of new entrants to the marketplace.
Lower prices could drive move from land lines
"The existence of pure wireless companies within a market keeps everyone's pencils sharpened," the report said.
SeaBoard said companies that specialize in wireless services will be at an advantage from carriers like Bell and Telus that have home phone services, since they'll be able to offer lower prices without fear of stealing from their own customers.
The end result, the report says, is that lower wireless prices will eventually push more consumers away from land lines and toward cellphones.
Canada has lagged far behind countries in Europe and Asia in mobile phone use, which analysts have attributed in part to a more developed land line infrastructure but also to a lack of competition.
The latest numbers from the Geneva-based International Telecommunication Union show Canada is also trailing in North America as well in cellphone use. Canada's mobile cellular penetration — or the number of mobile phone subscribers per 100 citizens — was 61.7 per cent in 2007, trailing North American neighbours United States (83.5 per cent) and Mexico (62.5 per cent).
Canada's land line telephone subscribers have also declined in recent years, from 65.9 per 100 inhabitants in 2002 to 55.5 per 100 inhabitants in 2007.