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Publications & Presentations
 March 2015 - Moore's Law
 June 2014 - Get it Wholesale!
 December 2013 - The Quest to Drive Consumer Benefit
 August 2013 - Why Canada? Why Now?
 April 2013 - Withering on Vine
 February 2013 - Mad as Hell!!
 March 2012 - Visiting Martians Shop for Broadband!
 February 2012 - Long Term Evolutionary Challenge: Limiting Wireless Carrier Gluttony
 November 2011 - Aide-Memoire: Foreign Investment in Canadian Telecommunications
 September 2011 - Pirates of the Arctic
 July 2011 - Some Notes for Canada’s Newest Industry Minister – An Open Letter
 May 2011 – A Tide in the Affairs of Men
 April 2011 – The Woods are Lovely, Dark and Deep: The Case for a Remote-Rural Exception in Frequency
 March 2011 – Hertz Much? Canadian Wireless Spectrum Valuation
 February 2011 – Over the Rainbow: Thoughts on the Canadian 700 MHz Discussion
 December 2010 - Strategic Air Commands: Mobile Carriers Embrace On-demand Activation
 October 2010 - There be Dragons: Canada’s Xenophobia in Telecoms Ownership
 July 2010 - Death Grip
 March 2010 - Wind in the Willows
 December 2009 - Gone with the Wind? Wireless Entrant Faces Arctic Reception in Canada
 November 2009 - Herding Cats: Managing a Wireless Community
 October 2009 - It's In The Air: Wireless Delivers the Promise of Broadband – Without the Wait
 August 2009 - Heart of [Wireless] Darkness: A SeaBoard Look At Wireless International Roaming
 April 2009 – A Giant Step Backwards: Canada’s CRTC Moves to Re-Monopolize Communications Marketplace
 March 2009 - Canadian Wireless Stakes:The Shape Of A Market To Come
 January 2009 - Paradise Lost
 December 2008 - Internet Hot Like Laval's
 October 2008 - Sow's Ear into a Silk Purse: Exploiting the Potential of the G-block
 October 2008 - Reason, Not Romance: A Better Internet in the Balance
 September 2008 - Start Your Engines:Canada’s Wireless Challengers Hit The Road
 May 2008 - Champagne Tastes: Beer Budgets
 March 2008 - So, You Want To Become A Wireless Services Provider?
 February 2008 - It Isn’t About Paying Paul Without Robbing Peter:Reflections on the CTF Debate
 February 2008 - The Race is On! Toronto Hydro Puts Toronto Hydro Telecom on the Block
 SeaBoard Group - 2007 Year End Review
 November 2007 - Wireless Data Prices, How do Canadians fare?
 August 2007 - SeaBoard Market Update & Outlook
 March 2007 - Lament For A Wireless Nation - A Cross-National Survey of Wireless Service Prices
 January 2007 - Looking Back Looking Forward
 November 2006 - Whither MVNOs
 September 2006 - Communications Pricing for Consumers 2006
 July 2006 - Knowing Me Knowing You
 June 2006 - Avoiding the Tragedy of Dorothy
 May 2006 - SeaBoard Sentinel - Knowing Thy Neighbour
 April 2006 - Escape Velocity- Videotron Pushes the Limit for Canada
 March 2006 - Leaving Jurassic Park - New Era in Mobile Services
 February 2006 - Coming to a Screen Near You: Telco TV
 Brace Yourself! 2006; Year in Preview
 November 2005 - Vox Populi: The People Speak
 October 2005 - Mobile Instant Messaging: Power of Presence
 September 2005 - Arming the Contenders
 August 2005 - Top of the First - The VoIP Battle Begins
 July 2005 - Lessons for Canada; Wireless Pricing - A Cross National Survey
 April 2005 - The Anarchist Cookbook
 March 2005 - God's Machine
 January 2005 - An Exciting Year Ahead
 December 2004 - The Medium is not the Message!
 December 2004 - Old Bottles, New Wine
 October 2004 - Billing - Beyond Feeds and Speeds
 Sept 2004 - Cabled Canada
 July 2004 - It's Your Call
 May 2004 - Field(s) And Stream
 April 2004 - Through The Portal - Smartly
 March 2004 - VoIP across the Enterprise: Proceeding Cautiously - the CompUSA story
 Feb 2004 - Get Shorty! - Canada's Wireless Market
 November 2003 - The Importance of Being Ernestine
 October 2003 - Wireless Wonderland
 October 2003 - Behind the Veil of Convergence: Lauding Logistics
 Sept 2003 - Beyond Ernestine - Your Call is Important To Us
 August 2003 - Not Your Parents' Phone
 July 2003 - Canadians Cut Their Wires
 May 2003 - Communications Pricing for Consumers
 January 2003 - Catharsis of Penury
 January 2003 - No Worries!
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Long Term Evolutionary Challenge:

Limiting Wireless Carrier Gluttony + SeaBoard Comment (New)


February 2012 - IGB Grant +1 514 849 3508, Amit Kaminer +1 416 413 1636, Trevor Marshall +1 416 878 7730, Mairi MacDonald, and Lindsay Shaddy




This paper looks at the Canadian wireless marketplace and explores the impact that the new competitors have had on market dynamics. Our conclusion? They have made a significant difference. We also conclude, however, that the work of government is not yet done. The competitive spark is not yet robust, and it needs to be, to survive the attempts by more established interests to extinguish the challenges and return to the grand old days of oligopoly.

We suggest that Canada's government can take heart - marketplace framework adjustments are being made by other governments too, in search for better models and greater consumer benefit.

No matter the geography, no matter the industry, governments today are taking a more active role than before in creating equitable markets to serve the public's interest. Telecom markets, for which the barriers of entry have traditionally been notoriously high, have not been spared. The actions taken in this sector by the governments of the US, UK, Australia, and France are but a few examples of this post-2008 paradigm shift. These governments have been taking active measures to improve the competitiveness of their wireless sector. What kind of active measures? The right kind, helping with the market design, but not imposing control.

The UK was courageous enough to propose reallocation of the valuable sub-1GHz spectra from old and rich to new and poor. The US overcame its love affair with laissez-faire to stop the AT&T merger with T-Mobile. The French government taught its own global brand, Orange, a lesson, too, by setting spectrum aside exclusively for a new entrant. The Australians? They took 100 years or so of incumbency and turned it on its ear, transforming an old telecom framework into a competitive model suited to meet the challenges of coming generations.

The Canadian wireless communications marketplace has been dominated by three firms since the purchase by Telus of Clearnet at the beginning of the last decade. These three firms offer wireless services to customers across much of the country. The companies have done well. Shareholders are happy. Suppliers are happy. Only one group has reason to complain: customers. Their complaints centre around high prices and lack of choice. One result of consumer antipathy is a resistance to further adoption of wireless devices. Canadians are voting with their wallets.

When faced with this sorry state of affairs, the Canadian government's response was to revitalise the Canadian marketplace through the introduction of more competition by licensing new competitors. Competition was to bring more choice and lower prices, as well as enriching the wireless experience. Several new competitors were licensed, and four launched service: Wind at the end of 2009, and, in 2010, Mobilicity, Public Mobile and Videotron.

This paper will show that the new competitors have made a difference; that the rate of wireless adoption is up; and that usage is increasing while prices have fallen. These results are cause for celebration, and we congratulate Industry Canada for having the vision to recognise the issue and possessing the strength of purpose to carry out the needed framework adjustments.

We also make the case, however, that the government still has work to do. Two major issues are currently under consideration: new-competitor access to the 700MHz spectrum and the removal of foreign investment restrictions. The right decisions on both of these matters have the potential to strengthen the competitive market even further. We urge the government to act and we suggest that the time to do so is now. The time for study, for review, is over. Mr. Harper needs to show Canadians that he can stand up to established interests and that he can follow through.

Seaboard believes the evidence to be clear. Canada's government must strengthen competition by erasing foreign investment limits and providing potential challengers with access to new frequencies without the need to compete against incumbent carriers for scarce resources – electromagnetic or monetary – so that they can continue to mount their challenges to established interests. Canadians need the benefits that more competition can bring to the wireless marketplace.


SeaBoard Comment: Wireless is Working!
4Q 2011 Canadian Wireless Results Show Challengers Doing Well


Over the past week, a number of Canada's wireless carriers released their financial and operating results for the last fiscal quarter (which includes the busy Christmas season and iPhone 4S launch). The upshot? There is reason for Canadians to celebrate: Competition has arrived in the Canadian marketplace! The incumbent share of new wireless customers was only just ahead of the new entrant share. That's a significant shift for the new entrants. It shows that Canadians are responding to Canada's newest wireless companies despite the entrenched resistance (contracts, win-back plans, flanker brands) that the incumbents are putting up.

Exhibit 1
Results Roundup - New Subscribers (Net Adds)
Source: Company Reports, SeaBoard Group Estimates, 2012

{available for subscribers}



It is apparent that the new entrants into the wireless marketplace, namely Public Mobile, Wind, Mobilicity and Videotron, are winning the race for customers despite having a much smaller coverage footprint and a small fraction of the resources of the established oligopoly – namely, the triumvirate of Bell, Rogers and Telus. This is great news. It is great because it shows that Industry Canada's gamble in the last spectrum auction is paying off for Canadians. More competition is good for customers and good, too, for the country.

The latest financial reports provide even more evidence that a competitive shift is under way in the marketplace:

  • Rogers ARPU (Average Revenue per User) is down 4% (Voice ARPU was down 12.1%) – a sea change from the time, four years ago, when incumbent ARPU went in only one direction: Up Up Up!
  • Telus missed the analysts' estimates in its 4th quarter; it spent more on device subsidies to keep its customers from switching away to the newer competitors with better deals. Bell made the same point when it raised device subsidies.
  • Bell's President and CEO, George Cope, told analysts earlier this week that he has seen "no let up in the competitive intensity in the Canadian wireless marketplace."

This new incumbent focus on "real" competition is a major change from the ersatz competition that Canadians have been subject to for the past decade. In an oligopolistic market, you only get the appearance of competition – the smoke of "we spend a lot of dollars in advertising" rather than actual competitive fire.

In our recent report, Long Term Evolutionary Challenge: Limiting Carrier Gluttony, we at SeaBoard Group argued that the benefits of the newly enhanced competition in Canada's wireless marketplace are leading to lower prices, better customer service, and better choice. We note that Canada's wireless incumbents, Bell, Rogers and Telus, are also pulling up their socks and lowering prices. We despaired, however, that the benefits of competition are not flowing to all Canadians but only to those in major marketplaces. What is needed, we argue, is for the Harper Government to follow through with its earlier initiative and provide access to the new spectrum that is about to be allocated to the industry in a way that the new upstart competitors have preferred access. We need to have this crucial block of spectrum set aside for the new competitors to enable them to bring their competitive spirit to more Canadians, as well as to improve their coverage in major centres.

In reaction to the SeaBoard report, the incumbent focus appears to have shifted to something they like to refer to as "sustainable competition." Their argument is that only the "national" incumbent companies have the scale and the heft to take advantage of the new spectrum, and they claim that they need the new frequencies to complete their own coverage.

Codswallop! The incumbent companies have held the adjacent frequencies, the 800 Mhz block, since the inception of their wireless companies a quarter-century ago. Have they built out all the areas of the country with that spectrum? No. There are still gaps; there are still holes. Let them use what they've already got before they come crying for more.
Some observers suggest, however, that the business models of Wind, of Mobilicity, of Public Mobile and even of Videotron are flawed; that no company can maintain an unsustainable business over time; that the challenges of building out a network are too great; that the pricing is too lean; and that the networks are too spotty for the companies to survive.

These are indeed challenges. From the comfort of hundred-year monopolies, Bell and Telus are clearly bemused over how companies without such a buttress can survive. From the perspective of Rogers, the monopoly cable provider in Canada's largest metropolitan area, this wringing of hands and focus on short-term return is clearly the result of corporate dementia. Have we forgotten the mantra of the company's founder, the late Ted Rogers, so quickly? Mr. Rogers famously eschewed a quest for profit in wireless for decades, focusing instead on building, strengthening and deepening his network. Where were the hand wringers then?

The key to the sustainability equation is investor ambition and horizons. Short-term investors aren't interested in building a national network to take on incumbent service providers with a century's head start. That takes mettle, it takes resolve, it takes patience – it demands a keen appreciation that the rewards will come, but it will be many years before those returns are generated. That was true for Bell; that was true for Telus; and it sums up Ted Rogers' approach to his wireless investment.

Canada's incumbent wireless providers appear to have forgotten about the shoulders of those they stood upon to get to their current position. Those shoulders, too, were burdened with debt. The only thing that kept the visions clear were the prospects of success – ambition if you will – and the ability to call on the cash flow of millions of customers of other federally licensed services.

One forgets, too, that the original wireless licenses – the licenses that kicked off cellular competition in Canada – were awarded by the Government. There was no auction. Her Majesty's treasury didn't reap hundreds of millions – or billions – in compensation for the spectral award. (SeaBoard estimates that the 1985 spectral award was worth more than $20B in 2012 dollars.) It was a hand-out to incumbent carriers, pure and simple – and it was definitely a hand-up. And these are the same incumbents that decry any further support to the new entrants.

Canada's wireless challengers are in building mode now. They are adding customers; they are adding facilities; they are adding employees; and they are driving competition in the marketplace.

The next steps for the Harper Government are clear. There are two. First, strengthen the competitive marketplace and strengthen the new-entrant challenge by allocating the new 700 MHz frequency spectrum to new entrants alone. Secondly, remove the restraints to foreign investment that significantly raise the cost of capital to new entrants. Let the competitive marketplace thrive!






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Monday, 01 March 2021

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