Telecom: BCE chief warns Ottawa to tread carefully on foreign-ownership reforms

By Jamie Sturgeon | National Post - CBC.ca | May 18, 2010

George Cope, chief executive of BCE Inc., cautioned yesterday that government should carefully weigh a decision to change or scrap foreign-ownership restrictions in the telecommunications sector, an area of the economy he says is already flush with investment.

This follows comments last week from Industry Minister Tony Clement further suggesting Ottawa is moving toward a policy shift to promote competition.

At a lunch speech in Toronto, the CEO of the country’s largest communications company said the Canadian market has become highly competitive in the two years since he took over, forcing BCE’s Bell Canada to pump $6-billion into new wireless and wireline upgrades through 2010 to stay ahead.

He pointed to Bell’s new, multibillion-dollar 3G+ wireless network jointly built with rival Telus Corp. as an example of how domestic needs are being met, and warned that allowing in firms from the U.S. and elsewhere may hinder future advancements.

“Do you think Summerside, P.E.I., would come up before Chicago? Not going to happen,” he said. “It happened in this case. So let’s be very, very careful about what we’re trying to solve in Canadian telecom rules because the investment is actually working.”

The network blankets 93% of the country.

Mr. Clement told a special parliamentary committee last week that restrictions could be lifted on the telecom sector by allowing key content assets owned by the biggest providers like Bell and Rogers Communications Inc. to remain in Canadian hands, while opening up distribution and network assets to foreign ownership.

The comments follow a pledge in the Throne Speech in March to liberalize the sector. “Our government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need,” Gov. Gen. Michaëlle Jean said at the time.

Ottawa’s move stems from two federal blue-ribbon reports completed in 2006 and 2008, that call for a relaxing of the rules as a way to spur more investment in economically important communications service.

This year however has seen three new entrants into the wireless market, in Wind Mobile, Mobilicity and Public Mobile, with cable giants Videotron Ltee. and Shaw Communications Inc. are on their way with wireless in Quebec and Western Canada.

Competition in broadband is also heating up as Bell and Telus Corp. invest billions this year overlaying copper networks with fibre, bringing alternatives to rival services provided by Rogers and Shaw. “What problems are we trying to solve, what’s the objective?” Mr. Cope said.

Still, the industry, especially in wireless, remains dominated by Bell, Rogers and Telus.

Some analysts suggest that without consolidation or access to more foreign capital (through a change in policy), the young startups face near-certain failure and a retrenchment in services in the market.

jasturgeon@nationalpost.com

Telecom: Wireless leads way as Bell keeps getting better

By J. Sturgeon | National Post | May 6, 2010

TORONTO -- As BCE Inc.'s marketing slogan suggests, it just keeps getting better.

The Montreal-based telecommunications giant reported a 61% rise in profit for the first quarter Thursday in the clearest sign yet that its "five strategic imperatives" campaign is yielding positive results. But perhaps most impressive, Bell, whose ad pitch is that "Today just got better," is sustaining healthy growth in its wireless business when many say the market is ripe for a slowdown.

Bell Canada, the operating entity of BCE, added an industry-best 55,625 new wireless customers during the period, helping the firm to better-than-expected financial results.

A big reason: Bell ballooned its retail presence by 750 stores in January when it began selling services through The Source, the consumer-electronics retail chain it acquired last year. The move delivered a one-two punch to competitor Rogers Communications Inc., which had been selling its phones through the chain until then.

Another reason was the ubiquitous marketing presence Bell held across the country in February. As the premier sponsor of the Vancouver Games, hardly an event went by without some reference to the Montreal-based company.

"No doubt there had to be some benefit from the Olympics," added George Cope, chief executive, on a morning call with analysts. "The addition of the The Source as a new distribution channel and significant Winter Olympics advertising" likely helped BCE gain customers, Jeff Fan, Scotia Capital analyst said.

Bell has been looking to gain wireless share to offset declines in its traditional phone service, making it a top priority among its so-called "five strategic imperatives." Bell is the second-largest wireless carrier in the country with about 30% of the market, just ahead of Telus. Rogers is the market leader controlling about 37% of the market.

The assault was stepped up late last year when the company hit the switch on a new multibillion-dollar HSPA network, breaking Rogers' exclusive hold on the immensely popular iPhone. The move provided a company record 163,000 rise in net new wireless additions in the fourth quarter. Since taking over two years ago, Mr. Cope has moved aggressively on five fronts -- improving customer service; accelerating wireless sales; using its legacy wireline presence to advantage; while investing in broadband and cutting out costs. There was "clear progress" on all five in the quarter, the CEO said.

But competitive headwinds are gathering -- the very forces that the initiatives are broadly designed to counter: greater competition amid slower growth across the industry.

This summer, regional cable provider Vidéotron Ltée. will introduce wireless in Quebec, squaring its offerings with Bell's. Meanwhile, three new independent wireless entrants -- WIND Mobile, Mobilicity and Public Mobile -- will compete for customers in key markets.

Of the new threats, perhaps the biggest is posed by Vidéotron. The Quebecor Inc. subsidiary plans to wrap cellphones into its existing cable, home-phone and Internet services, and offer all four under a single, discounted bundle. It will be a potent offering that will tempt wireless customers from all three major carriers to switch, analysts say.

But it could be particularly painful for Bell, which counts Quebec as one of its most important markets. Here too, though, the five-point plan is at work. Bell invested $431-million last quarter in pushing fibre deeper into neighborhoods and in some cases, directly to the home.

All told, Bell is spending a good portion of $2.55-billion on replacing copper with fibre in core markets. Importantly, the upgrades will support an IP version of Bell TV, a product designed to thwart cable products from Videotron and Rogers.

"Wireline continues to exhibit an organic decline. However, BCE is undertaking investment to stem overall customer losses by focusing on IPTV, which could bring back some needed revenue growth," said Maher Yaghi, analyst a Desjardins Securities.

For the quarter ended March 31, BCE said it earned 65 cents a share, compared with 57 cents in the same period a year ago. Analysts expected earnings per share of 63 cents.

Financial Post

jasturgeon@nationalpost.com

Telecom: Shaw making leap ahead in wireless, analysts suggest

By Jamie Sturgeon 04.10.10

Shaw Communications Inc. is embracing the future of the wireless business well ahead of its rivals, but it doesn't mean its acting on it any timesoon.

Calgary's swashbuckling cable and Internet giant has stymied investors and mystified industry analysts for months by keeping tight-lipped about how -- and when -- it planned to use the $189-million worth of airwave licences it picked up from Ottawa nearly two years ago.

Those spectrum licences, which cover more than nine million people across Western Canada, will allow Shaw to round out the so-called "quadruple play" that modern telecommunications firms have moved to offer by enabling Shaw to sell Internet, wireline phone, television and now wireless products.

Analysts say a timely wireless launch is an imperative for Shaw if it wishes to avoid being outflanked by rivals now aggressively going after its traditional TV customers, such as Telus Corp. (which is unrolling its IP-based product rapidly out west).

By building out a modern, data-centric wireless network that can offer appealing devices like the BlackBerry or iPhone, Shaw will be able to bundle services and compete on an even footing.

A timely entrance into the cellphone market would also help stamp out upstart carriers like WIND Mobile, which also acquired airwave licences during the federal government's spectrum auction in mid-2008 and began offering cellphone services in Calgary and Edmonton -- Shaw's backyard -- months ago.

Yesterday, Shaw tipped its hand slightly and revealed when it will launch:In late 2011. Timely was not a word bandied about much on a earnings call with analysts.

"Waiting is actually not a bad thing < its the right thing to do," Michael D'Avella, senior vice-president of planning at Shaw, said.

The delay has analyst suggesting that Shaw is holding off on spending hundreds of millions on a current 3G+ network like the ones operated by Canada's incumbent carriers in Rogers Communications Inc., Telus and BCE Inc., and instead move directly to a fourth-generation technology known as Long-Term Evolution (LTE).

Fuelling the speculation, Mr. D'Avella added: "LTE is going to be a much better technology once its fully deployed. And bear in mind that there will be a very robust ecosystem around LTE and all kinds of devices that have those 4G capabilities."

Carriers the world have begun preparing for the arrival of LTE, a system that will bring ultra high-speed broadband to a person's smartphone. Verizon Wireless in the United States plans to introduce the next-generation network in 25 to 30 cities in that country by the end of the year.

Yet not in Canada. Carriers here, with the exception of Rogers, have just finished pouring colossal sums of money into new 3G+ networks. BCE's Bell Mobility and Telus turned on their HSPA networks in November, while WIND Mobile and Videotron Ltee. in Quebec are still erecting theirs. No domestic carrier is in the mood to spend more on another upgrade any time soon.

Waiting another 18 months or so may prove a shrewd move, but it also carries risks.

Shaw will save itself the expense of playing catchup and give it a first-mover advantage in offering the most data-ready devices on the planet, capable of processing video and multimedia far beyond today's devices.

However, the wait will provide Telus plenty of time to lure those would-be smartphone to its "quad" offering, while handing WIND and by then Mobilicity time to pick off cellphone customers at the margins.

"Wireless penetration is growing everyday in Canada," warned Dvai Ghose at Genuity Capital Markets.

Shaw said it lost 1,055 basic cable subscribers last quarter as profit fell 11% from a year earlier to $139-million (32 cents a share) in the three months ended Feb. 28. However, revenue grew by 11% to $929-million.

Financial Post
jasturgeon@nationalpost.com

Media: Regulator says cable viewers willing to pony up more for TV

J. Sturgeon | Vancouver Sun | 03.24.10

TORONTO - Cable subscribers have shrugged at rate increases in the past and may be willing to do so again if new fees are passed on to them, the national broadcast regulator suggested yesterday.

In a report submitted to the federal Cabinet, the Canadian Radio-television and Telecommunications Commission said it does not believe "significant affordability issues would be created" for consumers if a new compensation regime were introduced as early as 2011.

Called "value for signal" or "fee for carriage," the new system would see big cable firms such as Rogers Communications Inc. and Shaw Communications Inc. for the first time pay conventional TV networks such as Global and CTV Inc. a fee for station signals.

On Monday, the CRTC moved to adopt the controversial measure to help offset declining revenue at network TV stations and preserve the Canadian content they produce.

Yesterday's report stems from a rare order-in-council from Heritage Canada in September and a subsequent public hearing in December. The Harper Conservatives have been cautious to support a CRTC ruling that would raise consumer costs and create a potential voter backlash.

The regulator's recommendation would almost certainly do just that, causing "modest price increases" for cable.

But Canadians may be willing to eat the charge, the CRTC's submission suggests.

The average cable rate was $53.22 a month last year, CRTC figures show. That's up almost 50% since 2002 when rates were deregulated, representing an annual rise of 5.6% to the average bill.

"Such results do not seem to suggest a significant withdrawal of demand for [cable or satellite] television services when consumers are faced with rate increases," the CRTC said.

The rise has help lift revenue and profit at the major cable firms. Now, with the fortunes of networks dimming, the CRTC aims to buoy the entire system with a new negotiation regime similar to one that exists in the United States.

The CRTC has put the decision to the Federal Court of Appeal, which is to determine whether it has the jurisdiction to impose what some term a new "TV tax."

The move opens a new battleground on which the broadcast and cable-satellite consortiums will continue the years-long fight over fees for over-the-air station signals.

Mirko Bibic, senior vice-president of regulatory affairs at BCE Inc., which operates satellite service Bell TV, said the telecommunications giant is preparing its case. Phil Lind, vice-chairman of Rogers Communications Inc., the largest cable company in the country, also said the company would fight the decision in court.

CTV or Global could not be reached for comment. (Global is owned by Canwest Global Communications Corp., parent of the National Post.)

The most critical scrutiny, however, could come from the federal government, which has the option of overturning Monday's decision.

Prime Minister Stephen Harper reiterated his party's position during Question Period yesterday. The government, he said, is "concerned about anything that imposes fees on consumers without their consent."

The price tag on an individual station signal is anyone's guess. Specialty channels such as TSN and HGTV command upwards of $1 or more a month, a fee lumped into a customer's cable bill.

In previous proceedings, the CRTC has used a price of 50¢ per subscriber for local station signals. All in, estimates received by the commission during hearings last year ranged from as low as $1 per subscriber per month to as high as $10.

But "since any fee charged would be the result of a negotiation, there is no way to accurately predict what the ultimate charges would be for consumers," the CRTC admitted.

Media: Pending CRTC decision signals shifting sands in TV industry

J. Sturgeon | Canada.com | 03.19.10

The television business is no longer a game reserved for millionaire media moguls. Consider that a station in western Michigan is being sold right now for US$550,000. On eBay.

As the tired but accurate explanation goes, the fat advertising profits that made owning a conventional station a lucrative endeavour in decades past have slipped away.

Fuelled by an explosion of specialty channels and deployment of broadband, new competitive forces have emerged that have shaken such major networks as Global and CTV here in Canada to their core.

The giants of broadcast south of the border -- the NBCs and ABCs -- have not been immune, either. Advertising budgets once automatically allotted to them are migrating away, enervating once-infallible business models.

Networks have responded as any business would: Cuts, closures and asset sales. Payrolls have thinned and so has the programming those jobs produced.

But there are two sides to the broadcasting system. The flip-side is the cable and satellite distributors that carry network programming -- Rogers Communications Inc., Shaw Communications Inc., BCE Inc. and others.

Last year, this Canadian consortium saw combined profits rise again by another $200-million to $2.3-billion, even through the recession. Rates have climbed through deregulation as more consumers choose pricier entertainment packages.

Meanwhile, Canadian broadcasters collectively lost $116-million in the same period, posting the first loss as a group in memory. Global's owner, Canwest Global Communications Corp., was forced to seek creditor protection for its television operations in October under a mountain of debt.

But there is renewed hope for broadcasters. On Monday, regulators from the Canadian Radio-television and Telecommunications Commission in Gatineau, Que., will release what many feel will be a watershed decision aimed at stabilizing if not reversing the slide.

"Something's got to give," said Ian Morrison, president of Friends of Canadian Broadcasting, an industry watchdog.

"If the cable industry weren't in a position where they were pulling in money hand over fist, then there'd be a huge problem. But there is an argument that they should pay for the over-the-air signals they pull in, and they can afford to."

Broadcasters have pestered the CRTC since at least 2008 for the right to charge their distributor counterparts a fee for the local station signals in much the same negotiated fashion U.S. networks are allowed to.

Simply put, the networks want another revenue stream from cable subscribers to compensate for lost advertising.

The CRTC has twice rebuffed them. But last year, as both CTV and Global were declaring monstrous writedowns and plummeting revenues, the commission, bound by the Broadcasting Act to guard the system and the Canadian content it produces, held another round of hearings.

"The issue is what -- not whether -- they'll do something," said a source close to the proceedings.

The balance of opinion now is that the CRTC will implement a "fee for carriage" regimen forcing negotiations between the two sides in what one industry source called a "transmission consent regime." Many also expect the CRTC to adopt a series of measures to free up more on-air time for ads.

Fearful of an attack on their bottom lines, Rogers and Shaw have vehemently opposed carriage fees. They argued during last year's hearings that through the $100-million Local Programming Improvement Fund (LPIF) and other subsidies, the system gets enough support.

Another argument is that Canada's big networks have sown their own misfortunes by overpaying for U.S. programs such as House and Desperate Housewives.

The dilemma has created an acrimonious schism between the two sides. But the tension is not isolated to Canada.

"It identifies a key underlying issue, and that is broadcasters everywhere are looking for more revenue, more stability," said Chris Diceman, senior communications and media analyst at debt-ratings agency DBRS Inc.

In the United States, two recent and very public rows reveal similar discord. Last month, ABC briefly removed its signals from cable giant Cablevision's systems the morning of the Academy Awards after parent Walt Disney Co. and the cable operator failed to reach a deal over carriage fees.

The dispute followed a similar feud between News Corp.'s Fox network and Time Warner at the turn of the year.

"Good programming is expensive," Rupert Murdoch (pictured), the owner of News Corp. and Fox, publicly told shareholders in the fall. "It can no longer be supported solely by advertising revenues."

There is a fresh focus to create a new framework "that works for consumers and is fair for the parties involved," Julius Genachowski, Federal Communications Commission chairman, told a Senate committee recently.

U.S. broadcasters won the right to charge cable distributors a fee or bargain for some other form of compensation for their programming in 1992 with the passage of the Cable Act. The networks have the right to yank their signals if negotiations break down. In a bygone era, networks flush with ad revenues would bargain with a cableco to get one of their specialty channels picked up for free or a station moved lower down the dial. No longer.

"It's not about channel position anymore," said James March, cable and media analyst at Piper Jaffray & Co. "Now broadcasters are saying: 'We need the money.' "

In Canada, there are no such rules -- yet. But even if networks here are awarded similar rights, there are fundamental differences in what they and their U.S. counterparts bring to the table.

In large part, CTV and Global are middlemen between Canadian viewers and U.S. programs. Every year, they travel to Hollywood and pay hundreds of millions of dollars for the right to broadcast such shows as Family Guy and CSI: NY north of the border. It's where Canada's major networks spend the biggest chunk of their money.

"The majority of viewing is to American television and we're trying find ways to subsidize and build up the Canadian system -- that's all well and good but the top 20 shows are American," said Phil Lind, vice-chairman at Rogers and a longtime cable executive.

"We're hooked on American TV, we just have a Canadian distribution system."

Meanwhile, most domestic content outside of newscasts has been relegated to late-night filler or buried down the dial. This content disparity has left broadcasters with very little to negotiate with beyond their "must-carry" status, which forces Rogers and others to distribute station signals.

The U.S. networks bargain with their content -- if The Simpsons are yanked, customers in New York call and complain to their cable company, not Fox. The same powers are useless here, unless U.S. affiliate feeds are blacked out during simultaneous broadcasts.

"How will they agree to a fee?" asked Jean LaRose, the CEO of specialty channel APTN and an industry veteran. "Shaw might look at [a station signal] and say you're worth five cents to me, tops, maybe two, because everything you have on there I get from the American feed."

Blocking content is one option, but one that pushes viewers to stray from the system in general, either to online or into grey market satellite services. No industry constituent wants that.

Still, settling on a price will likely be a major area of conflict. Broadcasters have been seeking similar rates to what more lucrative specialty channels receive -- in the neighbourhood of 50¢ a subscriber. It could mean $300-million by some estimates, or more than the cablecos' entire profit growth last year.

One broadcast source said the CRTC may ask the industry to increase its overall spending on Canadian programming if new fees are introduced.

Complicating matters is the restructuring of Canwest under court protection. Shaw has made a bid for a controlling stake in Global and the Winnipeg company's specialty-TV assets, effectively roping in one of Canada's two major private networks.

Ultimately, the brunt of any new compensation measures will be borne by subscribers, much the same way the Local Programming Improvement Fund was passed on.

Like many, Mr. Morrison at Friends of Canadian Broadcasting wants to know what the added weight to his monthly bill will bring. "The CRTC has to ask that," he said. "If they give the networks enhanced rights and access to a new revenue stream, what does the public get in return?"

jasturgeon@nationalpost.com

Telecom: Public Mobile goes live — with no network

By J. Sturgeon | Vancouver Sun | 03. 19. 10

It is fitting that Alek Krstajic, the chief executive of feisty startup wireless carrier Public Mobile Inc., has borrowed a page out of the playbook of Ted Rogers, a founding figure of Canada's $16-billion cellphone industry.

Public Mobile began selling cellphone services in Toronto and Montreal yesterday despite lacking a core ingredient in any wireless enterprise: a network.

Mr. Krstajic told reporters crowded into one of Public Mobile's stores in the heart of Toronto's Greek community that 15 stores were open across the city and another 10 in Montreal despite the fact that customers will not be able to use their new mobile phones until May, when Public hits the "on" switch.

"Ted said to me," recalled Mr. Krstajic, a veteran in Canadian telecommunications circles and former Rogers Communications Inc. executive, "don't let technical issues with the engineers stop you from selling."

Public Mobile does not have a technical issue with its new network; instead, it wants to avoid one. So it's taking another two months to go live.

"We want to make sure we're 100% ... that our customer experience is great," he said. "I can already see it in some people's eyes. Why would a customer buy now when the network's not on--why would I dish out between $75 and $125 for the handset?"

There is a pitch. Public Mobile plans to offer free, unlimited long-distance calling across Canada "for life" to anyone who signs up before May.

There are caveats. A customer will have to stay current on the bill and if the promotion attracts too many subscribers, Mr. Krstajic said, it may end prematurely.

It's an aggressive strategy and one that would almost certainly be applauded by the late Mr. Rogers, the entrepreneurial founder of the largest wireless provider in the country with more than 8.4 million subscribers.

Public Mobile, alongside a handful of other new entrants, plans to chip away at the formidable edifice that is Rogers and the country's other two incumbents, BCE Inc. and Telus Corp., which combined control 95% of the market.

Its strategy will rely on selling into neighbourhoods such as Toronto's Danforth and to people who do not make $100,000 a year and use a BlackBerry. Instead, Public Mobile said yesterday it will offer four handsets -- none of them smartphones--that will sell for $180 or less, and no contracts.

The company will offer a $40 monthly flat rate for unlimited -- "truly unlimited" -- voice calls and texting, the CEO said.

Greg MacDonald, an analyst at National Bank Financial, said he wants more clarity on exactly what $40 gets someone. "The release does not provide any further details to roaming charges or other calling feature options such as voicemail and call display," he said in note to clients.

Still, the rates are low and will add to pressure on the average revenue per subscribers the big three make, at least in the markets in which Public Mobile will compete, he said.

Public Mobile paid about $50-million in 2008 for wireless spectrum licences in Southern Ontario and Quebec. It is vying for share against Rogers, Telus and BCE's Bell Canada and a handful of other new entrants, including Wind Mobile, in Canada's quickly crowding cellphone market.

jasturgeon@nationalpost.com

Telecom: Quebecor eyes wireless as next front in platform expansion

By J. Sturgeon | National Post | March 11

Marrying content to networks has become the vogue with cable and Internet companies to differentiate themselves from peers. The consensus among industry watchers, failing to see any strong upside in value, has been lukewarm, but there are always exceptions.

Yesterday, Quebecor Inc. gave analysts and investors a deeper glimpse into plans to introduce wireless services this summer and further its position as a cross-platform content provider. And both groups came away enthused.

On a fourth-quarter earnings call, chief executive Pierre Karl Peladeau said the Montreal-based communications and media giant was "pushing ahead" with its wireless ambitions through cable subsidiary Videotron Ltd.

The wireless rollout is part of a broader campaign "aimed at producing and distributing content of the highest quality on the greatest number of distribution platforms," he said.

Videotron is a dominant player in Quebec's telecom services business, with a strong position in cable, Internet and residential phone markets. But it also operates dozens of French-language media assets, ranging from newspapers like Le Journal de Montreal and the TVA conventional television network.

With a population of 5.8 million French-speaking residents, the most consumed content in Quebec remains francophone, with Quebecor the owner of much of it, said Dvai Ghose, analyst at Genuity Capital Markets.

The company's media offerings resonate deeply with its customer base, and analysts say Quebecor plans to use that to advantage as it pursues a $1-billion wireless rollout.

"All this is going to be used to present a portal to wireless subscribers who want to have that French content," said Maher Yaghi of Desjardins Securities. "They see media as a source of interest to their customers and surround that media with ways to supply it to customers."

The company paid $550-million for airwave licences that blanket Quebec during Ottawa's wireless-spectrum auction in mid-2008. Analysts say Quebecor plans to bundle cellphone and smartphone products with its other services to steal share against larger rivals such as BCE Inc.

Mr. Ghose at Genuity is cautiously bullish that Quebecor can effectively use its content as a persuasive differentiator. "Can they execute it well? Time will tell. But they have the content and they have the wireless asset," he said.

Investors responded positively yesterday, sending shares in the company 5% higher before a slight afternoon retreat. The stock finished at $33.67, up 4.5%.

Most were reacting to a better-than-expected performance in the last quarter. Quebecor swung to a fourth-quarter profit of $73.8-million, or $1.12 a share, in the three months ended Dec. 31, compared with a loss of $344-million ($5.34) a year earlier because of sizable goodwill impairment.

The results were driven by continued growth in telecom services, where operating income jumped 29% year over year to $280.9-million. Media operations saw revenue declines slow as the recession ebbed and through restructuring efforts. The division earned $69.3-million.

Combined revenue rose 2% to $1.02-billion for the quarter.

jasturgeon@nationalpost.com

Telecom: Rushed launch takes wind out of new wireless carrier

By J. Sturgeon | Vancouver Sun | 03. 10. 10

TORONTO -- Conventional wisdom for Canada’s newest cellphone carriers has been to be first into the market. With fierce competition overhead from established incumbents such as Rogers Communications Inc., the thinking was that the earliest in would hold a key leg up against other newcomers and reap the rewards of consumers’ pent up demand for choice.

Three months after the launch of WIND Mobile, the conventional wisdom is now being undermined by some. “WIND it seems has missed the first-mover advantage,” said Iain Grant, principal analyst at SeaBoard Group, an industry research firm.

Mr. Grant said a hasty launch by WIND has led to spotty network deployment and subsequently weak wireless coverage. Limited distribution channels and advertising have also led to a “lost message” with would-be subscribers.

“Certainly reports of network faults ... and a small retail presence have dampened some consumer enthusiasm for the new entrant’s services,” he said in a new report.

Tony Lacavera, chairman of WIND’s parent Globalive Wireless Management Corp., acknowledged the firm was having some difficulties.

“We can see the weaknesses in the Toronto and Calgary networks and we’re adding sites, adding towers to try and strengthen the coverage. It’s the big operational focus,” he said in a recent interview .

Mr. Grant said other startup carriers such as Mobilicity and Public Mobile would do well to delay their respective launches until their networks are complete and a wide retail presence is secured. Ignoring that could cost customers.

According to Seaboard estimates, WIND has picked up about 30,000 subscribers in Toronto, Calgary and Edmonton, the three cities it now offers services in.

The uptake has not been as brisk as some predicted and indeed likely below WIND’s estimates, which are for 1.5 million subscribers within three years (that would require 41,500 new customers a month).

Analysts say WIND was rushed out of the gate in early December after Industry Minister Tony Clement overturned a ban from the regulator over its controversial ownership and capital structures. Parent Globalive is backed by Egyptian carrier Orascom Telecom, who has provided hundreds of millions in financing in exchange for a 65% economic interest and representation on Globalive’s board.

Mr. Grant said the company likely moved before the decision could be revisited. But things were rushed. Its network was incomplete and only one distribution deal, with Blockbuster, had been signed.

Evidence of unrest at WIND itself -- perhaps emanating from Orascom -- came last week when two senior executives, chief information officer Scott Waller and head of customer service Chris Robbins, pictured, were removed.

Still, others say WIND maintains an upper hand against other wireless newcomers. “The fact that [other entrants] haven’t even launched yet is a testament to the fact that they’ve got a huge competitive advantage because of Orascom,” said an analyst that asked not to be named. Orascom has given Globalive heft in negotiating network and handset agreements that other new entrants lack.

Moreover, new deals with big box electronics retailers Future Shop and Best Buy are rumoured to be in the offing, which would balloon WIND’s distribution.

Meanwhile, neither Mobilicity or Public Mobile, which will compete in major urban centres with WIND, have definitive launch dates.

“No launch is ever going to be perfect,” said the industry analyst. “If you wait for perfection you’ll never launch.”

Financial Post

jasturgeon@nationalpost.com

Telecom: In Wi-LAN, a path for Nortel's rebirth?

By J. Sturgeon | Ottawa Citizen | March 3, 2010

TORONTO -- It was in early 2006 when Wi-LAN Inc.’s board was forced to make a bold decision. Faced with a fast-approaching bankruptcy, the Ottawa-based telecommunications equipment maker moved to radically alter course and once and for all sever its deteriorating manufacturing operations.

“There were no employees left, very little cash in the bank and debts were more,” said Jim Skippen, Wi-LAN’s chief executive. “It was a desperate situation.”

Wi-LAN approached the would-be CEO, then working for cross town rival Mosaid Technologies, and persuaded him to help purge the firm of its business lines and focus solely on obtaining licensing royalties from its small but powerful patent portfolio.

“That was the only possible option, the manufacturing had not worked out very well and the company was in serious financial straits,” he said in an interview.

In the four years since the brush with near-collapse, Wi-LAN has seen its growth profile rise steadily. Now, the firm of roughly 40, comprised mainly of engineers and lawyers, is on the brink of its biggest financial windfall to date. An upcoming hearing in a long-running litigation process against some of the largest handset and wireless device makers in the business including Apple Inc. all but promises to net the firm tens of millions in recurring revenue, analysts say.

In Wi-LAN’s rebound there may lie a pathway to resurrection for a much, much larger telecom compatriot: Nortel Networks Corp.

Similar to Wi-LAN, Nortel’s fate as a maker of wireless and wireline networks was sealed when it filed for creditor protection on Jan. 14, 2009. Nortel filed under a mountain of debt that surpassed US$10-billion. To settle up with a long list of creditors, Nortel has proceeded to auction off its core operations through a handful of so-called “stalking horse” sales since.

The sales of its vaunted wireless and enterprise network businesses have generated more than US$3-billion, however, the Toronto-based firm only held $5.7-billion in assets as of Sept. 30. The auctions have handed rivals like Sweden’s Ericsson AB and New Jersey-based Avaya Inc. key assets and personnel as well as the legacy of the 128-year-old Canadian firm.

“The corporate structure that was in place simply does not exist now,” said one former executive that has moved on to one of the successful bidders.

But, Nortel has retained an enviable portfolio of patents -- about 3,000 across a product base encompassing advanced, next-generation wireless networks and ultra-high speed broadband technologies. Certain companies, including Wi-LAN, have been approached by Nortel to gauge interest on a sale. But there is much speculation that Nortel is considering another option.

“They’ve talked about maybe going it alone with their patents,” said Peter Imhof, a fund manager with Sprott Asset Management.

“It’s absolutely conceivable,” said Joseph Compeau, professor of information systems at the University of Western Ontario’s Ivey School of Business. “There is a model there to license this stuff. Especially the LTE portfolio.”

Led by a suite of patents covering cutting-edge wireless technology vaguely termed Long-Term Evolution (LTE), some have pegged the value of the entire portfolio at US$1-billion.

For months Nortel has been weighing a one-time payment of that magnitude against emerging from bankruptcy as a patent licensor. “It came down to whether they were going to sell them for a big chunk of cash or was there more value in getting a recurring dividend on them,” the former Nortel executive said of the situation before he left.

A spokesperson for Nortel declined comment. Ridout & Maybee LLC, an IP law firm in Toronto that represents Nortel, also declined comment.

There may be good reason in hanging on.

The size of Wi-LAN’s telecom patent portfolio is less than a third of Nortel’s. About 50 of those form the nucleus of what Wi-LAN developed over a decade and a half as an operating entity. Through numerous licensing deals, Wi-LAN has grown into a thriving concern. Its biggest came in 2007, when Finnish handset maker Nokia Corp. signed an agreement worth US$49-million, which included handing over of some additional patents to Wi-LAN.

Now, two nondescript patents named 222 and 802 pertaining to local-area WiFi and CDMA cellular networks, respectively, lie at the heart of a dispute with nearly 20 manufacturers of wireless products, including Apple.

On March 11, the company will attend a so-called Markman hearing in a Texas court that will define the parameters of what the two patents cover. The Markman will give Apple and others, including PC makers Dell and Hewlett-Packard a sense of whether the court believes those firms are willfully infringing on Wi-LAN’s patents.

Failing a financial settlement, a trial is scheduled for next January. Most companies simply will not take the risk. Instead, Mr. Skippen says more than 90% of patent cases are settled “on the courthouse steps.”

Sean Peasgood, equity analyst at Wellington West Capital Markets, says the date will serve as a “catalyst” for Wi-LAN’s bottom line. The public firm is expected to generate between $28-million and $50-million in revenue this year. But the analyst suggests the firm could bring in as much as $100-million as settlements are signed.

That does not approach the billions of dollars a company the size of Nortel generated during its heyday, but revenues in that range and higher collected on a patent portfolio of a few thousand could go a long way in making creditors whole if they are patient, as well as address pension shortfalls.

Still, in Nortel’s case, the idea of a reborn company may be a pipe dream. “There’s a lot of people pulling for pieces of the company,” said Mr. Peasgood, who has covered Nortel. “Whether the company can move forward and try and monetize those patents, I’m not sure.”

Patience is not a virtue found in most bankruptcy proceedings, he said. “Generally, the rule of thumb is, that on a new licensing program, it can take two years to get up and running.”

As for Wi-LAN, its board pursued the licensing strategy before it ever had to file under the Companies’ Creditors Arrangement Act and therefore was not forced to leave ultimate decision-making powers to a judge, whose main focus is getting as much value back to stakeholders as orderly and quickly as possible.

“It’s much harder to do this once entered into bankruptcy. You don’t have that flexibility,” said Mr. Skippen, who admits that his company would be interested in the event of a formal sale of Nortel’s patents. “[Nortel] waited too long maybe.”

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Telecom: Mobile's big moment at Games

By J. Sturgeon | Vancouver Sun | Feb. 16 2010

Using a BlackBerry to snap Sidney Crosby on a breakaway or deliver a medal-clinching pass at GM Place in Vancouver will be a dream turned reality for thousands of flag-waving, smart-phone-toting Canadians over the next couple of weeks.

For the wireless carriers responsible for managing the networks all those digital images will be zipping over, that dream could easily become a nightmare if they are not prepared.

The 2010 Olympic Games offer a rare moment. The two-week burst of wireless activity as an estimated one million tourists converge on British Columbia's lower mainland is the first real test for how carriers like BCE Inc., Telus Corp. and Rogers Communications Inc. will cope with a torrent of demand for all that the mobile Web has to offer -- myriad multimedia applications, streaming video, updates, stories, texts.

"The Vancouver Olympics will be a good test bed for network capacity issues," says Michael Wade, a professor at the Schulich School of Business at York University and an expert on the Canadian telecommunications industry.

"At the Olympics, more so than normal life, it won't just be voice and texting," Prof. Wade says. "People will be taking pictures and even short videos, which they'll be sending out through their cellphones."

Prof. Wade says wireless carriers have roughly doubled network capacity at every Games for the last decade or so, or every two years. BCE's Bell Canada, the premier sponsor in Vancouver and official communications provider took that into account but went one step further, adding an additional 25% to the Vancouver region.

These Games are different in that the number of data-hungry smartphones in use between Vancouver and Whistler is expected to surge. At the Beijing Games in 2008 the iPhone was brand new. Waterloo, Ont.-based Research In Motion’s BlackBerry was still something used almost exclusively by corporate types.

Consumer sales for both have soared in the two years leading up to yesterday's opening ceremony. Both Apple and RIM are now flanked by competitors such as Google Inc.'s Android, which has partnered with handset makers such as Motorola and HTC Corp. to lure ever more consumers into the smartphone category. Figures from research firm Gartner Inc. suggest global penetration of smartphones reached 14% last year.

The fact that Olympic tourists are generally more affluent may also affect usage. "Bell has gone 225% above the capacity they had in Beijing, anticipating the extra load," Prof. Wade says.

"[We] did forecast what the traffic would be like and took into consideration that more people were doing more things with their phones now," said Bell spokesman Jeff Meerman.

Wireless expansion was one element of Bell's converged "all-IP" network, itself a first for the Games. It means every event broadcast, wireless email sent or call made -- in fact seemingly every form of communication short of smoke-signaling -- will run across a single Internet Protocolbased network and out to the world.

The network has been a massive, years-long undertaking, requiring literally thousands of kilometres in new fibre cabling buried in the ground, 42 new wireless cell sites, 7,000 IP phones, and 9,000 provisioned cellphones. The price tag -- more than $60-million.

But Bell is not the only one braced for the mobile onslaught. Rival carrier Telus has also been busy building additional cell sites and expanding capacity on its core network with more fibre. All in, the Vancouver carrier invested $51-million to install its new high-speed packet access (HSPA) network in Vancouver, Burnaby, Richmond, the North Shore, and Sea-to-Sky corridor, doubling capacity in those areas, according to spokesman Shawn Hall.

"They have invested quite a bit making sure that everything goes well," says Nizar Assanie, principal analyst at IE Market Research in Vancouver of both companies.

How these beefed up networks respond to the influx of traffic during the Games will be closely monitored. The event will serve as a litmus test for what will be required in the not-so-distant future when smartphones have replaced cellphones as the dominant personal device and other wireless products like Apple's new iPad encourage users to seek out bandwidth-hogging multimedia content.

Both Bell and Telus have special engineering teams assigned to compile every last bit of datum that will be used to determine how to meet demand when it arrives and avoid network overload.

And some important groups have raised red flags about a looming crisis. In the United States, Julius Genachowski, head of the Federal Communications Commission, the regulatory body for the U.S. telecom industry, raised the issue at an industry summit in San Diego last fall: "What happens when every wireless user has an iPhone, a Palm Pre or BlackBerry Tour?" he asked.

But the carriers are convinced that wireless networks will remain ahead of the rising tide of demand. Globally, the large majority of them are migrating, or at least making plans to, toward an ultra-fast technological standard called Long-Term Evolution.

In Canada, no major carrier has plans of rolling out LTE technology for at least the next few years. However, all are now armed with HSPA-based systems designed to move to the new standard when the market is ready.

"Carriers are investing a lot of money to ensure that the capacity is there," says Mr. Assanie of IE Research, a company that analyzes global trends. "It is their business to make sure."

Media: Great on paper, iPad not ready to save printed word yet

By J. Sturgeon | Financial Post | 01. 30. 2009

They stole headlines last year and were championed as the saviours of the newspaper, magazine -- in fact, all print media. This year, industry observers say e-readers like the Kindle made by Amazon.com will take off with consumers as we continue to shift reading habits from paper to screens.

Steve Jobs brought things to a fever pitch this week when his Apple Inc. introduced the iPad, a device many said would accelerate and revolutionize that trend. With it would be the return of paid content.

"We're going to stand on [Amazon's] shoulders and go a bit further," the celebrated chief executive said during the introduction of the product: an oversized touchscreen device with the dimensions of a large hardcover book.

Integral to Apple's e-book approach is the creation of iBooks, an application that serves as a storefront for the Cupertino, Calif. firm's new online e-bookstore. It will sit on the iPad's main screen, allowing readers to purchase major titles from the world's biggest publishers, including Penguin and Harper Collins.

Still, if the iPad is to convince readers to pay for digital print products, it struggled to impress veteran media observers.

"It checked off on its to-do list everything that was obvious. Make an e-reader application. Make sure you have a bookstore integrated into it. Use the elegance of the device to create a reading experience and be able to pull books off bookshelves. All of that," said James McQuivey, media technology analyst at Forrester, a U.S. researcher.

"But there is an opportunity missed here to take it to the next level."

In general, the iPad is simply an enlarged version of the iPod Touch with the addition of an e-book application, many analysts said.

For instance, the New York Times, which plans to begin charging for its Web content next year in another attempt to stem falling ad revenues, unveiled a new app for the iPad at the presentation. Yet there is no indication it differs to any great degree from the free one now offered on the iPod Touch through Apple's App Store.

As important, innovation on the social media front -- which could provide a value-added service and thus, be worth paying for -- is lacking from the iPad's e-reader experience. There is no way for users to tell their friends or Twitter followers automatically what they are reading (or buying).

"[Apple] could have demonstrated a much more integrated reading experience," Mr. McQuivey said.

It does not mean it cannot be done later on. But the iPad's saviour status took a tumble in the wake of Mr. Jobs' presentation on Wednesday.

That may not be lost on Apple, which priced the base model at a modest US$499 (16GB). The most expensive model is only US$849 (3G-capable, 64GB), perhaps in recognition that Apple has not reinvented the wheel with the iPad as it did with the iPod in 2001 and the iPhone in 2007, analysts say.

Canadians can get their hands on it in March. But it will be a version strictly made for local Wi-Fi networks. After that, a more expensive "3G" model that can access the Web through a cellphone carrier's wireless network will be introduced, possibly in late spring or early summer --it will be available first only in the U.S. through AT&T.

"Apple was in a position to say, 'Look, we're going to partner with publishers that create apps that are innovations in reading.'" Forrester's Mr. McQuivey said.

It may still be, but the iPad and its army of developers have more work to do yet.

jasturgeon@nationalpost.com

Media: Rogers trims programming, head count at Citytv network

J. Sturgeon | Financial Post - CBC.ca | Jan. 18 2010

Aisling Slattery’s photograph could still be found on Citytv Calgary’s Web site Tuesday afternoon, but her job as the anchor of the station’s noon hour newscast was gone.

Her fate was shared by about 60 other workers across the TV network as its parent, Rogers Communications Inc., eliminated programming while cutting production and on-air jobs at all stations but Winnipeg.

“Today was my last day,” she scrawled on her Twitter home page. “It’s been an absolute honour anchoring the news... I will miss you all very much.”

Rogers, one of the largest media companies in Canada, cut prime time and evening newscasts at Citytv stations in Vancouver, Calgary, Edmonton and Toronto Tuesday, ushering many on-air personalities and longtime broadcasters out the door, as well.

The rationale, a Rogers spokesperson said, was simple economics. Conventional television stations have been bleeding advertising revenue since the recession began in 2008, as advertisers have drastically dialed back their budgets.

Koreen Ott said the telecommunications giant, which is also the country’s biggest cable TV provider alongside Shaw Communications Inc., was forced to cut “underperforming” programs. “It’s about delivering results,” she said.

Citytv’s long-running Breakfast Television and CityLine programs will remain in place; however, the four-hour morning shows in Vancouver, Calgary and Edmonton will shrink to three hours in length, she said.

While the news surely came as a shock to the many camera operators, producers and editors who learned that their jobs were gone Tuesday, it was not to industry analysts.

“What’s surprising is that the cuts came now, not before,” said Kaan Yigit, president of Solutions Research in Toronto. “Global and CTV were not making it up really when they argued that local TV is facing strong financial challenges.”

The Global Television network, owned by Canwest Global Communications Corp. (also the parent of the National Post) and CTV Inc. are the country’s two largest private conventional networks. Both have cut deeply into payrolls and been forced to sell and even close stations as advertising revenues dropped.

The country’s over-the-air stations are also coping with the longer-run migration of viewers away from traditional TV packages and into specialty channels and online sources, leaving advertisers to chase them.

Tuesday, it was Rogers’ turn. “Shifting viewer patterns coupled with the overall state of the economy required the company to rethink its programming lineup,” the firm said in a statement.

The hardest hit was Citytv’s flagship station in Toronto, where 35 personnel were fired, including some senior producers. Most visibly, long-time anchor Anne Mroczkowski, who along with Gord Martineau, had been a cornerstone of that city’s news hour for more than two decades, was let go.

Together, she and Mr. Martineau, who will remain at the station, were the longest serving on-air news team in Canadian television history.

There may be relief coming for the country’s networks. The regulator for the TV industry is expected to come out with a decision sometime before the spring that will address a proposal to compensate TV stations that send out their signals over the air for free.

As a cable operator, Rogers may be on the hook to pay TV networks for their signals if the idea is endorsed by the Canadian Radio-television and Telecommunications Commission. They have protested loudly against the idea.

However, if the CRTC mandates a “fee-for-carriage” regime, Rogers’ TV network, which employs about 1,000, stands to be a beneficiary.

National Post

jasturgeon@nationalpost.com