FEATURE: DATA TSUNAMI, and how we can avoid it

By Jamie Sturgeon | Canada.com | July 10, 2010

Ever heard of an exabyte? Probably not since it is a unit of measurement so vast that there hasn’t been a need to think about it until recently. The term is a metric, like the much smaller giga or megabyte, that is used to quantify digital data.

By some estimates an exabyte, or EB, is equal to about 50,000 years of high-quality DVD video. Times that by five, and that is how much data is being consumed across global wireless networks annually as ever more BlackBerries, iPhones, mobile modems and now tablet computers attach themselves to the World Wide Web.

And it has only just begun.

From five EBs currently consumed a year, that figure is expected to surge to 50 within four years, according to European network maker Ericsson AB.

“It’s a challenge for carriers,” said Mark Henderson, chief executive of Ericsson Canada at the Canadian Telecom Summit, an annual spring gathering of the industry’s top minds.

Will networks — including Canada’s — be able to cope?

Some do not think so. Jennifer Pigg, vice-president of research for Yankee Group, says “carriers haven’t prepared” for what she calls a data “tsunami” that has already started to clog up networks.

And mobile broadband hasn’t even hit the mainstream. Although accelerated by Apple’s iPhone launch a few years ago, the spectre of a tidal wave of wireless data has only come to the fore in the last 12 months.

AT&T and other major carriers in the United States are already experiencing network congestion resulting in dropped calls, sluggish transfer speeds and other periodic disruptions in certain high-use zones like New York and San Francisco.

“The few, the proud — the AT&Ts — have been the first out of the bunker if you will, and have taken some unexpected shock. Clearly, carriers didn’t realize [the data explosion] would have such a huge impact,” Ms. Pigg says.

Yankee Group suggests that wireless data traffic will increase 10 to 30 times over and above today’s usage within three to five years. Global wireless capacity, on the other hand, will grow to only four times the current bandwidth availability — nowhere near what’s required.

Canada may be more prepared than other nations. From national incumbents Rogers Communications Inc., Bell Canada and Telus Corp., to new startups like Wind Mobile and Mobilicity, Canadian carriers have poured a combined $6-billion since 2008 into building out modern data-centric networks and ballooning the country’s bandwidth capacity.

The majority of Canadian carriers possess advanced high-speed packet access “plus” (HSPA+) systems — the gold standard of modern wireless networks, capable of delivering data transfer speeds of between seven and 21 megabytes per second. That’s on par with fixed-line broadband connections. Moreover, these networks can readily be upgraded to next-generation 4G standards specifically designed to handle massive data loads.

“I think Canadian carriers have done a great job of keeping up with some of the most advanced data networks you see today,” said Ericsson’s Mr. Henderson. “We’re world-class at this point.”

The crowning achievement came last November when Bell and Telus turned on their joint HSPA+ network blanketing 93% of the population. Far more than just providing cellphone services to new areas, the billion-dollar undertaking introduced high-speed Internet to thousands of communities for the first time, bridging the digital divide for untold numbers of rural Canadians.

“The reality is, in Canada we have good service in broadband despite what some studies say,” says Greg MacDonald, telecom analyst at National Bank Financial. “We have high penetration of data at attractive rates. And for a country of this size, the coverage we have is phenomenal.”

Rates are debatable, with Canadian consumers paying higher prices than most other places. But what is certain is that Canada has world-class 3G coverage. Of about 20 large-scale HSPA+ networks operating throughout the world, Canada boasts three, according to the GSM Association, which tracks global deployment.

But even the industry admits demand is soaring and the clock is ticking.

“They are extremely well-prepared, there’s been massive investment. But that’s for now,” said Bernard Lord, president of the Canadian Wireless Telecommunications Association, of the state of Canada’s networks. “To keep up with demand, there will be much more investment required.”

Signs that demand threatens to overwhelm supply have already appeared. Bell has twice flirted with a capacity crunch. At the Vancouver Olympic Winter Games, Sidney Crosby’s gold medal-clinching goal in overtime saw a torrent of texts, streaming video and other data requests flood the network in a single, historic burst of wireless activity.

Those signals got through, but Stephen Howe, Bell’s chief technology officer, said the burst came close to exceeding what the carrier provisioned for. “With Sidney’s goal, we nearly hit capacity,” he said.

It happened again in April, during Game 7 of Montreal’s epic series with Washington during the National Hockey League playoffs. “Even though we added further capacity from the Olympics, in that short period of time we were already experiencing yet again huge growth in volume,” he said.

Every Canadian carrier is closely watching how others are managing.

“It’s not that bad things will happen if we continue on the same path — bad things are happening,” Mr. MacDonald said. “So you start questioning what the solutions are.”

Fortunately, fixes are emerging. “What AT&T — and Rogers and Bell and everybody — is doing, once they realize there is this stress on the network, is to make it as efficient as possible,” said Amit Kaminer, analyst at SeaBoard Group in Toronto.

In May, AT&T eliminated its flat-rate, unlimited data plan in favour of a tiered pricing system based on capped usage. The move limits usage to 2 gigabytes, and charges overage fees to users that exceed that. A second, less-expensive plan gives customers 200 megabytes, or enough to check emails and browse the Web. Analysts say the move better reflects current customer habits while mitigating network stress.

AT&T is also leading the charge in channeling traffic into manageable pools. In late May, it announced that it would set up a local Wi-Fi zone over Times Square in an effort to ease the load on the parent network.

“We’re just starting to find out the consumption patterns and usage on mobile data devices. It took us a couple of years to understand [cellular] voice. It took us a couple years to understand SMS [text flows]. It will take us a couple years to understand data,” Mr. Kaminer said.

Most of the ingredients are in place now to avoid the crunch. Leading microwave “backhaul” technology made by Ottawa-based DragonWave Inc. and others is available to efficiently beam huge amounts of traffic from cell towers into core networks and out to end users.

Other 4G technologies, like more efficient tower cells and data management software systems — collectively known as long-term evolution, or LTE — are already being deployed in the United States and will likely be introduced by Canadian carriers starting in 2012, said Mr. Howe at Bell.

But more efficient networks are only one side of solving the data equation. “The other thing that is fundamental to all this is the availability of spectrum. That’s the real estate we need to be able to deliver services,” said Mr. Lord, a former premier of New Brunswick who joined the wireless lobby association in October 2008.

Spectrum refers to the radio frequency bands wireless traffic flows over. It is a finite resource, which communications providers must share with others, like radio and television companies as well as government.

And more spectrum will be required by carriers.

Adrian Foster, a partner at Ottawa telecom consultants Mclean Foster & Co., and co-author of a recent policy paper released by think-tank C.D. Howe Institute, said that only about half of the spectrum that will be required in the next several years has been allotted.

If supply is to keep up, regulators and Industry Canada must speed up the process of parceling off more airwaves for communications companies. Ottawa is dragging its feet while countries in Europe and the United States are quickly advancing into 4G standards.

“What we’re primarily suggesting is we have gridlock,” Mr. Foster said of the regulatory environment. Waiting too long to free up more spectrum, specifically the 700-megahertz band now occupied by television broadcasters, will mean Canada will fall behind.

A new auction is expected to take place either next year or in 2012, but Ottawa has given no public indication of a concrete timeframe.

“The government has to make decisions,” Mr. Lord said.

On top of the 700MHz bands, another swath of spectrum in the 2.5GHz range is also being eyed for auction. Together, both would go a long way in ensuring Canadian wireless users are not faced with a capacity crunch.

To be sure, Bell and others have room to spare today — Bell has not yet needed to tap spectrum it acquired during Industry Canada’s last auction in 2008 — but demand is climbing fast. In some cases, it is a full year ahead of estimates, Mr. Howe said.

“There is a need for more spectrum, more backhaul — there are challenges,” Mr. Kaminer said, yet he quickly adds: “But we’re not working in a vacuum. There are a lot of companies and people working on this.”

jasturgeon@nationalpost.com

© Copyright (c) National Post

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: Virgin Mobile boldy moving up market to ward off new threats

By J. Sturgeon | Financial Post | 12.21.2009

Competition will be the watchword for Canada's wireless industry next year, as established players face off against a cast of new entrants poised to steal market share.

While the current operators are talking tough, questioning whether any of the new startups have the right strategy or wherewithal to challenge meaningfully, a shakeup of the entire sector looms.

Nowhere are the crosshairs of the new players trained more closely than on the lower end of the market -- existing cellphone users who merely want inexpensive voice and text-messaging services or Canadians who own no mobile phone because they find current prices prohibitive.

It means the discount or "flanker" brands of Canada's big three wireless firms -- Fido, owned by Rogers Communications Inc., Koodo, owned by Telus Corp., as well as Solo and Virgin Mobile Canada, owned by BCE Inc. -- will face the fiercest competition.

For one of them, the threat is affecting a reinvention, says its president.

"Early next year, we'll be in the first phases of a very different Virgin," said Robert Blumenthal, the head of Virgin Mobile Canada.

What that means is unclear -- Mr. Blumenthal is mum on details. But he did reveal that Virgin will begin selling Apple Inc.'s iPhone.

It is a move, he says, that signifies a transition at Virgin from a discount sibling to BCE's Bell Canada, which fully acquired it this spring, to a full-weight partner, offering a complete suite of services for consumers who are increasingly demanding faster and more sophisticated devices.

"You'll see a great expansion in our portfolio and us being able to offer higher-value devices and services," he said in an interview last week. "Where we had been traditionally lower down in the marketplace, we'll be expanding to realize our true potential."

In the new year, Public Mobile Inc., DAVE Wireless Inc. and Videotron ltee will all launch, joining WIND Mobile, which began offering services last week in Toronto and Calgary. DAVE and Videotron have been quiet on their plans, but Public Mobile has stated repeatedly it will offer cheap, flat-rate voice and text services for perhaps $40 a month across its coverage areas between Windsor, Ont., and southern Quebec -- the most populous region in the country.

Mr. Blumenthal says the threat is overstated, but admits that pricing pressure will be a theme for next year and that Virgin is "considering everything."

One thing is for certain: He wants Virgin to get simple.

As it stands, Virgin offers dozens of prepaid and contract plans, not to mention several "add-on" options. "The easier you can make the decision, the easier to sell, the easier to buy. It helps sales and it helps the consumer make choice," he said.

Virgin Mobile, a subsidiary of the U.K. conglomerate, originally entered Canada four years ago with its celebrity CEO Sir Richard Branson partnering with Bell. The Montreal firm supported Virgin with its network in exchange for shared revenues.

In May, Bell acquired Mr. Branson's half for $143-million while agreeing to continue paying licensing fees. It was then that Mr. Blumenthal, a former Telus executive, joined Virgin.

The division has become a key driver of wireless growth for Bell. Analysts suggest Virgin now occupies as much as 15% of the telecommunication giant's wireless base.

However, if it is to maintain momentum, Mr. Blumenthal says Virgin must leverage Bell's new network upgrade to capture higher-margin smartphone users, which make up the fastest-growing market segment.

"Over time, I have a belief that as more people become wireless users and their wireless usage becomes more of a necessity than a luxury ... people tend to move up."

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Telecom: Bell poised to begin offering iPhone

By J. Sturgeon | Financial Post | 10.05. 2009

Bell Canada has cleared the way to begin offering the vaunted iPhone, announcing yesterday it has completed a long-awaited overhaul of its wireless network that will enable the carrier to support perhaps the most iconic handset in the history of the cellphone and smash the de facto exclusivity chief rival Rogers Communications Inc. has held over the device.

For years, both BCE Inc.' s Bell Canada and Telus Corp., the nation's second-and third-largest cellphone companies, respectively, have trailed Rogers, largely because of network superiority. Since its acquisition of Microcell in 2004, Rogers has used next-generation gear called high-speed packet access (HSPA), while the other two relied on CDMA, or code-division multiple access.

A primary advantage of HSPA is the favour it has gained with handset makers as it has overtaken CDMA technology with cellphone carriers around the globe.

Among the HSPA users is Cupertino, Calif.-based Apple Inc., which designed its smash-hit iPhone expressly for HSPA networks.

Having the the only compatible network in Canada, Rogers has been able to offer the iPhone while Bell and Telus watched from the sidelines.

That competitive handicap was dissolved yesterday as Bell announced it has completed a year-long transition to HSPA and will introduce service next month. "The new network will be ready to roll in November, quickly notching up competition and wireless choice for consumers and businesses across the country," said George Cope, chief executive of Bell.

In an interview, Wade Oosterman, president of Bell Mobility would not confirm whether Bell and Apple were in talks to bring the iPhone to Bell in light of the move, but said he anticipated making a new handset announcement soon. Sources suggested both Bell and Telus, which declined to comment on when it would introduce its HSPA upgrade, were close to securing a deal with Apple.

Bell's move, made months ahead of schedule, comes as Bell, Telus and Rogers brace for the arrival of new entrants analysts predict will steal market share from all three.

Three new players in Globalive Wireless, Public Mobile and DAVE Wireless are expected to launch services in major markets this year or early next year. Globalive, which is undergoing a review of its ownership structure by Canadian regulators, has vowed to launch in Toronto and Calgary before the year is out.

"[With] the coming arrival of new wireless brands and networks, Bell will be ready to compete," the Montreal-based company said.

The iPhone, like other smart-phones such as the BlackBerry, nets higher monthly revenue per user on average versus traditional cellphones that do not offer the same level of Web services and cannot be charged higher data fees, although analysts aren't sold yet on whether the hefty upfront subsidies carriers pay for the iPhone are worth it for them.

Both Bell and Telus announced last fall they had begun pouring millions into the network transition ahead of the 201 0 Olympic Games in Vancouver, which will see tourists from around the world converge on B.C., netting the companies lucrative revenues from international roaming fees.

Bell also recently announced an agreement with U.S. giant AT&T that will lock up roaming payments from U.S. customers travelling within Canada.

The earlier rollout will see Bell widen its handset offering for the holiday season as all three incumbents face pressure to capture as many customers as they can ahead of the market shakeup.

The move, which overlays HSPA gear on Bell's existing network, also means Bell can offer devices for both network standards. Bell is already the exclusive carrier of the Pre. Made by Palm, the CDMA-only handset is considered a chief rival to the iPhone.