When Quebecor Inc. spent $555 million in 2008 buying cellular licences for its Videotron cable division, the outlay included $96.4 million on spectrum covering Toronto. That was surprising because Videotron only operates in Quebec.
It raised the question of whether the Montreal cableco would extend its soon-to-launch network into the country’s biggest city, or did it buy the spectrum as an investment?
On Wednesday a company spokesman gave the answer: Thumbs down on Toronto.
“Right now, not there,” said Marc Labelle, general manager of corporate communications.
While the network won’t extend out of the province (except in the Ottawa area), Videotron subscribers will get roaming service across the country due to a deal struck with Rogers Communications Inc.
In one way that makes sense: Videotron will maximize its wireless products only by bundling them with cable, Internet, VoIP packages. That will give it a leg up on competitors that can’t bundle.
On the other hand, incumbent wireless operator Rogers Communications has cable operations only in Ontario, Quebec, New Brunswick and Newfoundland but has extended its wireless network into other provinces. Similarly, BCE Inc.’s Bell Mobility unit and Telus Corp. sells wireless in provinces where they don’t have land lines.
Telecom analyst Mark Goldberg of Mark Goldberg Assoc. isn’t surprised by Videotron’s decision. “Their focus is Quebec, which is where the brand is and where Quebecor’s other media assets are,” he said. “That’s where they have the power of quadruple play.”
Videotron is not a newcomer to wireless. As a virtual wireless operator it has been leasing spectrum from Rogers for years and selling service under its own name. However, with the spectrum Quebecor bought at the 2008 AWS auction Videotron is now in control of its future as a wireless carrier.
There’s no shortage of wireless carriers who would like to buy the 10Mhz of Toronto spectrum. First on the list would be Bell, Rogers and Telus, whose appetite for spectrum seems unboundless. However, by Industry Canada auction rules, the incumbents can’t buy spectrum of the new entrants until five years after they’ve received their licences, which would be 2014.
As for the other new licence holders from the 2008 AWS auction, Globalive Wireless Management Corp.’s Wind Mobile already has spectrum covering Toronto through a licence for southern Ontario, as does DAVE Wireless, which hasn’t launched yet. More spectrum, especially for Toronto, doesn’t hurt but at this point in time these operators are more interested in putting money into their networks than adding spectrum.
Two other new licence holders are also cable companies, Calgary’s Shaw Communications and Halfax’s Bragg Group, which operates EastLink Cable. However, neither has cable in Toronto.
It’s unlikely Public Mobile, expected to launch in a few months in Toronto and Montreal, would buy Videotron’s spectrum because it’s incompatible with the PCS spectrum it bought.
Dark horses include Montreal-based Cogeco Inc., which has cable in Quebec and Ontario, hasn’t moved into wireless yet. Through a 2008 acquisition of Toronto Hydro Telecom, it does have a substantial foothold as business telecommunications provider, but no cable in the city. If Cogeco does want to start selling wireless, it could first resell spectrum from an existing provider.
Meanwhile, Videotron continues building its Quebec network. The company said Wednesday that this year it will hire 600 full-time staffers, including engineering, customer service, technical support, network construction and maintenance, sales and IT.
In a press release, the company noted that when it announced the building of its wireless network in October 2008 it 1,000 jobs would be created by the end of 2010. That projection is now more than 1,200 jobs.
Videotron says the new wireless service will launch this summer, which is later than expected. Industry analysts say among its difficulties is that the cableco has chosen to cover the entire province from the start, a big task considering the vast size of the province. While it is relatively easy to find antenna locations in a city, rural areas will often require construction of expensive towers.
Like other wireless Canadian wireless carriers, Videotron’s network will be based on HSPA, using equipment from Nokia Siemens Networks B.V.
Asked about the delay, Labelle mentioned that since Videotron’s October, 2008 announcement “new [wireless] technologies” have arrived, a reference to the faster HSPA+ version which became available last year. It promises download speeds of up to 21 Mbps. But some of the delay is because Videotron is apparently also looking farther ahead to the so called fourth generation wireless technology, LTE, which promises download speeds under ideal conditions of 100 Mbps. “We have to get ready for that,” Labelle said. “We want to tweak the network [before launch] so it will be ready to … pass on to the 4G” when needed.
While in the U.S. two wireless networks are already eyeing LTE (Verizon Wireless is doing tests, AT&T may start trials this year) industry analysts say Canadian carriers shouldn’t be in a rush. HSPA+ will go up to 84 Mbps, says equipment maker LM Ericsson.