Quebecor to make bid to enter wireless market

Published on the Ottawa Business Journal website.
Apr. 17, 2007

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Quebecor Inc. is looking at making a major investment in third-generation mobile services in Quebec and will be bidding in the upcoming wireless spectrum auction, chief executive Pierre Peladeau said in a speech Tuesday.

Mr. Peladeau made the announcement during a speech to the Canadian Club of Ottawa, stressing the need for competition in the wireless industry and calling for Industry Canada to make it easier for companies like Quebecor to compete against “the oligopoly of three companies – Bell, Telus and Rogers.”

Quebecor, which owns the country’s third-largest cable company Vidéotron Ltée through its Québecor Media division, has been expanding into the phone market with cable-based Internet protocol technology, as well as offering cellphone services through Rogers Communications Inc.’s wireless network.

Mr. Peladeau said Canada’s wireless industry has fallen behind other industrialized countries because of this lack of competition, but also added there is a need for swift government action to allocate frequencies for a new generation of wireless mobile devices.

“We believe that the spectrum auction for new frequencies should happen more quickly than what the Industry department is calling for, which is January of 2008,” said Mr. Peladeau in his speech. “Canada has already fallen too far behind. If we truly want to support Canadian culture and see it flourish, we have to equip ourselves very rapidly with the appropriate vehicles.”

He added that Canada is sorely lacking in third-generation (3G) wireless technologies and stressed the importance of developing the market.

“3G devices are gradually becoming the new universal distribution backbone, for music, television, movies and much more,” said Mr. Peladeau. “All of this will allow us to offer our customers a full range of products conceived and developed here in Canada. Our degree of integration and interactivity among our various components is more advanced than anyone in the country.”

Responding to Mr. Peladeau’s speech, Canadian Wireless Telecommunications Association chief executive Peter Barnes agreed that competition would be welcome in the wireless sector, but said it was unfair to compare the Canada’s industry to that of other countries.

“There are a lot of developments in Canada and we do have state-of-the-art services available here,” Mr. Barnes said in an interview. “There may be some services offered in Japan that we don’t have here, but it’s still … a high-growth market.”

Mr. Barnes noted that the local wireless industry is expected to grow by 15 to 20 per cent every year, and said the 3G market in Canada is actually quite healthy.

“3G is not black and white, it’s a constant evolution,” he said. “You can say that the current industry here is a four-lane highway and we are now adding the fifth and sixth lanes as soon as companies see a market for the other ‘lanes.'”

Mr. Barnes said wireless usage in Canada, at 400 minutes of calls per month for the average cellphone user, is the second highest in the world after the United States with 800 minutes per month.

“Clearly we’re doing something right,” he said, adding that the average wireless usage is 150 to 200 minutes globally.

However, Mr. Barnes applauded Quebecor’s announcement that it would be participating in the spectrum auction, saying the move would raise the bar for other wireless providers in terms of services.

Mr. Barnes also noted that it was “confusing” that Mr. Peladeau was calling for greater competition in the market but also asking for more government intervention, and emphasized the need for a competitive marketplace.

“We embrace competition, and if there are new players in the market, well, that’s just fine,” he said. “In fact, we should expect more.”

Mr. Barnes said competition and market forces should help solve the problem – if there is one – of service provision, noting that “customers will vote with their pocketbooks” for the services they want.

“There’s a fine balance between the marketplace and providing new services, because those new services require investment,” he said. “No-one in this business wants to hold back profitability by not providing certain services if customers want it, and if one company doesn’t provide a particular service, then its competitors will and everyone will soon catch up.”

Despite Mr. Peladeau saying that the average Canadian wireless user pays 33 per cent more than Americans for the same service, Mr. Barnes says Canada has consistently been ranked as one of the lowest-priced cellphone services among the 30 members of the Organization for Economic Co-operation and Development (OECD).

In recent cellphone pricing studies by the OECD, Mr. Barnes said, Canada has been in the top half of the list of least expensive wireless services for all three categories of low-, medium- and high-volume users, and has been in the top 10 for the low- and medium-usage categories.

“We’re right with the pack, considering the geography and density in Canada,” said Mr. Barnes about wireless penetration in the local markets.

Industry Canada is currently in the process of a public consultation on the feasibility for the spectrum auction, and is expected to hold the actual auction in early 2008. A total of 106 MHz of spectrum will be made available.

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