The 411 on Canadas Wireless Landscape

1
The 411 on Canadas Wireless Landscape Impact of
Regulatory Market Factors on Configuration,
Availability and Pricing of Services
2
The 411 on Canadas Wireless Landscape
And why dialing 411 is more expensive than

• Surfing the web via mobile in Rwanda

• Playing a multiplayer online game via 3G in Korea

• Watching Arsenal vs. ManU on your Blackberry in
  the UK

3
Outline

• The evidence How Canada is lagging
• The problem The vicious cycle
• The way forward Business models for home and
  abroad

4
Outline

• The evidence How Canada is lagging
• The problem The vicious cycle
• The way forward Business models for home and
  abroad

5
Average Users Around the World

• Ahmed, UAE
• Used Bluetooth-enabled Escada phone to make
  advances to his now fiancée
• For their engagement, gave her a Qiblah F7100 LG
  phone points to Mecca using GPS technology

• Tamiko, Japan
• Cant WAIT for Second Life to launch on DoCoMo
• Asked for flat-rate data plan for her birthday
• Uses mobile coupons for shopping after school

• Nigel, UK
• His offspring will have the opposable texting
  thumb
• Gets a new phone every 6 months without asking
  the latest is GPS enabled to help him find
  Doughty Mews
• Possibly a victim of happyslap, unfortunate use
  of MMS

6
And then theres Jim

• Jim, Canada
• Addicted to his Blackberry to keep up with work
  emails
• Used the internet once to check a hockey score
  took him ten minutes, and his bill was higher
  than his cable bill that month he hasnt tried
  again since then. There are good mobile browser
  plans now but Jim has a long memory.
• Text messaged his girlfriend once, but she didnt
  know how to respond
• Asked for a phone upgrade 1/3 through his
  contract, and had to sign another 3 year
  contract, with no cost savings.
• Bought an iPhone in the US, tried Rogers service
  but then had it re-programmed to use another
  cheaper service provider

No wonder Canada is falling behind
7
Penetration in Canada Lapped by Turkey, Mexico
only marginally behind
2G and 3G Market Penetration, 2006
120
3G subscribers
100
2G subscribers
80
60
40
Per 100 Inhabitants
20
0
Canada
Germany
Korea
USA
UK
Japan
Turkey
Mexico
OECD
Netherlands
Cellular mobile subs per 100 inhabitants, 2005
Source OECD Communications Outlook 2007
8
In Canada, a phone is but a phone
All figures are s of current mobile customers
Sources Telecoms.com (MMetrics, Feb. 2007),
Fast Forward 2006 (for Canada), WirelessWatch
(for Japan), Ipsos Insight 2006 Note some
numbers from Japan are 2003 Note 70 in Japan
play games weekly, 38 play weekly
9
And that phone isnt cheap
700
Medium Usage Basket Costs, 2006
600
Medium Usage Basket 780 calls, 600 SMS, 8 MMS
per year (August 2006) Source OECD
500
400
300
200
100
0
Korea
The Cost of Data in Canada
Rogers
FIDO
Bell
cost to transfer 500MB or 100 minutes at 700kBps
Telus
Vodafone (UK)
Telstra (Australia)
Terracom(Rwanda)
Sprint (USA)
T-mobile (USA)
Vodafone (NZ)
Source OECD
10
And while ARPU is high the revenues arent
directed towards innovation
Average Revenue Per User, 2006
1000
900
2003
800
2005
700
600
500
USD
400
300
200
100
0
Japan
USA
Korea
Turkey
UK
Germany
Canada
OECD
Netherlands
Expenditure on RD
11
Outline

• The evidence How Canada is lagging
• The problem The vicious cycle
• The way forward Business models for home and
  abroad

12
The cause of our lag? A vicious cycle of blame
(and Lame Excuses)
The Markets Too Small We have to charge high
rates to make the Economics Work, and we dont
have a lot left over for innovation
CARRIERS
Of course the markets too small my mom wont
get a cell because its too expensive!
Not our fault the carriers have been slow to
innovate with content, and improve the user
experience
I had bad experiences with early applications
and data services. They were pricey and clunky.
I got unexpected bills and couldnt control my
costs.
APPLICATIONS AND CONTENT DEVELOPER
13
But the Cycle Can be Broken
WIMAX
Spectrum auctions /new competition
Google open handset alliance
Flat rate data plan
Introduction of QR codes
Mobile broadcasting standard chosen
A killer content app
A wired TTC
Spectrum auctions - AWS Alternative Wired
Services possibility of new competition with
GSM standard Wimax Network Deployment We need
more GSM carriers prices are lower, lower
production, 400m,
14
Examples of Regulatory Moves on the Competitive
Landscape

• Traffic shaping
• US FCC established 10 principals for net
  neutrality in 2005 and is moving towards further
  legislative and regulatory action (re. Comcast
  case Ass. Press Electronic Frontier
  Foundation) however, no parallel initiative from
  the CRTC and Competition Bureau RECENT ISSUE
  OF TRAFFIC THROTTLING OF ISP TRAFFIC BY CARRIERS
• Result Canadian ISPs have admitted to traffic
  shaping, meaning WAP-enabled content sites and
  portals (e.g. games sites) will get second class
  treatment from carriers in Canada which can
  promote their own services this will result in
  slower roll out and higher price for services
• Mobile Exemption order
• CRTC elected not to regulate mobile video in 2006
  as part of its new media exemption order
• Result predictions that the ruling would
  encourage innovation and the creation of new
  services has not yet come to fruition prices
  are too high for content creators to take
  advantage of the wide-open content regulation
  model.
• Deregulation of facilities
• CRTC announced recently (Mar 3, 08) deregulation
  of facilities
• Result intended to promote competition and allow
  market forces further dictate the direction of
  the telecom industry
• Mobile data caps
• the European Commissioner is threatening to cap
  wholesale data roaming prices if the industry
  doesnt stop overcharging
• Result Will keep data rates consistent for
  wireless users travelling between countries in
  the European Union

15
Outline

• The evidence How Canada is lagging
• The problem The vicious cycle
• The way forward Business models for home and
  abroad
• Consider what Jim really wants, is prepared to
  pay for, and what is possible in our nascent
  market
• Serve the more advanced markets until we (or in
  case we dont) catch up
• Explore which business model works best for which
  market

16
Jim will never be Tamiko Keitai Culture vs.
Timmys to Go

• Public transportation conventions led to
  messaging/emailing via mobile
• Japanese are avid gamers, keitai is used as a
  console
• So phones are a fifth appendage a social tool, a
  wallet, a games console, an iPod, and a
  metropass

But in Canada, a steering wheel in one hand and a
Timmys in the other leaves little room for a
mobile on the way to work Canadians can avoid
per minute fees at both ends by calling from
their flat rate land line. Why text? Wait until
you get home or get to work?
Source Introduction Personal, Portable,
Pedestrian by Mizuko Ito, in Personal, Portable,
PedestrianMobile Phones in Japanese Life. MIT
Press,
17
Start with what we know Canadians like.. and have
the rights for
Social Networking
T?tes-à-Claques
18
Start with what we know Canadians like.. and have
the rights for
Music
Traffic
Hockey
19
Ensure You have An International Business Model
until Canada catches up
Toronto based Launched mobile video in Japan
Charlottetown Based Biggest client UK, US
Waterloo Based Biggest client NTT DoCoMo Inc,
Japan.
20
Divide and Conquer Different Content Business
Models for different markets
Content Distributors
?
?
Carriers like NTT DoCoMo are innovating and
offering new applications on-deck
Carriers in Canada have been slower to offer new
applications
On-Deck content
?
Off-deck (post broken cycle) could represent the
biggest opportunity - but ad market is nascent
Revenues might be greater on-deck (greater
traffic), but opportunities remain
? (?)
Off-deck content
?
?
Established standards in Europe, SE Asia (e.g.
DVB0-H) represent an opportunity for short- and
long-form content
Lack of industry or government leadership to
drive a broadcast standard
Mobile broadcasting
21
Questions Comments..

• Nordicity Group
• Strategy and Business Planning for the Creative
  and Telecom Industries
• Stuart Jack (Partner, Ottawa Telecoms ICT)
  sjack_at_nordicity.com
• Peter Lyman (Senior Partner, Toronto)
  plyman_at_nordicity.com
• Dustin Chodorowicz, Partner, London, UK
  dchodorowicz_at_nordicity.com
• Terri Wills (Manager, Toronto Strategy)
  twills_at_nordicity.com
• Kristian Roberts (Consultant, Toronto)
  Kroberts_at_nordicity.com
• Kurt Eby (Consultant, Ottawa) keby_at_nordicity.com
• Roland Renner (Senior Associate, Ottawa)
  rrenner_at_nordicity.com