Wind Mobile says ‘extreme rents’ higher than the cost of building a tower

TORONTO—Wind Mobile said it is paying “extreme rents” for wireless tower sharing and called for mandated tower access at regulated rates as the Conservative government is said to be considering stronger roaming and tower sharing rules favouring the new entrants. On a panel Tuesday at the Canadian Telecom Summit conference, Ed Antecol, vice-president of regulatory affairs at Wind, said tower sharing fees on other companies’ infrastructure are so high that it is often cheaper for Wind to put up its own tower. Industry Canada's arbitration process is also long and costly, he said, and often not worth it. “The incumbents have inflated the cost of tower access to extreme levels, where it’s often cheaper to build an entire tower than to take the bottom 15 feet of a tower,” Antecol said. “It costs more to go to arbitration than it takes to build a tower.” Antecol, who appeared on a panel called the Regulatory Blockbuster with representatives from incumbents BCE Inc., Rogers Communications Inc., and Telus Corp., said the company is forced into expensive tower sharing arrangements when municipalities block new towers, and that there is not a level playing field in the wireless market. Putting up a new wireless tower costs in the range of $350,000 to $1 million, depending on the type and efforts to disguise it, people familiar with the issue said. Analysts speculate that Industry Canada will announce stronger tower sharing and roaming rules to help the new entrants compete against the established incumbents. Industry Minister Christian Paradis made a favourable policy statement for the new entrants Tuesday, saying he will not permit “undue concentration” of spectrum licences, which would mostly affect large players Bell, Rogers and Telus. Ted Woodhead, senior vice-president of government and regulatory affairs at Telus, said on the panel that Antecol was “pulling the fire alarm” over the issue of tower access, and said the wireless business is an expensive one. “It costs a lot of money to build airlines. It costs a lot of money to build telephone networks. It costs a lot of money to build railways. You chose the business you wanted to get into,” Woodhead said. Antecol said there are public concerns about the proliferation of wireless towers in communities, which should encourage more sharing of the infrastructure. “There’s fundamental problems. They need to be addressed, and hopefully the minister will address those in the coming months,” Antecol said. Veritas Investment Research said in a research note in May that it expected Paradis to introduce “regulatory relief” for new entrants, including more favourable roaming and tower sharing rules as well as the ability to purchase spectrum licences through installments over time. RBC Capital Markets analyst Drew McReynolds similarly said in a May 17 note to clients that potential new government regulations to foster wireless competition include mandatory roaming and tower sharing at regulated rates and terms, and mandated “soft handoffs,” which allow customers with competing wireless providers to roam from their own network to another without dropped calls. Anthony Lacavera, CEO of Wind Mobile, which is in the process of transferring control to Amsterdam-based VimpelCom Ltd., said in an interview with The Wire Report at the conference Tuesday that tower sharing rules are not well enforced and are not provided at commercially viable rates. He said tower sharing and roaming pricing and terms should be regulated with mandated access rules and a shorter arbitration process for faster decisions. “Mandate commercially viable rates, and enforce commercially viable rates,” Lacavera said. “I am hopeful that the government tweaks the roaming. We lost that at the CRTC, with the hard handoffs, and I hope they revisit that,” Lacavera said, referring to a Wind complaint against Rogers that the CRTC rejected in 2011. Ken Engelhart, Rogers’ senior vice-president of regulatory affairs, agreed with Woodhead that companies new to the wireless business should expect to spend billions of dollars, with their costs higher than their revenues for several years. Engelhart said when Rogers entered the mobile wireless business, its earnings before interest, taxes, depreciation and amortization (EBITDA) was negative for its first five years of operation. Capital expenditures and negative earnings, Engelhart said, would also explain why few foreign investors seem interested in acquiring Canada’s new entrants, which are accepting offers. New entrant Mobilicity, operated by Dave Wireless Inc., received court approval this spring for a sale or refinancing plan, and during the court process the company said it looked around the world for foreign investors and “nobody wanted to buy them,” Engelhart said. “These businesses are enormously, enormously expensive, and it takes a long, long time to have a payoff. When a wireless new entrant goes into a mature market, and is not making much headway, I’m not sure there are foreign investors who are that interested,” he said. Engelhart said tower access is not a major issue in urban areas, where the new entrants mostly operate, because cell sites are installed on buildings. He said he has discussed the issue several times with Wind, and said tower sharing for all players is expensive. “I’m a tenant on thousands of towers. I hate it,” Engelhart said. “I pay through the nose. You want to try to get a tower spot with CBC? It’s brutal. It’s a brutal process. They charge you a fortune, and it’s completely Hobson’s choice. That’s the way it is when there’s a tower. It’s not an easy thing, but you’ve got access. You’ve got plenty of access,” Engelhart said. Antecol said more effective tower sharing rules would lead to better and more affordable tower access for everyone, including Rogers. Paradis said Tuesday the Industry Department will release the details of new transfer rules for spectrum licences in mid-June. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Nicholas Kyonka at nkyonka@thewirereport.ca --- CORRECTION: An earlier version of this story incorrectly refered to CRTC arbitration for tower sharing instead of that of Industry Canada.

Wind Mobile says ‘extreme rents’ higher than the cost of building a tower

News | June 5, 2013

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