Wind looking to offer 3G roaming thanks to price cap

Now that the federal government’s domestic roaming caps are in place, Wind Mobile is looking to upgrade to 3G for its roaming network by the end of the summer, chief regulatory officer Simon Lockie said on Tuesday. His company currently offers only 2G data connections outside its own network, Lockie said, because of the high prices it was forced to pay to send data over other carriers’ networks before the passage of the government’s budget bill, which included a usage-based cap on these wholesale roaming rates, on June 19. “The terms are so bad that we have to make it as unattractive to roam as possible,” he said in a phone interview Tuesday. “What we had to do, because it's so expensive, is go 2G. What you can't do is consume meaningful amounts of data, and that's where the big bills really rack up.” Wind Mobile offers 3G coverage for its users in so-called “home” areas where the company has built towers, including Toronto, Calgary and Vancouver. For users outside those areas, the company pays for access to other networks at a wholesale rate — a rate Lockie and others have complained was too high before the government stepped in. In a filing to the CRTC this week in the regulator’s wholesale wireless review, Wind said it spent $3.7 million on domestic roaming in 2013, and $3.6 million in 2012. Wind CEO Anthony Lacavera said at the Canadian Telecom Summit in Toronto last month that the company had revenues of around $350 million in 2013. Lockie said that amount, which is a small relative to the company’s revenue, is a symptom of the high rates it had to pay under its domestic roaming deal before the government intervention. “The number is so low precisely because it's such an egregious situation,” he said. “It's so low because we had to disincentivize accidental or ignorant consumption of data while roaming.” The incumbent wireless carriers’ approach to domestic roaming has been incredibly short-sighted, Lockie said, because they sought to maximize the cost per roaming user, not increase revenue by increasing access to their network. “When you build a network, to earn the best possible return on that capital expenditure, you want traffic on it that pays you,” he said. “They've been doing their best to deflect it.” Now that the government has brought in legislation that effectively caps wholesale roaming charges at retail rates, Lockie said Wind is looking to launch 3G for roaming customers “as soon as possible.” Ken Engelhart, vice-president of regulatory affairs at Rogers Communications Inc., which provides roaming access for Wind customers, said the relatively small amount Wind spent on domestic roaming means the company is using high rates as an excuse not to invest. "Those numbers put the lie to everything that they're saying," he said in a phone interview. "They're saying that these big roaming payments make it impossible for them to invest. When you're spending $500 million on spectrum, a billion dollars on your network, the $3 million that they're spending on roaming is a rounding error. It just doesn't make a difference on how much you invest." Engelhart said the unintentional consequence of the government's roaming cap might be that companies have little reason to upgrade their networks. "My concern is that if the roaming rate is set too low, you lose the whole point of competition, which is competitive networks," he said. "People will just stop building networks. When that happened in Europe, they went from having some of the best networks in the world to having some of the worst networks in the world in just a few years. If the roaming rate is too low, that could happen here." The legislation recently put in place is meant to be a temporary measure until the CRTC, which is reviewing domestic roaming prices and the wholesale wireless market overall, makes a decision on whether to implement its own regulation of domestic roaming rates. New entrants arguing for even lower rates than the government's cap mean one thing, Engelhart said. "What that tells me is that they have given up on investing and want Rogers to do their investing for them," he said. "Now they've stopped building. They're spending nothing on networks. They just want to use our network. They've kind of betrayed the original purpose of the set-aside, which was to have competitive networks." Greg MacDonald, managing director at Macquarie Capital Canada, said the incumbents will have to adjust quickly to the new world. “The incumbents kept the new entrants at high roaming rates because it kept them out of business,” he said. “Now that they're being forced to accept this, the savvy incumbent is going to immediately go and try and cut the best deal with the new entrants.” MacDonald said the concern potential subscribers have about the high cost of roaming is one of the biggest problems Wind has in attracting customers. "Most people don't really understand how much data they're using and, therefore, don't really understand how big the bill shock can be if they move outside of their home zone," he said. "This has become a much bigger issue with data services than it ever was with voice because the potential penalty could be much higher." MacDonald compared Wind's domestic roaming rates to the costs of roaming overseas, which he said were the big reason that, until recent efforts by carriers to drop prices and offer bundles, Canadians rarely used their phones when travelling abroad. "People just turn their phones off because they don't know how to figure out how much they're using out of market," he said. "They just hear the horror stories of people coming back with a huge bill and avoid it altogether." MacDonald said accommodating customers’ access outside home networks and spectrum have become wireless carriers’ biggest costs. “It's not surprising at all to me that the government has addressed these two issues with the new entrants,” he said. On Monday, the federal government announced a newly planned auction for AWS-3 spectrum would happen next year, with the majority of bandwidth available set aside for “operating new entrants.” — Reporting by Peter Henderson at phenderson@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Wind looking to offer 3G roaming thanks to price cap

News | July 8, 2014

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