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Continued cellular disatisfaction

Stories about disatisfaction with cellular carriers continue to surface in the mainstream media and blogs alike.  This morning's NY Times speaks of a cellphone straitjacket that is inspiring a rebellion.  Primarily about Google's entrance into the market with the Open Handset initiative, the author posits a clash of titans — Silicon Valley versus the mobile industry. Silicon Valley's VC community seems only too willing to play along, as the times discovered when interviewing Khosla's David Weiden:

“Definitely there is hostility,” said David Weiden, a partner at Khosla Ventures in Menlo Park who has previously worked at McCaw Cellular, Netscape and AOL. “There are enough catalysts for change now, and it is already happening.”

But the question many are asking is why the tension now, in contrast to, say, six months ago? The catalysts are threefold, said Mr. Weiden: the proliferation of new technologically advanced mobile phones, greater bandwidth and increased competition. But mainstream consumers too are being conditioned to expect more, particularly after the debut of the iPhone which offers easy-to-use Web browsing, Wi-Fi capabilities and high-quality video.

Closer to home, Brightspark Ventures' Tony Davis (returning to the blogging world after a seven month hiatus) expresses doubt that all of this activity will yield results.  He notes that the handset industry is still fragmented, and that the carriers still control the agenda.  Certainly that's true in Canada, and to a lesser degree in the US. 

And speaking of Canada, this weekend we entertained a friend who works for one of the larger mobile providers in this country.  Over breakfast we chatted a bit about the mobile industry in Canada.  One of the observations proffered was that mobile in this country is different. Spread out over long distances, it's more expensive to build out the nationwide network coverage that would be required to provide unlimited high speed data, for instance.  Canadians should expect to pay more because the telcos have to build a similar size network to the US in order to serve a population that's 10% the size.

Maybe.  Or maybe Rogers' rumoured March iPhone launch will be the first fissure in the rational pricing model that has served our telecom oligarchs the fat profits they have enjoyed for such a long time.

{ 5 comments… add one }

  • Tony Hung November 12, 2007, 9:08 am

    The argument that there are other factors which might make things more expensive in Canada. But there's the issue of magnitude, which you rightly touch on — how _much_ more expensive should things be, if at that?

    I expect the answer is "probably much, much, much less than everyone expects, or Telco's want to share". 😉

    t @ dji

  • Paulo November 12, 2007, 12:50 pm

    I am sure that economies of scale do come into play to some extent.

    However, this 10%-the-size argument doesn't completely cut it since most of the high-speed networks in both Canada and the US only serve metro areas anyway, and there are fewer of them in Canada. In fact, I believe it's the case that in Canada fewer metro areas cover a larger percentage of the overall population than the equivalent number of areas in the US.

    It is true that it's more expensive to hook up the vast distances *between* the metro areas, but that's not a 3+G specific problem, and it's likely already been done to some extent as part of the past "packetization" of the networks.

    I just don't buy the argument that it's that much more expensive.

  • Steve November 13, 2007, 11:17 am

    "Spread out over long distances, it's more expensive to build out the nationwide network coverage" With all due respect to your house guest, who was probably just passing on the self-serving accepted wisdom in Canada's mobile market (including CRTC), this argument is very weak.

    Canada's vast land mass is obviously not served by mobile carriers and even good stretches of our major transportation corridors are without it too. When we look at where the coverage is, and where the vast majority of our population is, the real story emerges. Canada is substantially more urbanized than the US: (http://www.demographia.com/db-intlua-area2000.htm) at 1550 people per square urban KM compared to 1150 in the US.

    I know the network infrastructure costing & engineering models are based on a wide variety of factors in addition to population density (as a surrogate for demand/useage desnity), however this is a major variable. Many of the other demand variables, including in particular price, are within the industry's ability to control.

  • Alec November 13, 2007, 11:39 am

    I made that point, Steve, but apparently our regulatory environment requires that the far flung reaches of the Canada also be served. Not being competent to refute the point, I didn't.

  • tom November 18, 2007, 6:30 pm

    i am sure that I have heard that 85% of the budgets of the wireless carriers is related to marketing and not technology. if that is true than size of the network would not be the biggest issue affecting pricing. maybe they need to cut out all those TV ads and base the marketing campaigns on price instead. what we really need as consumers is the comoditisation of wireless voice and data. only than will there be any rationality to pricing.

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