Friday, October 24, 2008

Videotron's Wireless Network Plans Announced

This is mostly a news item, and I don't do many of those. For many, it's an old news item by now, but not for everyone. I've been out of pocket almost all week, and this is the best I can do here, and didn't want this to pass unmentioned.

On Tuesday, Videotron announced their wireless network plans, and they're pretty ambitious. I was hoping to participate on the briefing call that day, but was too tied up at the Avaya analyst conference.

In the current economic climate, it's a huge deal to hear about spending like this. After spending $554 million to acquire spectrum during the AWS auction (which I've been following) - table stakes to get into the wireless game - they're now commmitting around $250-$300 million more to build an HSPA network. Videotron has said they were serious about wireless from the beginning and now they're putting their money on the table.

I can't help but think there's got to be a bit of political hubris at work here, as this is a Quebec story, not a Canada story. That message comes out loud and clear in the press release, especially with the proud claim how this investment will create 1,000 jobs for Quebecers. I'd be remiss to mention that the Bloc - their separatist party - fared well in the recent federal election, largely at the expense of the fading Liberals. I digress.

I should also note that Videotron is one of the biggest and best Quebec-based companies, and they are only in the wireless business to serve Quebec. Their population is a bit under 8 million, and I don't know if their Capex plans on a per-capita basis would be high or low relative to other markets. Regardless, it's happening, and that's the story here.

Anyhow, like Rogers, Videotron is a multimedia conglomerate, and have a lot of content at their disposal, so their plans extend well beyond voice. Bell diversified into content a few years back, but could never make it all work. However, networks are faster today, and we have smartphones now, so things will be much different for Videotron this time around. What also makes this interesting is that Videotron has a track record of being disruptive, most recently with their push into VoIP, which has been costly for Bell.

So, I'd expect similar things this time around with wireless. Actually, Videotron does offer wireless today, but over the Rogers network, which really limits what they'd like to do. Once they come to market on their own, Rogers will lose their traffic of course, but more importantly, they'll now be competing directly against each other.

Aside from this being a bold statement of investment in Quebec's communications infrastructure, it's great news for Nokia Siemens Networks (NSN), who were announced as the prime vendor for their network buildout. NSN is on a roll in Canada, having also just been awarded the business to build a jointly-funded HSPA wireless network for Bell and Telus. Wow. Hard to believe how these two competitors are now working together, but it's a necessity. Rogers already has GSM, and once Videotron comes with HSPA, they would be at a huge disadvantage if they sat tight with their CDMA networks.

If you can't beat 'em, join 'em, I guess. It's clear that the economics for each to build separate HSPA networks just don't work, and it sure will be interesting to see how they manage to share things once it's done and they go back to competing against each other. Or maybe - just maybe - they'll join forces to compete against the cablecos. How interesting would that be?

And just to complete the picture, today Shaw announced they were putting aside plans to build their wireless network. They're in a much smaller market than Quebec, but still spent $190 million to acquire spectrum licenses. Maybe they'll sell it to the highest bidder - if that's allowed - or maybe they'll jump back in the game if the market changes. Who knows?

With Videotron's news, the focus now shifts to what the other new wireless players plan to do - namely Globalive, Bragg/EastLink and DAVE Wireless. It's not easy raising money today for anything, let alone yet another wireless network. This sure sets the stage for an interesting 2009 in Canada's wireless marketplace, and I'll be back on this soapbox again soon.

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