The worldwide mobile phone industry crawled back from the recession and posted positive numbers in the last quarter of 2009. Now the industry is set to continue that growth for the year ahead, while potentially disruptive forces could change how carriers monetize their service and maintain customers.

Canadian wireless carriers will ‘bend over backwards’ to please customers

As 2010 brings heightened levels of competition and potentially disruptive technology to the wireless sector, Canadians will see carriers “bending over backwards” for them, industry analysts say.

“Canada is in the early stages of wireless industry growth,” says Krista Napier, senior analyst emerging technology, IDC Canada.

The last quarter of 2009 saw the launch of two new networks in Canada: Bell Canada and Telus Mobility’s joint HSPA network went live across the country, and Globalive Communications Corp. began rolling out its nation-wide network in major cities as Wind Mobile.

Worldwide, the mobile phone market grew by 11.3 per cent in the fourth quarter, according to IDC’s Mobile Phone Tracker report. 

The positive numbers are a sign of relief for an industry that saw its market shrink for five consecutive quarters. Canada’s new network from Bell and Telus boosted mobile phone shipments, the reports says, particularly those of Apple Inc.’s iPhone.

Canada’s wireless market will see greater competition in 2010 as companies that participated in 2008′s wireless spectrum auction will start to roll out their services. Wind Mobile was the first to do so, and Dave Wireless’s Mobilicity brand is expected to launch in the Spring. Public Mobile is also expected to go live this year.

“We’re going to see carriers bending over backwards to please the customer,” Napier says.

Aside from competition, carriers may see competition from “over the top” players who take advantage of voice over internet protocol (VoIP) technology to deliver voice services at a cheaper rate. Cell phone subscribers are accustomed to buying voice plans and data plans right now, but that could soon change.

“Once voice gets turned into data packets and sent over the same data channel, they become vulnerable,” says Ronald Gruia, principal analyst at Frost & Sullivan.

Skype announced last week it will release a new version of its mobile application that allows for VoIP calls to be placed over a 3G network. The service allows for Skype users to connect with each other for free conversations, or make long distance calls to land or mobile phone numbers for fractions of a penny per minute. Bell and Telus say they will allow this application to run on the new HSPA network.

It’s one more sign that wireless voice minutes are quickly becoming a commodity, says Michael Urlocker, technology hardware analyst with GMP Securities L.P. In India, it is possible to pay just .007 cents per minute.

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“We’re not at that level here, but I think there’s a lesson to be learned,” he says. “If you can have a solid network at a low cost in India, I think you could do it in Canada.”

However, data-intensive applications can put a strain on networks, analysts say. AT&T in the U.S. has experienced this, with its network being bogged down by avid iPhone Web surfers.

Instead of 3G data, such woes might push consumers to rely more on WiFi connections, which could be a cost saving for them, but poses another risk of revenue loss for carriers. But Canada’s networks may avoid congestion, Napier says.

“The networks here were constructed well, and an evolution to LTE (4G) over the next three to four years will help handle growth,” she says. IDC projects the mobile data market will be $6 billion in Canada by 2013.

As players such as Apple and Google win customers’ dollars spent on mobile devices, carriers could best make money as commodity sellers, Urlocker says. It’s a model more akin to electricity than to a cable TV company.

“But they pursue growth opportunities that don’t exist, or that they don’t have the skill set for,” he says.

Nokia was the dominant worldwide mobile phone manufacturer in 2009, capturing 38 per cent of the market share, according to IDC. It was followed by Samsung with 20 per cent, and then by LG, Sony Ericsson and Motorola.

Mobile phone shipments will increase in 2010, the analyst firm predicts.

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