to extend service to nearly 90 per cent of Canadians.
Under terms of the agreement, Bell will receive reduced-rate access to the Telus Mobility network in Alberta and British Columbia and provide Telus with the same access to the Bell Mobility digital PCS network in Ontario and Quebec. A third party, Aliant Telecom Wireless, will give Telus reduced-rate access to its Atlantic Canada network in exchange for access to the Telus Mobility network in the two Western provinces.
While reciprocal access was already available to the wireless arms of the country’s telecommunications companies through the 1999 Comprehensive Commercial Agreement, the agreement announced Wednesday gives that access at reciprocal rates and makes resale financially viable in a region serviced by any of the companies involved. Bell and Telus said the agreement will save each company $500 million in capital expenditures over the term of the 10-year agreement, allowing for easier entry into the country’s non-urban areas.
“”This agreement addresses the capital dollars required to cover the dispersed population and vast geographic regions of Canada with an all-digital network across the country,”” said Telus Mobility president and CEO George Cope. “”This allows us to take CDMA technology across Canada and increases the competitive landscape.
“”The idea of this agreement is to make rural traffic as profitable as our urban traffic.””
Analysts agreed the sharing agreement, which is expected to be made official in January, makes sense given that the companies both use the CDMA network.
“”All of the wireless carriers are looking at expanding what amounts to a commodity network,”” said Ian Angus, president of the Angus Telemanagement Group. “”The simple (solution) is to share the network. I think there’s considerable logic here.””
Both Bell and Telus said cost savings from the agreement will hasten the delivery of next generation services to Canadians, including third generation (3G) wireless technologies. The agreement covers not only voice and data service at 1.9 GHz and 800 MHz, but also the next generation technologies.
The companies also deflated suggestions the agreement could endanger competition in the wireless market.
“”I want to stress that this agreement is for networks only. We will be aggressively competing with Telus in all other areas,”” said Pierre Blouin, president and CEO of Bell Mobility, adding that Industry Canada has been made aware of the agreement. “”Nobody has highlighted any issues about this. It is for sure not targeted at (hurting) anyone else in the market.””
Blouin noted the $180 million Bell is currently spending on building its own network in urban centres in Alberta and B.C.
Analysts also doubted the agreement was an attempt at collusion.
“”This does not mean that the two companies are going to sit back and carve the country up,”” said Mark Quigley, director of research for the Yankee Group Canada. “”We’re still going to see a tremendously intense competitive arena.””
“”It doesn’t lessen competition,”” added Michael Sone, principal at NBI Canada/ Michael Sone Associates. “”There’s been roaming agreements all along and it hasn’t hurt competition.””
In fact, analysts agreed with Cope’s assertion that putting Bell and Telus on equal footing in each other’s territory will actually increase competition in those areas. They also agreed that bringing more players into rural regions will encourage further wireless adoption, though they were skeptical of Cope’s claim of making rural service as profitable as its urban counterpart.
“”It’s unlikely to ever be as profitable, but the more traffic you put on the network, the more profitable it’s going to be,”” Angus said, adding that more carriers in a region encourages market stimulation.
Where Wednesday’s announcement leaves Canada’s other two wireless players is unclear. Bell and Telus are not the only companies to enter into a network sharing agreement; Atlanta-based Cingular Wireless and VoiceStream Wireless of Bellevue, Wash. announced on Monday they had agreed to share their networks in an effort to cut capital expenditures and broaden their respective coverage areas. However, analysts doubted any imminent agreement between Rogers AT&T Wireless and Microcell Solutions Inc.
“”First off, neither Rogers nor Microcell would enter into a similar agreement because they have different networks,”” Quigley said, alluding the fact that Rogers employs a TDMA network while Microcell, which uses the brand name Fido, runs a GSM network.
That problem could be overcome with the rollout of Rogers’ own GSM network, scheduled for sometime this fall, but Angus said Microcell’s current cash crunch and the size difference between the two companies would make an agreement difficult.