Q&A with … Michael Sone, NBI/Sone Associates

With the Canadian Telecom Summit just around the corner, we sit down to talk with the conference organizer and President of Canadian telecommunications industry market research and consulting firm NBI/Sone Associates, Michael Sone, about the latest trends and issues facing the industry.

Canadian Connections (CC): What is the biggest buzz in the telecom industry as we look forward to the 2008 Canadian Telecom Summit?

Michael Sone (MS): The buzz continues to be in respect of the migration from wireline and purpose built to wireless and broadband converged communications - Converged communications with a quadruple or quintuple play (voice, data, TV, internet and in Saskatchewan/Manitoba- security); HDTV; Video on demand, Wi-Fi/mobile convergence. Any service, anywhere, over every device.

CC: From an industry perspective, what are your thoughts on net neutrality and its implications for Canada?

MS: There are very few people who can clearly state what is meant by the term net neutrality and even fewer who can describe what kind of new safeguards are being sought from government legislation or regulation. As such, the challenge for the regulator and policy makers is to sift through the hyperbole and look at whether new rules are really required to safeguard consumer interests, or alternatively, if the regulator simply has to ensure that service providers are conforming to the existing provisions in the Telecom Act. The Internet has reached its current state in the absence of regulatory intervention - policy makers need to be concerned about the potential of unintended negative consequences associated with such measures. The consensus appears to be for continuing to allow ISPs and content providers the freedom to develop their own business models.

CC: Canada continues to have one of the world's highest broadband penetration rates – to what do you attribute this?

MS: Unlike some other parts of the world, Canada has one of the world's greatest penetration of personal computers. This, coupled with what is arguably the best telephone and cable network anywhere, set the stage nearly a dozen years ago for the introduction of high-speed Internet access. This arrived first in the form of a (then) unheard of 1 MB service from Rogers and Shaw via the now defunct @home network. The telcos followed suit with their own service via DSL technology - at that time considered leading edge compared with other countries' digital efforts via ISDN. Over the years, service providers have kept pace with Canadians' seemingly insatiable appetite for faster computers and faster broadband to match. Videotron has an industry leading 50 Mbps service that was tested at over 100 Mbps. Compare this to, say, South America where, even today 1 MB is considered fast! In much of Asia, however, far different social environments have resulted in a preference for mobile Internet access.

CC: There have been suggestions that by the end of 2012, Canada should only anticipate a mobile penetration rate of 84.7% - how does this compare to other mobile markets?

MS: Some markets, Scandinavia for example, where there are people who have two or even three phones, surpassed 100% penetration several years ago but these rates are due to artificial numbers driven by rate arbitrage encouraging multiple SIMs, international roamers (again due to rate arbitrage) and prepaid card aging (discarded prepaid SIMs from tourists but are still on file. Other regions with a legacy of poor landline service are approaching similar penetrations. Canada, on the other hand, has a superb wired telephone service. Also, Canada's superb broadband network lends itself to wide scale adoption of VoIP, further slowing migration to wireless. Nevertheless, wider deployment of Wi-Fi and that technology's VoIP compatibility via UMA-capable and dual-mode (cellular/Wi-Fi) devices will inevitably move Canada towards the 85%-plus range over time.

CC: What are your thoughts on the wireless spectrum auction?

MS: At the outset, there are already many parties that have declared an interest in bidding and have made their deposits. Some of these are new and relatively unknown, while others, such as the cablecos and telcos are no surprise at all. While the current cellular operators will likely be the winners of much of the universally available spectrum, the new entrant cablecos (Rogers is not in this group) may secure most, if not all, the blocks that have been set aside for new competitors. We should see at least two, and possibly three new players in many markets in Canada. Competition typically brings out the best from all participants: incumbents and new entrants alike. Consumers can expect to see more aggressive pricing and a wider array of choices for handsets, devices and services in the next 6-12 months. However, the trouble is what to do with the spectrum once it has been won. The incumbents will probably just keep it in reserve for future capacity and technology but the new entrants will be faced with major technological challenges. Since the spectrum is in the 2 GHz range there is no currently existing infrastructure or any devices that address the particular frequencies involved. Manufacturers will need persuading to make available North American versions of European and Asian products which have only recently been introduced. And, since the CDMA carriers have not yet decided on their future migration paths and others in North America seem to be leaning toward a mobile Wi-MAX solution, any new competitive cellular services are unlikely to appear in Canada until late-2009 at the earliest.