Roaming and LTE behind Canadian operators' switch

By Tammy Parker

The move by Canadian CDMA operators Bell Mobility and Telus to launch WCDMA/HSPA probably won’t disrupt the market anytime soon, though it does put the companies in position to gain new roaming revenue and ultimately launch LTE.

In mid-October, the two companies announced that they would team up to deploy a WCDMA/HSPA overlay onto their CDMA networks at a cost of about US$1 billion, split evenly between the two partners. The operators have had an agreement to share CDMA-network infrastructure since 2001.

The primary benefits of the overlay will be that the two operators will be able to top the speeds offered by their EV-DO networks, gain access to a broader range of handsets and end-user equipment, and create a core network compatible with their planned LTE rollouts.

Nokia Siemens Networks and Huawei Technologies were tapped to supply infrastructure equipment for the overlay, which is expected to be operational by the start of the 2010 Winter Olympic Games in Vancouver.

Although the overlay will enable Bell and Telus to snag some 3G roaming revenues (from international roamers and from customers of new market entrants in Canada), they will still miss out on lucrative GSM roaming revenues. That GSM-generated money will remain the domain of rival Rogers Wireless, which is Canada’s only GSM operator – and thus its only WCDMA/HSPA operator. Rogers has been banking nearly US$500 million in GSM roaming fees each year.

GSM is expected to generate hefty international roaming revenues for operators in that technology camp for the foreseeable future. At a recent 3G Americas analyst meeting held outside of Dallas, representatives of US operators AT&T and T-Mobile discussed their plans for LTE and also addressed the future of GSM. Neither operator said it intended to sunset its GSM network. They envision needing GSM for years to come to accommodate roaming. Further, Ken Corcoran, CTO of America Movil, noted that even though the Mexico-based operator is launching WCDMA/HSPA across its markets in Latin America, it continues to build out GSM as well, because the technology’s economies of scale lend itself to low-tier markets and inexpensive devices.

Not only will they miss out on GSM money, but Bell and Telus have a lot of catching up to do on the WCDMA/HSPA front, given that Rogers has deployed WCDMA/HSPA in 25 Canadian markets with populations of at least 100,000 and is already planning network upgrades. The operator has “aggressive plans for 7.2Mbps [download capability] in all major markets,” said Arnold Abramowitz, Rogers’ senior director of network engineering.

However, if Bell and Telus can get their WCDMA/HSPA overlay broadly deployed by 2010, which is likely, they will grab HSPA roaming revenue from the new entrants to Canada’s mobile market that won spectrum during the AWS auction held earlier this year. By and large, the new players are expected to launch WCDMA/HSPA networks of their own, being allowed under government mandate to let their users roam onto incumbent operators’ compatible networks in areas where the new entrants lack coverage.

Canada’s AWS auction, for 1.7/2.1GHz spectrum, wrapped up on July 21, bringing in C$4.25 billion (US$3.41 billion). On offer was 105MHz of spectrum, with 40MHz reserved for new entrants. Rogers Communications, Canada’s largest mobile operator, was the top AWS bidder, offering C$999.4 million for 59 licenses. Telus bid C$879.9 million for 59 licenses, and Bell Mobility bid C$740.9 million for 54 licenses.

The top winner among new entrants was Globalive Communications, which bid C$442.1 million for 30 licenses covering 26 million people across Canada, though it was largely outbid in Quebec by the Videotron unit of Quebecor. Globalive, parent company of alternative communications provider Yak Communications, has pledged to be a price leader with low-cost, flat-rate services.

On Oct. 22, Quebecor confirmed that it would spend up to C$1 billion over four years to build an HSPA network, with the first launch expected in 12 to 18 months. The projected expenditure includes the C$554.4 million cost of its acquired AWS spectrum, said the company, which has selected Nokia Siemens Networks as infrastructure supplier.

The WCDMA/HSPA overlay network planned by Bell and Telus will use their 850MHz and 1900MHz spectrum rather than their AWS spectrum, which the two are most likely reserving for future deployments of LTE. That means new entrants that bought AWS spectrum will need to supply their customers with multiband handsets and PC cards to enable them to roam not only onto the Bell and Telus overlay but also onto Rogers’ WCDMA/HSPA network.

In a way, the decision by Bell and Telus to implement the WCDMA/HSPA overlay takes some of the heat off of Rogers, which, as Canada’s only WCDMA/HSPA operator, had been expected to bear the brunt of new-entrant roaming traffic that could possibly overwhelm its network.

All three operators are now in line to upgrade to LTE, when that becomes available. Kris Rinne, senior vice president of architecture and planning at US operator AT&T and also chairwoman of regional trade group 3G Americas, has predicted that LTE will be adopted by more than four-fifths of the world’s mobile carriers, including many, such as Bell and Telus, that are now CDMA operators. “Incredible economies of scale will be created with LTE through the GSM community as well as the CDMA community,” she said.

AT&T intends to deploy LTE in 2011 using its 700MHz and AWS spectrum.

Regulator Industry Canada hopes to auction 700MHz spectrum in 2009, a move that could further affect the competitive positions of both new entrants and existing operators, particularly if open-access conditions are placed on any spectrum slices, as was done in the US 700MHz auction that wrapped up early this year.