Wireless penetration rates are just shy of 10 percent in Canada, but are predicted to exceed 40 percent in the next decade, according to a recent study by Redondo Beach, Calif.-based MESA Research.
In “Telecompetitiveness and the Wireless Sector: Competition Without Chaos,” Dr. William H. Davidson examines Canada’s wireless industry climate and-focusing on the dawn of broadband personal communications services-stresses a need for government to activate public policy that propels equal access to competition and integration of wireless sectors for the benefit of consumers and the country’s economy as a whole.
Increasing development of voice and data services is and will continue to blur boundaries among wireless segments, resulting in a single extended market structure, Davidson noted. In what Davison describes as “the new wireless economy,” advances in the wireless business have kicked off a revolution. Davidson suggests that increasing power of user devices, the rise of interactive media networks and applications, a growing choice in carriers and services, `anytime, anywhere’ connection capabilities and workers’ increasing need for mobile communications are key factors transforming wireless niche markets to large mainstream markets.
As such, “Wireless technologies and services will increasingly become enablers of economic development, export and growth,” Davidson determined. Canada’s cellular and paging industries already are substantial contributors to the national economy, according to MESA, and just two national networks make paging and cellular services available to 94 percent of the population.
If emerging wireless networks and technologies are seamless and transparent, Davidson noted, competitive dynamics will ensue, benefiting consumers.
Seamless national cellular coverage achieved through reliance on national carrier franchises has made wireless performance better in Canada than in many nations, asserted Davidson. However, Canada’s PCS market and other future wireless technologies bear the risk of creating chaos, he explained. This chaos could be generated by factors including incompatible equipment technologies, limited interconnection and the expense of software architecture functions resulting from interconnection problems.
Hence, a public policy perspective that treats all wireless activities-including cellular, paging, PCS, specialized mobile radio and satellite services-as part of a single sector will promote competition in telecommunications and stimulate the nation’s economy, Davidson concluded.
Canada’s public policy could sanction a market structure that emphasizes the role of a few “inner circle” players, complemented by other market participants or “outer circle” players, said Davison.
A typical industry follows a rule of three, he explained, whereby a handful of companies collectively control 60 percent to 80 percent market share. These are companies that can support fixed investments in product and service development, national market coverage, state-of-the-art information systems and software, a full line of advanced products and services and extensive promotion, which helps to establish brand recognition.
An outer circle member would focus on a particular product, service or market niche, such as value-added cellular services.
The dynamics of inner and outer circles pose obstacles in Canada, which has a number of outer-circle players, explains Davidson, but where inner-circle players are less defined. At least five firms are vying for that position in a market which may have less capacity than others for inner-circle players, said Davidson. This scenario could lead to industry fragmentation, postpone market development and create “a less than optimal industry structure.”
Industry Canada could promote integration of segments and seamless service by facilitating interconnection, ensuring effective standards and protocols, supporting facilities sharing and granting national licenses, Davidson said.
Government could encourage compatibility with global markets-establishing a platform for export of hardware, software and services-and accelerate the deployment of mainstream technologies through licensing policies and other activities, he said.
