Wind Mobile Thoughts

So Wind Mobile is going live this Wednesday according to the CBC. What great news for us Canadians, finally some competition in the market. Here are some thoughts on Wind, the Canadian mobile telecommunications industry, and what Wind has to do to be successful.

Background

Wind Mobile is the brand under which Globalive Communications Corp, which is owned by the Egyptian wireless company Orascom, will operate in Canada. After successfully buying spectrum in all of Canada except Quebec (more on that later), and being approved to operate by Industry Canada, Globalive faced a potentially disastrous setback when the CRTC ruled that Wind did not meet the requirement that it be Canadian controlled.

Now, the question as to whether Wind is Canadian or not is a matter of contention. Certainly Globalive is not Canadian, and Globalive owns most of Wind’s shares as well as its debt, but the board of directors of Wind is made up of a majority of Canadians, and the majority of the voting shares of Wind are controlled by Canadians. While Wind’s shares are held offshore, and while its debt is owed to foreigners, control of the company apparently remains in Canada. So, is Wind Canadian?

The CRTC thought not.

Fortunately for Wind, Tony Clement, Industry Minister of Canada, disagreed and overturned the CRTC ruling, allowing Wind to operate in Canada. They will go live on Wednesday, December 16th in Calgary and Toronto, opening stores and additionally offering phones in kiosks in Blockbuster stores. Details on pricing will be officially announced Wednesday, but some details on plans have already leaked.

The Network and the Hardware

Wind will operate an HSPA network of 7.2 Mbps (no word yet on HSPA+ 21 Mbps), on what is known as the 3G AWS band (1700/2100). This band uses the 1700 MHz band for uplink and the 2100 MHz band for downlink. This is the same band that T-Mobile uses in the US, but no other carrier in North America uses it. What this means is that there will be a limited offering of phones available for use with Wind (certainly everything T-Mobile offers), at least initially.

Wind has managed, despite this unusual network, to offer a fairly wide range of phones right off the bat, including Blackberry and Samsung phones.

No iPhone

The iPhone does not operate on the 3G AWS band so it will not be offered by Wind initially. This is nothing that Wind can help – the spectrum that was auctioned off is just not compatible with the iPhone. There are some rumours that T-Mobile will get the iPhone in the future in the US, which means that Apple will make future versions of the iPhone compatible with the 3G AWS band that Wind uses.

No Android Either

Sorry. Not yet.

The Industry

As you are likely to know, the Canadian wireless industry is dominated by three major national carriers – Bell, Rogers, and Telus. Wind is launching in Calgary and Toronto in a few days and in several other cities in Q1 of 2010. It is worth mentioning that several other companies will be starting up in Q1 2010 as well – DAVE Wireless will launch in several Canadian cities at that time, Public Mobile will launch in Toronto, and Quebecor’s Videotron will launch in Quebec.

During the period of uncertainty over whether Wind would be allowed to operate in Canada, many believed that the front-runner for challenging the big three was likely to be DAVE. While still a strong contender, it now seems that Wind may have gained an edge with an early start and some media attention. Certainly Wind is doing very well with their handling of the media, getting much play in the newspapers, on tv and online.

Perhaps Wind’s strongest point of contention is that people are likely to see it as “the new guy” who will save us from the big three who have been content to lumber along with the status quo. This impression is furthered by Wind’s website windmobile.ca with its very distinct web 2.0 flavour. It almost resembles twitter.com, both in style and in how user-content-centric it is. You can write a short comment and post it to the Wind website as a suggestion for all to read. Try finding that anywhere else in the Canadian wireless world.

Reactions

Certainly the big three will not let Wind come into their territory without a fight. While I don’t expect any reaction in terms of price cuts immediately, there has already been a reaction from the incumbents. One of the first lessons you learn in any business strategy class is that the incumbents in an oligopoly will do everything they can to raise the barriers of entry for new players.

Quebecor did this with its subsidiary Videotron in Quebec. Videotron paid more for the rights to the 3G AWS spectrum in Quebec than Wind paid for in the rest of Canada. Quebecor essentially made it too expensive for Wind to operate there.

The big three have gone about this largely through lobbying and regulations.

According to spokesman Shawn Hall, Telus, “would not be surprised to see several challenges to the precedent-setting decision,” and is “assessing the decision and our response to it.”

Even the unions are chiming in. The Communications Energy and Paperworkers Union is considering launching a lawsuit to re-ban Wind from operating.

“This decision is illegal,” Dave Coles, president of the Communications Energy and Paperworkers’ union, said today in a phone interview. “There’s no sense in appealing to cabinet.”

“We’re going to challenge it in court,” he said.

Adoption

Wind’s success will be entirely dependent on if they can attract customers. They are off to a good start, gaining media attention and publicity with a positive image and a lot of consumer interaction. Being the first new entrant into the market, edging out DAVE and Public, will certainly help, but it might not be as big of an advantage as one might think.

Due to the fact that many Canadians are tied in to 3-year contracts with their current providers, and are likely unwilling to either pay the ~$400 ETF required to break the contract or to buy the rest of it out, Wind won’t realistically have access to the entirety of the Canadian market for three more years as people slowly come off their contracts. This means that Wind is essentially on the same ground as DAVE – both newcomers to the market trying to pick off people as their contracts end.

Teens

Of course there is one other group Wind can target – teens. Wind can try to be a teen’s first mobility provider – there’s no waiting for a contract to end if the user has never had a mobile phone. This should be a market heavily targeted by the new entrants due to the level playing field and certain demographic advantages.

First, teens are extremely heavy users of text-messaging and less so on voice. Text messaging is a cash cow for wireless providers right now. It is essentially free to implement, yet carries huge premiums (15c a text message anyone?). A plan offering very little voice time, free evenings and weekends, and unlimited text messaging for a low rate would be a great teen plan. Throw in some data and I’d upgrade it to perfect. It becomes hyper-perfect when you consider free Wind-to-Wind calling as well.

Being the new guy would also help with the teen segment. Everyone’s uncool parents talk on their Bell/Rogers/Telus phones. All the cool kids at school use Wind.

Summary

Wind has jumped some hurdles on its way to entering the Canadian mobile telecommunications market, and it seems the worst is yet to come. The decision to allow Wind to operate stands as of now, but will face scrutiny and challenges in the months to come. Wind will also have to face up against three well-entrenched incumbents, and a few new competitors in what really amounts to a commodity market with little differentiation.

Wind Mobile Pros/Cons

Pros:

• “New guy” image
• HSPA network
• Consumer-centric attitude
• Looks to have great pricing plans

Cons:

• Shares “new guy” image with DAVE and Public
• Not operating in Quebec
• No iPhone/Android phones at launch

Comments? I’d love to know what you are thinking about this.