It's time to YAK in Canada!

By Peter Nowak

Fido, Solo and Koodo are going to have some new competition next year, although the newcomer's brand name won't end in "o." Globalive Communications Inc., the big winner in this summer's government auction of cellphone airwaves, will launch two separate wireless services in the second half of next year — one discount brand officially named Yak and another as-yet-unnamed core brand. Yak, which is the same banner that Globalive uses to sell land line, internet and long-distance services, will compete directly with Fido, Solo and Koodo, said company president Anthony Lacavera on Thursday. Those are the discount brands of Rogers Communications Inc., Bell Canada Inc. and Telus Corp., respectively. Yak will target the same customers Fido, Solo and Koodo cater to — namely, cellphone users who are more price sensitive and interested in voice and text rather than advanced smartphone features such as e-mail and web surfing, he said. Globalive will also compete with the core brands from Rogers, Bell and Telus, which offer smartphones and data services, through a core brand. The Toronto-based company plans to launch a countrywide network, with the exception of Quebec, by the end of 2009, with backing from Egyptian telecommunications billionaire Naguib Sawiris.

Neither brand will include lengthy term contracts or system access fees, which Lacavera said are the two most hated aspects of existing cellphone services identified by visitors to Globalive's website. Rogers and Bell recently lowered their prices and dropped the system access fees on their Fido and Solo brands, following the precedent set by Telus with Koodo earlier this year, in anticipation of Globalive and other new entrants coming into the market. Industry analysts have said it's only a matter of time before the big three cellphone providers are forced to axe the system access fees on their core brands as well. A number of other companies are also planning to launch services to compete not only with the big three, but each other as well. Toronto-based BMV Holdings, backed by several private equity firms, plans to launch a $40 unlimited talk-and-text service in Ontario and Quebec, while Montreal-based Quebecor also intends to have a network up and running in its home province. Both are aiming for the second half of next year. Toronto-based entrepreneur John Bitove, who owns XM Satellite Canada and a host of fast-food restaurants, also recently moved a step closer to launching his own cellphone service with the announcement of a management team for his DAVE Wireless company. Cellphone prices from existing providers are already heading downward as a result, which will make profitability for newcomers harder to achieve.

Globalive expected the big three to fire pre-emptive shots against newcomers, Lacavera said, and has prepared its business plan accordingly. "By the time we come in, Fido, Solo and Koodo will have achieved a new equilibrium," he said. "We'll come in just under that." Nevertheless, the wireless market — particularly in Ontario and Quebec — is going to become crowded next year, with three or four new players joining the existing trio, which themselves field two brands each. Not all of the players are expected to survive, even though Canada is a wireless laggard with close to 40 per cent of the population not owning a cellphone. Lacavera said Globalive will have a leg up over other new entrants because it has an established business of more than one million landline, internet and long-distance customers, which will allow it to bundle services. The company is, however, reassessing how it sells internet services in light of the recent decision by the Canadian Radio-television and Telecommunications Commission that allowed Bell to continue slowing the speeds on lines it sells to wholesale customers. While Globalive currently rents lines from Bell, the company is looking at putting its own equipment into communications exchange buildings in order to circumvent the speed throttling, which could interfere with its internet-based phone service. "[The CRTC decision] gives us a great opportunity to push forward with some investments in our DSL service to better control our own network bandwidth to our customers, as there are now clear advantages to going that direction," he said. "There is a risk that [voice over internet protocol traffic] may get adversely affected."