Thursday, February 18, 2010
Canada vs. U.S.: Who Will Win in Wireless?
If you think Americans have had a tough time with their cell phone carriers, you haven't heard about Canada's woes. For years, Canada was a somnolent mobile desert, ruled by a slow-moving oligopoly of wireless carriers that often cloned U.S. product lines and required three-year contracts.
But over the past year, something very radical happened in the land of maple-flavored toques.* First, all three of the country's major carriers (and some minor players) started building HSPA+ networks. Then, since they were all using the same standard, they started competing on phones. And now, with fearless new companies coming into the game, plan prices are starting to come down, too. If this trend continues, Americans may soon be headed up north to smuggle cool phones across the border, rather than the other way around.
Here are three lessons the U.S. needs to learn before we become a mobile backwater compared to our Molson-swigging neighbors.
Lesson 1: Standards are great for consumers. Here in the U.S., we have a wide array of different wireless networks: HSPA 7.2, HSPA+, CDMA, iDEN, and WiMAX. That made sense when the networks were being built, but now it just throws up a bunch of barriers to competition and choice. Most of the world has standardized on HSPA+ and the upcoming LTE, which makes it more difficult for the CDMA, iDEN, and WiMAX carriers (that's everyone but AT&T and T-Mobile) to tap into the wide world of phones, iPads, and such.
The advantage of using a common standard is most clearly shown by the fact that now, in Canada, there are three carriers that offer the iPhone. Three. Competition! We don't have that here, in part, because our number one, three, five, six, and seven carriers all use CDMA. Apparently, Apple doesn't want to build a CDMA iPhone just for the U.S. and a few other countries, or throw over AT&T just to gain access to the #number four carrier.
Some of this will straighten itself out as Verizon, AT&T, MetroPCS, and T-Mobile all move to the next-generation LTE system over the next several years. But that's "over the next several years," and it still leaves Sprint scouring the globe for the occasional WiMAX device hidden under Motorola's couch cushions.
Interestingly, the HSPA+ transition in Canada wasn't mandated by the government. It was a business decision on the carriers' parts.
Now, this could all turn around again; we don't know how quickly the Canadians will be able to transition from HSPA+ to LTE. But for now, they have the upper hand.
Lesson 2: The consumer, not the operator, should be the customer. Right now, in the U.S., consumers are not the customers for mobile phones. This sounds weird, but it's true. Because of our huge wireless carriers and oddball standards, manufacturers are constantly kowtowing to operators not consumers. Even Apple does this; otherwise you'd be able to tether your iPhone by now.
In Canada, we're starting to see global-standard phones, such as the Nokia N-series, the Sony Ericsson Xperias, and the LG New Chocolate, that haven't been heavily tampered with by carriers. That's going to result in some exciting choices for Canadians.
This isn't just about Canadian carriers all going to global HSPA+. Canadian carriers are much smaller than AT&T and Verizon (think one-tenth the size) so they have less buying power. But I think it's safe to say that when carriers spec out phones, consumers lose. I'm not sure how to stop the carriers from interfering with phone features and choices in the U.S.
Lesson 3: More spectrum and more entrants equals a better market. The HSPA+ revolution in Canada created competition between networks and handset makers, but it didn't do much for service plans. Now, two new entrants, WIND and Mobilicity, are beginning to make waves with low-cost, no-contract plans combined with surprisingly powerful phones.
This is what Cricket, Boost, and MetroPCS have done for a while in the U.S., of course. But while our low-cost carriers have been curiously tentative about the fast-growing smartphone market, three out of four of WIND's currently available phones are smartphones. Just as WIND gets up and running, Mobilicity will hit the Canadian market and then there's Quebec's Videotron too.
A continual flow of new entrants with new ideas keeps the big guys from falling asleep at the wheel. While the U.S. has zero chance of seeing any truly new wireless carriers soon, we could get a similar shot in the arm if some of our smaller carriers merged to play in the top five. A combined MetroPCS/Cricket or a U.S. Cellular/Alltel/Revol merger could definitely throw our top four carriers off guard. Then maybe we'd have some lessons to teach those Canadians again.