Drawing Comparative Inferences from Canadian and American Network Investment

Peter Nowak recently had a good post concerning the nature of mobile pricing in Canada. You really should go read it all. However, there was one key piece that he noted, towards the end, that deserves to be highlighted. Specifically:

It was only a few short years ago when Bell and Telus were getting pummeled by Rogers, thanks to that company’s chosen technology. Rogers, like most of the carriers in the world, went with GSM network technology while Bell and Telus opted for CDMA instead. Without getting technical, GSM won, and Apple put the exclamation point on the battle in 2007 in the form of the iPhone. Unable to offer the latest and greatest devices, including that quintessential and hotly desired device, Bell and Telus moved quickly to upgrade to the next greatest and latest 4G technology. Rogers followed suit. The same is happening in the United States, with Sprint and Verizon – both former CDMA users – both spending heavily on LTE.

Network investment in both Canada and the United States does not reflect the competitiveness of either market, but rather phone makers’ decisions on technologies. Carriers are simply being pulled along for the ride.

One thing I may indeed have been wrong about in the past is how high prices were mainly the result of the lack of foreign competition in Canada, which wasn’t legally allowed until last year. The poor technological choices made by a number of carriers can’t be discounted as a factor. The industry is now waving the billions they’re having to spend to correct those mistakes in the faces of consumers and government, with prices – be they as they are – the necessary rationalization.

A key aspect of Nowak’s argument towards the end is that network investment was driven not so much by carrier-driven decisions but by the decision of a device manufacturer: Apple. I’d not really considered how Apple’s decision to ‘cut out’ a group of telecom companies from offering the iPhone could have been/was significantly responsible for massive re-engineering and investment in compatible networking technologies (i.e. GSM). Obviously such changes to the network infrastructure came at a significant fiscal cost.

It would be interesting to take Nowak’s point and then build on it to better understand how Canadian three year contracts might have alleviated the ‘hurt’ experienced by Canadian mobile providers. Specifically, we could ask the following:

  • what was the churn that Bell and TELUS experienced as a result of not being able to provide the iPhone?
  • was churn in Canada comparable to the CDMA providers in the United States?

Based around these questions we could establish a working hypothesis that churn was lower in Canada than the US. If this hypothesis bore out when tested we could try to ascertain why it bore out:

  • were Canadians happier with Bell and TELUS than their American counterparts?
  • were Canadians unable to choose their preferred economic options at a rate comparable to American customers because of the longer contracts associated with the Canadian carriers?
  • Other?

In effect the bad bets of American and Canadian carriers on CDMA offers an interesting comparative case from which we can draw inferences about the effects of the much-loathed three year cellular phone contracts in Canada. It would be awesome to see the numbers crunched to evaluate the effects of those contracts, especially before and after Bell/TELUS look launched their HSPA+ network(s). From there, I’m sure some interesting thoughts on the CRTC’s wireless code of conduct (which includes effectively mandating two year contracts) could follow: if a device as disruptive as the iPhone appears on the market, what would it do to the Canadian telecommunications market?