Even after the stores opened and the customers have packed home with their lawn chairs, the disaster that has been the iPhone’s launch in Canada continues to ring (pardon the pun) in the ears of consumers. I took a spin around Vancouver on my motorcycle (sorry, going too fast for photos) this morning at 7:30 and counted 250-300 people at the Broadway & Arbutus Rogers store, some TV trucks, and some balloons but otherwise not much fanfare. The smaller stores had maybe a dozen or so people hanging around at best.

I was concerned that the media were going to get taken on a ride by Rogers with this launch. Fortunately, the CBC is reporting that desperately few of the customers who were encouraged by Rogers to go to Rogers flagship stores in 6 Canadian cities have walked home with the prize, while still others are getting denied the purchase because some Rogers outlets are showing preference to new customers (and thus, highly-spiffed new activations) over existing ones. The CBC has thus far been on the money on this issue I hope this REAL story is echoed in other media over the course of the day.

As Daniel Smith reported, Apple may have heard the more than 63,000 voices at RuinediPhone.com and diverted shipments destined for Canada to elsewhere. Plausible, but this clear internal “leak” might actually be a way for Rogers to blame the lack of supply on Apple in a very subtle way.

This is what happens when big, arrogant service providers who fail to remain customer-centric come into contact with a mass-market trend. The launch of the iPhone in Canada could (should) have had a huge impact on subscriber loyalty and shareholder value for Rogers, but today even those few folks lucky enough to actually have paid through the nose and signed their lives away on a 3-year contract to get an iPhone are embittered by the experience.

It seeps down from those obnoxious gouging prices and the three-year lock-in (in an industry where the life cycle of a phone is less than 2 years) all the way to the flagship Rogers store passing out Granola Bars from Costco instead of paying the overnight campers the respect of some eggs or pancakes (they promised ‘breakfast’).

Somewhere in between those two offences is the fact that, with diminished supply on hand, Rogers store managers failed to tell those in the lineups that there weren’t enough devices to go around. Moreover they failed to give those people any promise that they might get one sometime in the future, so as a result many fan boys have now sat on their asses outside a store all morning for nothing.

Rogers created a media event around the iPhone launch.. great for free marketing, bien sur. They made promises about special promotions and breakfasts and early openings for these stores, and encouraged crowds to concentrate at specific stores to make sure they’d be part of the media frenzy and make the event seem much larger in scale than it actually is. It’s an even trade, I guess, when the consumer ends up getting what they went there for. But with the biggest stores having fewer than 100 units on hand you can do the math: of those 200-400 people who waited at each of the flagship stores, as many as 75%-80% did it for nothing.

In essence, Rogers exploited them to generate buzz and get some free marketing, and gave them nothing in return. So let’s do the math: A Triple-Lock for the lucky few, a lost night’s sleep for many, and for everyone a granola bar.

Yeah, screw you too, Rogers.

The next thing I’ll line up for is to be the first subscriber on the nation’s next GSM wireless carrier.

Telus and Bell have confirmed they’re in merger talks, after BCE earlier announced it was mulling over its options earlier this Spring. Both companies are weakened by declining landline revenues as competition from Wireless and the Cable Guys and, to a lesser extent pure-play VoIP contenders, is heating up. This makes a lot of sense, but probably not for the reasons that your average reporter would think.

It has been known for some time that CableCos would move into the voice business, which thanks to VoIP and their co-ordinated efforts through PacketCable, was almost trivially easy to accomplish. Both of Canada’s major telecom service providers find themselves in a major uphill battle.

This slide, from Telus’ August 2006 Q2 investor conference call tells the story:

Things are not looking good on the home front. To make things worse, and while Telus contends that the wireline side is “stabilizing”, revenues are still dropping and this slide from the Q1/2007 investor call shows:

While it did indeed show that SkaterBoy is in fact Rocking it With IP (say hi Jill Schnarr!), what’s easy to see is that the base is eroding, both in terms of subscriber count and revenues. Their Broadband penetration is not so good, either. Bell Canada, with its larger service area and more densely-populated markets, appears to be doing better when compared to Telus, according to LightReading (see charts below), but they are at present weathering the storm .. not lighting the world on fire.

By comparison to Bell’s numbers here, Telus’ Broadband Internet subscriber base is a claimed 949,000 users as of the end of Q1/07.

Both companies are looking to data and wireless to grow the business. Wireless is a growth industry, of course, but I would contend that, when it comes to wireless subscription growth, we are in a bubble. Saturation has already caused wireless subscriber growth to begin to taper off, and as in the telecom bubble of the late 1990s, that drives up customer acquisition costs (since these companies would sooner pay more $$ for users than innovate in order to attract them). Perusing the Telus Investor Slides linked above reveals exactly that. Data is growing, but likely only within their existing base of wireline subscribers. And if that base continues to churn as fast as it is, that market will reach true saturation a lot sooner than wireless.

Launching broadband as a service is one thing. Broadband is, however, a commodity — as are residential and business subscriber lines. Telus, Bell, and all other ILECs are presently learning what happens when your basic services remains.. uh.. basic, and your only foils against competition are pricing and bundling. Furthermore, service innovation within the ILEC world has totally stagnated, insofar as new service development is concerned, as they’ve focused on pink elephants like IPTV (which, this author contends, won’t work) and Verizon’s IOBI (which suffers from huge capital costs for minimal incremental benefit). The fundamental problem for the Incumbents is simply making things scale on the telecom network. It wasn’t built for that, and even with IP upgrades grafted and forklifted into place, it still doesn’t have the bandwidth for compelling services. The Cable Guys have their own problems, but they get a free ride for now thanks to the fact that their delivery of TV entertainment is broadcast easily down their plain old copper wire — including High Definition.

The Incumbents need to bite the bullet and implement FTTH to get themselves out of this hole, but some analysts estimate the cost to be about $9650 per subscriber. That’s a purchase order that I would not be excited to sign, and more than a few pundits think that Verizon’s $23 Billion bet to wire up 18 million homes will kill the company.

So, while Canada’s two big incompetents incumbents are struggling with a sharpening decline in their base, the Shaw and Rogers folks are starting to kick ass, seeing growth on all fronts. Shaw, which started late in the telephony game, has been growing all of their services, with about 2M cable subscribers, 1.5M internet subscribers, and around 100,000 telephone customers. They’ve added the latter service with minimal cost impact and a very low customer acquisition cost, and the ARPU of a Shaw HD Cable customer with High-Speed Internet and one phone line is very near $200/mo. This is the holy grail of residential telecom. And while they start from a smaller base of customers, their capital cost to deliver multiple services is a lot lower.

So, what does this all mean? Current default logic in the Telecom arena is that all of the players need to be at least a Triple-Play and arguably a Quadruple-Play in order to grow their services and revenues, and defend their userbase. I think that I’ve presented a straw-man case illustrating that the Cable Companies, because their networks already do the harder thing (distributing realtime entertainment cost-effectively) with relative ease, have a decisive advantage leaping toward this, particularly because Rogers Communications already owns a wireless Service Provider.

Telus and Bell should and probably will merge in order to cost-optimize, lay off a bunch of redundant workers, and debt-finance the building of Fiber-To-The-Home. They will need to do so before they are, over the course of the next decade, eclipsed by the more nimble and more entertainment-oriented Cable companies. It will not be easy for Canada’s two incumbents to recognize their lot at the moment as dumb-pipe carriers, and the only network which it has been established can reliably and scalably deliver realtime entertainment and content is Fiber.

Cable Guys ultimately need to get there, too, as we’ll increasingly want to Time-Shift our media, but PVRs and HD are stop-gaps which are saving them from needing to make an early, costly, network upgrade. Besides, Cable Companies needed to upgrade their networks substantially for broadband, and did so during the 1990s, delivering Fiber to the neighbourhood (FTTN). Making that next leap, while costly, will not kill them.

Which leads to the following hypothesis:

Is now the time to merge Shaw and Rogers? As the only major Service Provider in Canada without a Wireless business unit, Shaw is the clumsy kid at the prom in the powder-blue suit. Definitely the smallest of the four, Shaw doesn’t have as diversified a business as any of the other three but has stuck to its knitting. It has also been busily snapping up smaller Cable Companies in the West, including my friends @ Whistler Cable. Mark Evans thinks this is a possibility, too, for the record, and the companies have a history of collaborating to achieve efficiencies. Jim Shaw and Ted Rogers, while officially rivals, often reveal a friendly candor and mutual respect. The idea is alluring.

The reality is that if Telus really wanted to cement its future, it should buy Shaw. But this would create a physical monopoly in the West, rather than the defacto monopolies which exist today, and the CRTC and Industry Canada would never allow it. But one other opportunity may lay on the horizon: If Telus and Bell merge, they will have to release some of their wireless spectrum back to the regulators. If this occurs, then the market may open up for another major wireless carrier to emerge in Canada: one funded by that quiet kid in the Powder-Blue suit. If the Quadruple-Play hypothesis is correct then this will allow Shaw to compete on a level playing field with a merged or non-merged Telus and Bell, and maintain parity with Rogers. And while it’s probably not a great idea to have wireless this consolidated over the long-term, this could allow Jim Shaw to build up some value in Shaw Communications prior to the inevitable merger with Rogers.

Convergence freaks tend to assume that all roads ultimately lead to all of your myriad services being delivered via a fibre-optic cable straight into a hub in your basement (or storage closet) regardless of whether your Service Provider came from Cable or from Telecom. I don’t disagree, but I do contend that its a twisted, heavily contentious road that’ll get us there. And fortunes will be made or destroyed in the process thereof.

NEW YORK (AP) –Here’s another reason to check your telephone bill closely.

A subtle realignment this fall in the nation’s inscrutable tangle of phone systems could cause a surprising increase in what some consumers pay to call cell phones from traditional landlines.

The change, rooted in the different ways landline and wireless phone networks are laid out, means some calls to cell phones that were once considered local now incur higher toll charges.

For most people, the increases will be negligible. Verizon Inc., the largest regional phone company, estimates that in the 33 million households it serves, the average bill will rise pennies per month.

Even so, Verizon warned customers about the new policy in an insert with September phone bills and acknowledged that some people’s monthly charges could jump $10 or $20 unless they change their calling habits.

“This change may come as a shock to many wireline customers the first time they see it on their bills, and could cause callers to hesitate next time they reach for the phone and want to dial a wireless number,” said Travis Larson, spokesman for the Cellular Telecommunications and Internet Association, a trade organization for wireless carriers.

No serious trouble reported

The billing change doesn’t appear to have caused serious trouble where it already has been in effect, mainly in the West and Midwest.

“I’m not aware that this is an issue that we get a lot of consumer complaints on,” said Federal Communications Commission spokeswoman Meribeth McCarrick.

Why is this happening?

Area codes are divided into “rate centers” with their own number prefixes. Calls to nearby rate centers are considered local, while those to further rate centers generate intra-state or regional toll prices. Calls between more spread-out points count as long-distance.

Because of differences in how wireless networks are set up, wireless carriers don’t need to get phone numbers in every local rate center. So your cell phone could have a number from a rate center distant from your home.

For such customers, a call from home to their cell phone could incur per-minute toll charges.

To stimulate use of mobile phones, wireless carriers years ago got landline companies to treat such calls as local. Wireless carriers reimbursed landline companies for the lost toll revenue — a process known as reverse billing or wide-area calling.

Reverse billing diminishes

Reverse billing has diminished over time, largely because wireless companies acquired numbers in more rate centers as their customer base exploded.

For example, in New York state, fewer than 6 percent of wireless phone exchanges still employ reverse billing, said Michael O’Connor, a director of federal regulatory issues at Verizon.

Similarly, Sprint PCS estimates that wireless billing covers fewer than 5 percent of its customers, said Jack Weyforth, manager of carrier interconnection. AT&T Wireless spokeswoman Rochelle Cohen said “a very small percentage of our customers have these sorts of phone numbers.”

On Nov. 24, reverse billing will begin to die altogether. The FCC is changing how phone numbers are allocated to different providers and in many cases reverse-billing systems aren’t sophisticated enough to deal with that switch.

The final blow to reverse-billing should come next year as consumers get “number portability,” the right to keep their mobile numbers if they switch carriers.

Michael Altschul, general counsel for the cell-phone industry group, said local phone companies asked regulators in several states to let them kill reverse billing.

That forced wireless companies to establish their own connections in local rate centers by leasing costly equipment and space from landline companies, he said.

“We’re disappointed with the (local phone companies) that they’re discontinuing this service, because it was meeting the needs of customers,” added Diane Rainey, a spokeswoman for wireless carrier Nextel Corp. Unclear how many affected

Sam Simon, chairman of the Telecommunications Research & Action Center, a consumer rights group, said complexities of the phone system make it unclear how widespread the new charges will be.

No phone company would give details on where people could be affected.

All nine states where BellSouth Corp. is the local phone provider got rid of the old billing system by Oct. 1, spokesman Jeff Battcher said.

In the 14 states served by Qwest Communications International Inc., the change is scheduled to take effect in November, though Qwest is working on ways to extend the old system wherever possible, spokeswoman Carey Brandt said.

Many SBC Communications Inc. customers experienced the change several years ago. People in Texas, Oklahoma, Arkansas, Missouri and Kansas will begin to see it this fall, SBC spokesman Kevin Belgrade said.

Copyright 2002 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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http://www.pcsvision.com/pictures.html

To me, the applications for this are interesting, and none of us probably really knows what the broader uses will be. I saw someone on another mailing list refer to this as the “next big thing” and I thought that was an interesting opinion because it challenges my own notion that these types of services never really see the light of day ’cause people just can’t figure out what to do with them..

I think I understand what some people see in these types of services but I’m not sure that they really defeat the all of the problems with this particular phone. In this case you still need to have a digital camera which either puts a photo up on the web somewhere, or you need to have their special digital camera that connects to the PCS phone.

That factor means difficulty of use which means further difficulty surmounting the chicken/egg problem. If the camera was built-in to the phone, well, that’s a killer app. But even then you still need to have the special, highly expensive phone at both ends in order for it to work. People rarely buy mobile phones in groups, at the same time; or even with the same carrier.

Anyone else have any opinions?

-Ian.

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http://www.handspring.com/products/treo/index.jhtml

Now what we need is a wireless carrier that will let us have multiple devices on one phone number, so that when I DON’T need this big clunky thing I can just haul around my tiny Samsung.

-Ian.

http://dailynews.yahoo.com/htx/nm/20000713/wr/sprint_worldcom_dc_1.html

Thursday July 13 12:44 PM ET WorldCom, Sprint Call Off $120 Billion Merger By Ian Simpson NEW YORK (Reuters) – Long-distance telephone powerhouses WorldCom Inc. (NasdaqNM:WCOM – news) and Sprint Corp. (NYSE:FON – news) canceled their $120 billion merger plan on Thursday in the face of opposition from U.S. and European regulators. Analysts said the collapse of the deal makes both companies attractive takeover targets, especially for foreign firms seeking a U.S. foothold, but Sprint’s top executive declared that his company was not for sale. On Wall Street, investors reacted to the news that the merger was off by bidding up shares of WorldCom. The No. 2 U.S. long-distance company was up 2-7/8 at 47-3/8 in midday trade on the Nasdaq stock market and was among the most active issues. By contrast, shares of Sprint, the No. 3 U.S. long-distance company, were off 15/16 at 46-3/8 on the New York Stock Exchange. WorldCom, based in Clinton, Miss., and Sprint, based in Kansas City, Mo., said they had called off the merger because of pressure from the U.S. Justice Department and the European Union. The regulators moved to block the deal two weeks ago, saying a merger would cripple competition in the Internet and long-distance telephone markets. In a statement, WorldCom Chief Executive and President Bernard Ebbers said the collapse of the deal would mean less innovation and choice, and higher rates for residential telephone service. The companies also said the conditions for the deal demanded by the Justice Department “would compromise the customer and financial benefits of the merger.” But Joel Klein, head of the Justice Department’s antitrust division, hailed the collapse of the merger pact. “The merger would have led to higher prices, lower service quality and less innovation for millions of American consumers and businesses,” he said in statement. Sprint Chairman and Chief Executive William Esrey said Sprint was not discussing a merger with any other company. ”We’re talking to no one. We have talked to no one,” he said in an interview on business TV network CNBC. “Sprint is not for sale,” he declared. Analysts said WorldCom and Sprint could become takeover targets for international companies seeking a foothold or a bigger presence in the U.S. market. Germany’s Deutsche Telekom AG (DTEGa.DE) (NYSE:DT – news) tops the list of prospective bidders. Also believed to be interested are Nippon Telegraph and Telephone Corp. (9432.T) (NYSE:NTT – news) and France Telecom (FTE.PA) (NYSE:FTE – news). “Deutsche Telekom has been visibly on the prowl,” said Richard Klugman, an analyst with Donaldson, Lufkin & Jenrette. ”I don’t know how to handicap who they are going to get, but certainly WorldCom and Sprint would be high on their list.” The German company wants to get into the U.S. market mainly to add customers and gain access to a fiber-optic network and Internet backbone. It has been linked to a string of possible targets, including Sprint and Qwest Communications International Inc. (NYSE:Q – news). Published reports earlier this week said Deutsche Telekom had approached wireless carrier VoiceStream Wireless Corp. (NasdaqNM:VSTR – news) about a takeover. Local phone company BellSouth Corp. (NYSE:BLS – news) could also re-emerge as a suitor for Sprint, analysts said. BellSouth bid for Sprint last autumn. Sources have said WorldCom could shed its consumer long-distance business and focus on the more lucrative segment of providing data, Internet and international communications services to corporations. The WorldCom-Sprint merger plan sparked controversy from the moment it was announced last October. The head of the Federal Communications Commission said it would hurt the robust competition that had driven down long-distance rates.