A cell tower in rural Ontario on July 15, 2020.Sean Kilpatrick/The Canadian Press
A new competitive front is emerging in Canada’s home-internet business.
A recent promotional offer from Rogers Communications Inc. RCI-B-T on fixed-wireless home internet has telecom analysts watching for signs that the service could become more popular in Canada – and possibly erode the sector’s profitability.
Fixed wireless refers to the provision of home-internet service via wireless airwaves. Instead of receiving their internet service via fibre-optic, coaxial cable or copper wires connected to their homes, customers have receivers that pick up wireless signals from nearby cell towers.
Browsing speeds offered through fixed-wireless service are often slower than those available through wired connections, as they can be impacted by factors such as the distance between the customer’s home and the cell tower, the presence of trees and network congestion.
Despite these technical limitations, some American customers have been ditching the traditional broadband plans sold by cable companies such as Comcast and Charter for cheaper fixed-wireless offerings from wireless carriers such as T-Mobile and Verizon. T-Mobile had amassed 4.24 million home-internet customers as of Sept. 30, while Verizon hit 2.68 million fixed-wireless connections.
Executives from both Comcast and Charter, meanwhile, have told investors that they expect many of the customers who have switched over to wireless home internet will eventually return to the cable companies’ products.
In Canada, however, fixed-wireless service has not taken off to the same extent, with telecoms offering the service in rural areas at pricing that Desjardins analyst Jérome Dubreuil describes as “not particularly aggressive.”
At least part of the reason why fixed-wireless home internet has not been widely deployed in Canada is because “major wireless companies in Canada all operate fixed networks,” according to Mr. Dubreuil.
“Ramping up fixed-wireless across Canada could potentially have a negative impact on wireline margins,” he explained in a recent research note.
Telecom consultant Mark Goldberg believes that something else is hampering the growth of fixed-wireless internet in Canada – a lack of sufficient spectrum, the airwaves used to transmit wireless signals.
“You need to be able to deliver consistent ultra high speed to have a credible product to compete against wireline,” he said.
That may soon change, as Ottawa recently concluded an auction for 5G wireless spectrum licences.
During the most recent Black Friday promotional season, Rogers “came out swinging” with a competitive new national wireless home-internet offer, according to Scotiabank analyst Maher Yaghi.
The telecom giant appears to have focused its efforts on Quebec, where it has mass-marketed the plans at what Mr. Dubreuil considers “competitive” pricing. Available as part of a bundle with mobile phone service, Rogers’ wireless home-internet plans offer speeds of between 25 and 50 Mbps and cost between $35-45 per month in that province, according to Mr. Dubreuil.
Rogers calls the service 5G home internet because it utilizes the fifth generation of wireless technology. The speeds it offers are significantly lower than those available to the telecom’s fixed-line internet customers. On its website, Rogers advertises download speeds of up to 2.5-Gbps for its fastest “Ignite Internet” plan. (Rogers declined to comment for this piece.)
According to Mr. Yaghi, the prices that Rogers is charging for its 5G home-internet service are in line with those offered by low-cost competitors, such as independent providers of fixed-wireless internet service and the “flankers” owned by the major telecoms.
“This shows an aggressive posture from Rogers to compete,” Mr. Yaghi wrote in a recent note to clients.
However, Mr. Dubreuil noted that the offer is “thus far limited to Rogers mobile subscribers and that the company’s current fixed-wireless pricing is primarily competitive at the lower end of the broadband market.”
“One instance of more aggressive fixed-wireless access offers does not make a trend, but we believe it would be imprudent to ignore this given the significant negative impact that the deployment of fixed-wireless access technology has had on broadband valuations in the U.S.,” Mr. Dubreuil wrote.
He also highlighted the potential positives associated with the offer, such as reducing churn – the monthly rate of customer turnover – and improving 5G monetization, “even if it never becomes a direct alternative to fibre.”
Greg Taylor, a spectrum expert and associate professor at the University of Calgary, is bullish on the technology’s prospects, noting that in some rural areas it could provide faster service than existing copper networks.
“I think wireless has a strong role to play in the future of Canadian conductivity,” Mr. Taylor said, pointing to the success of fixed-wireless home internet south of the border.
“Canada seems primed for growth in this area.”