Dependencies and Wind Mobile

One of the worst things you can have in a business plan is a dependency on something that is critical but out of management's control. Although this unfortunate circumstance may be unavoidable, it still means that there is substantial risk in the business venture. Wind Mobile is dealing such a dependency right now. Interesting, however, even from the little that is publicly disclosed, it appears that they are choosing the proper tactics.

There are two important dependencies that Wind has on the incumbents:

• Roaming
• Towers

Addressing these dependencies is not easy. While it is true that there is money to be had when the incumbents -- primarily Bell and Rogers -- they quite reasonably judge that it is in their best interests to not negotiate, or to not negotiate in good faith since they benefit from a paucity of competition. This is where the CRTC makes its entrance, since it has the power to force roaming agreements and tower sharing.

This power has been used in both cases. Wind already has a roaming agreement with Rogers, one which may benefit both Rogers and Wind. Tower sharing negotiations are proceeding, but is apparently not entirely as well as for roaming. Unfortunately the sticking points in the negotiations are not public and I have no inside knowledge. Despite this gap in what is known, I think it is useful to understand this situation and assess Wind's interesting tactics to deal with what they imply are bad faith negotiations.

Some quotes from this article in the Ottawa Citizen:

More than 70 per cent of WIND's requests to share a tower have been approved, says Ken Engelhart, senior vice-president, regulatory, at Rogers...

"I am completely baffled and mystified by Globalive's (WIND's parent company's) statements," [Engelhart] said. "We have agreed to share towers with them. The vast majority of the offers we make to them they reject."

Bell was equally baffled by WIND's recent statements. Jacqueline Michelis, a spokeswoman for the company, said Bell has not turned down any requests from new cellular companies that want to share space on its towers. Michelis said while some negotiations are ongoing, no one has been barred from using Bell cellular towers.

"We have not received any final approvals from competitors to share towers. We continue our efforts to engage in this process in Ottawa and throughout the country," Campbell [CEO, WIND Mobile] said on Tuesday.

It is a time-honoured tradition for incumbent telecom operators to use the legal and regulatory process to their advantage even when the rulings are decidedly not in their favour. Rather than run through a catalogue of these, let's focus on just a couple of US examples I'm familiar with. The first is from the early 1990s (before there was open telephony competition) when competitors (known as CAPs, or competitive access providers) were allowed to provide dedicated inter-building facilities (often known as special access). Until then you could only get these from the monopoly telco, usually one of the BOCs (Bell Operating Companies). These links were of many types, including simple copper voice circuits and digital carrier systems (e.g. T1). But to be useful, these competitors needed to interconnect with the incumbents' networks. The FCC mandated this, knowing that the incumbents would never willingly permit this.

Even apart from the delayed negotiations and attempts to charged exorbitant fees, the artificial barriers that were put in these companies' paths were at times astounding. One example is that the tradesmen and engineers had to book building access long in advance and then had to be escorted every step of the way. They of course had to pay for their escort. The "cages" for their equipment were placed where, it seemed, power was unavailable, or there were concrete walls between them and the network interface equipment. They even went so far in some cases as to bar access to the restrooms, arguing that those areas were not covered by the agreements. There was more, but let's leave that for now.

Another example was local number portability, where the incumbents insisted on long and detailed form being filled out and then faxed to their office. The forms seemed to change fairly often, sometimes without notice, and they would reject or ignore any request to port a customer's number if even one letter was out of place or, so they would claim, the fax was smudged. Of course they could simply protest that the fax was never received, and there was no way to prove otherwise. It should be no surprise that they fought against electronic document transfer.

Coming back to Wind's difficulty, from the article it would appear that they have a similar situation on their hands. Rogers says that Winds kept rejecting their proposals, yet what they were is not disclosed. I can speculate that the pricing or restrictions are of the same order of ridiculousness as those US examples I gave above. It is then disingenuous for Bell to claim that "no one has been barred from using Bell cellular towers."

Unlike the CAP and CLEC examples from the US, the situation for Wind is not equivalent and, further, it appears they expected this and made plans accordingly. At the same time that they are publicizing the difficulty and appealling to the CRTC, they are erecting temporary towers in areas where they are having difficulty gaining tower access. This achieves two objectives. First, they can offer a decent though substandard level of service in the affected area, which reduces the impact of being denied acceptable terms by the incumbents. Second, using the federal laws for transmission towers to their advantage, they are bypassing municipal approvals and irritating the heck out of local residents. This guarantees a political storm that will only increase the pressure on Bell and Rogers.

To me these appear to be brilliant tactics. Now they have municipal politicians and residents adding to the clamour for CRTC action. I suspect that Rogers and Bell will soon find that they can find it in their hearts to offer better terms to Wind.