ANTHONY LACAVERA CARRIES two BlackBerrys with him wherever he goes. One is a Wind Mobile handset, of course. The other, Rogers (with the logo scratched off).
The Globalive chairman and Wind Mobile CEO wants to make sure wherever he goes, he can do a real-time comparison of his own of his company’s network performance versus the Canadian mobile market leader, via his own handset. Just last week he was doing that in Kitchener-Waterloo, Wind’s newest market.
In a couple of years, he hopes to be able to do the same thing in many more places using a more robust bit of spectrum: 700 MHz.
“The 700 auction is, truthfully, more critical than the AWS was. It’s the most critical next step for our business. We must be allowed to acquire spectrum in that auction at a fair price,” he told Cartt.ca in an interview at the Globalive headquarters last week.
It’s been a demanding, hectic few years for Lacavera. In August of 2008, we were just finished the advanced wireless spectrum auction which wireless companies spent $4.4 billion for the raw material they need to begin – or expand – their companies. Globalive won spectrum in (almost) every place needed to launch a new national wireless company.
In those three years, four serious wireless challengers have emerged to take on Rogers, Bell and Telus: Mobilicity, Public Mobile, Vidéotron – and the largest of the newcomers thus far, Wind Mobile.
Backed by Egyptian wireless giant Orascom, Wind was an unwelcome addition to the Canadian marketplace as far as the other companies were concerned and they proved it on the legal and regulatory front. With such a huge global firm backing him (owning most of the equity, nearly all of the debt but not, critically, controlling the the board of directors), Lacavera can potentially buy network gear and handsets at far better pricing than even the largest incumbent Canadian operator.
However, as far as Canadians are concerned, the more competition, the better, no matter who put the money up for Wind’s launch.
Now with the merger of Orascom into Russian wireless company VimpelCom, an even larger behemoth is behind Wind in Canada. With close to 200 million customers worldwide, VimpelCom/Orascom alone is nearly 10 times the size of the entire Canadian wireless industry, when measured by number of subscribers.
Of those 200 million, Wind Mobile in Canada is just about 0.16% of its backers’ total subscribers. But at nearly 320,000 subscribers, it is easily the biggest of the new wireless players and seems poised to bust out this fall.
Two months ago, Lacavera (pictured at this year’s Canadian Telecom Summit), chairman of Globalive – which is also the parent of VOIP provider Yak, business solutions provider OneConnect and a number of other companies – took over the Wind Mobile CEO role from Ken Campbell and intends on pushing Wind even harder, ramping up market roll-outs and hitting the gas on marketing.
Last week he sat down with Cartt.ca editor and publisher Greg O’Brien to talk about his company, the wireless industry, the upcoming auction and the regulation surrounding it all. What follows is an edited transcript.
Greg O’Brien: It’s been almost two months since you took over as CEO of Wind Canada, so first of all, I’m wondering why the change, and what have you altered, accelerated or maybe slowed down since then?
Anthony Lacavera: It was all done on a positive note. We had initially started with a CEO (at Globalive) with Enzo D’Onofrio and one at Wind with Ken Campbell… but I just felt it was time to bring the structure together. Given the overall convergence in the industry, it was time to point our organization in one direction… There’s also a great complementary opportunity in terms of the customer base where we can sell wireless to the fixed line customer base and fixed line to the wireless base.

So, it’s really about bringing the organization together. Ken was there for three years and did a great job getting the business out of the gate… But obviously I wanted more customers, more sites, more stores.”
GOB: You’re no different than any other CEO there in wanting more.
AL: So, he was hearing from me about that every day. Would I have liked him to have done double the customers? Sure. But where he got to was great given where we started and given all the regulatory and legal uncertainty.
GOB: But is there anything specifically you slowed or accelerated or altered since then, other than what you’ve already noted?
AL: Certainly since we got the favourable decision from the Federal Court of Appeal in June, we have accelerated the rollout. Now that hopefully the regulatory and legal questions are behind us, we can focus on the business for the first time.
The incumbents were very successful in slowing us down because obviously there was a lot of uncertainty when we were not even certain we would have the license.
GOB: And big incumbents do that in every industry. The use every arrow in the quiver, as they say, including legal and regulatory.
AL: Absolutely. People always ask me: “Aren’t you upset with the CRTC?” I’d say no. “Aren’t you upset with Rogers, Bell and Telus?” No. I’d do the same thing if I was Rogers, Bell or Telus.
But we launched in Kitchener-Waterloo yesterday and I was amazed at the turnout. There were over 300 people in the store and it got a lot of profile in the area. So Kitchener-Waterloo is operational, Cambridge and Guelph will come online in the next 30-60 days and then we’re going to continue down the 401 to London, Chatham and Windsor. With the legal and regulatory questions behind us, we are really going to accelerate the rollout.
GOB: Any plans to bring Globalive, Wind and Yak under one brand and perhaps make everything Wind?
AL: I think long-term, we’ll have Wind and Wind Business Solutions. Those will really be the brands. Nothing is definitive but that’s the logical direction for us given the investment we’re making in the Wind brand.
GOB: And voice – especially long distance voice with Yak – you’ve got to see that’s a business getting smaller and smaller over time. It’s become such a commodity and headed downwards every day.
AL: Certainly the Yak long distance business is declining. It’s holding its own relative to its industry because that part of the industry is in incredible decline, so Yak is doing well compared to the industry benchmarks. But still, it’s a declining business. We have a lot of other little products in there, like cheaper international long distance, unlimited this and unlimited that but we find more and more that as people get a good broadband connection, they are migrating everything online to either a free or a pay-per-use VOIP platform.
We have launched a Yak digital voice solution… and then there’s always the debate then you’re self-cannibalizing too. We have a customer already spending X and now we’re trying to get them on the VOIP platform – they’re still spending X but we had a cost of sale and a commission…
GOB: Well, if you don’t do it, someone else will do it for you.
AL: That’s it. You got it. You’re going to lose them anyway, you might as well sell them again.

GOB: Going back to your Wind subscriber numbers for a second, the last quarterly report shows 17% growth and over 317,000 customers. Are you relatively pleased given all that happened? Did you expect more?
AL: We would have liked more. We got delayed about six months by the court because the roll out pretty much stopped when we had the decision come down against us in February. We would have already been operational in Niagara, London… there would be a lot more covered pops right now. But there’s nothing else we could have done given the legal and regulatory questions that there were.
GOB: Now that you’re clear on that front, what are your plans heading into the back to school season – and after that – the Christmas push.
AL: As we’ve been in the business, we definitely have learned the Canadian consumer has been long educated to expect a cheap phone – that they should expect a significant phone subsidy and even though it is blatantly a subsidy, even though they end up paying enormous tariffs to get access to that subsidy, they still want to do it.
We have learned that over time and also directly from our Wind Mobile community (which is pretty active online). Because (users) can access me, they do, so I get tons of real visibility into what’s going on. The world is changing that way and it gives us an advantage over the other guys because it’s not like you can call (Bell CEO George) Cope up or Nadir (Mohamed, Rogers’ CEO).
GOB: And I don’t think they’re on Twitter either like you are… They do have people on Twitter though.
AL: So, to sum it up, I’m not thrilled with the subscriber results but I don’t think we could have done anything different given all the uncertainty that was imposed on us by the regulatory question and the Telus legal action. I say Telus because it was lost largely in the media that Telus was leading that. It was Public Mobile in front, but in my opinion, it was all Telus behind it.
Now, during all that, we continued with site acquisition, but the rollout stopped.
GOB: Stores, marketing, technical everything was pulled back.
AL: Yes, but site acquisition continued, so that’s why we can really accelerate and we are aggressively building now. We, as investors, stopped the rollout because I couldn’t justify continuing with the Orascom and VimpelCom guys to continue the pace of rollout when we had a court decision that could go against us.
GOB: And, at the time, there was some political uncertainty as well because we didn’t know if the government then was going to be the government and what could change there.
AL: And also Egypt exploded, so that was going on too and the Orascom-VimpelCom merger was in question, too. It was an incredibly tumultuous time for the company. (Orascom is based in Egypt and during the conflict its CEO Naguib Sawiris was pictured consulting with high profile Egyptian politicians as the country went through its revolutionary spring uprising and is heavily involved in the country’s politics right now. Go ahead, Google him.)
GOB: Now that the VimpelCom-Orascom merger is done… have there been any changes for you? Any different instructions or excitement or level of investment for Wind in Canada?

AL: Canada was in the deal, so clearly the VimpelCom guys like the investment otherwise they would have kept it out of the deal. There was some analyst speculation that VimpelCom wouldn’t be interested (in Canada) or sell it as non-core… and that doesn’t make any sense to me. Why buy in the first place then? They wouldn’t have bought if they didn’t want us.
GOB: And you’re their only North American investment.
AL: Yes… What I’m really happy about is before that deal was completed, there was always this outstanding question that given the balance sheet of Orascom, the leverage they had in Weather Investments (Orascom’s former parent company), it was obviously a highly leveraged buyout to acquire Wind and Infostrada in Italy in 2005 and when it acquired Hellas in Greece, that was a highly leveraged transaction as well.
So there was all this debt piled up in Weather and inside Orascom and that was creating a lot of speculation saying, because Orascom is pretty highly leveraged, “how are they going to continue to fund Canada?”
With the VimpelCom transaction… there’s no doubt they have the capacity to fund, so that question just gets killed. So when we approach landowners, when we approach mall owners or we approach our competitors about tower sharing and so on, this question whether we’re going to be around because competition has never really lasted in this country is gone.
GOB: When it comes to the track record on telecom competition in this country, history is littered with billions and billions of dollars spent in vain.
AL: So much carnage.
GOB: Now that you have that stability behind you, what do you hear from (VimpelCom) and what does that allow you to do? You can purchase handsets more cheaply. Towers and radios, too. How much easier does it make your business?
AL: The financial strength of VimpelCom (190 million subscribers, worldwide) goes a long way with vendors, both handset makers and the network equipment manufacturers. From a procurement standpoint, we have a lot more leverage and certainly we will use that and are using it.
So when we go to Huawei, Ericsson, Samsung, Alcatel or Nokia for handsets or network equipment, we’re using all the buying power and negotiating leverage of VimpelCom to get pricing I think is… I don’t know what Rogers, Bell or Telus are paying for equipment, but obviously, VimpelCom is buying a lot more than they do, combined.
GOB: How would you describe the state of wireless competition in Canada at this point, now that you and Mobilicity and Public have had some time in the market, Rogers has Chatr out there too, Telus seems to be pushing Koodo really hard, Mobilicity just came out with a $25 unlimited plan…
AL: That was in response to our $29. Awesome. Look, obviously the pricing is irrational and not sustainable. So, to me you need to look at what is the staying power of different competitors because clearly no one is making money from the pricing that is there today. Something has to give. You either need a lot more subs on that network or you need to have consolidation and prices need to go back to a sustainable level. Pricing is at a deep promotional level right now.
GOB: Twenty-five bucks a month for data voice and text is pretty cheap.
AL: It’s insane. We came very aggressive with $29, but they need it. It reeks of desperation and if you look at the investor base in Globalive and in Mobilicity and Public, it’s relatively well known that the investors in Mobilicity and Public are institutional investors, private equity investors, and the investors I have are strategic operators. So I think we definitely have a substantial and sustainable advantage over those who have financial investors as backers.
GOB: You have the subscriber lead as well (among the newcomers).
AL: And we’re just going to be piling on. Having just launched Kitchener-Waterloo, we’re going to the Niagara region and London and so on, so soon, we’re going to be way, way ahead again. But with the six-month lull we had, Mobilicity was able to gain a bit of traction in Toronto because we still had some black spots – and the whole Chatr thing happened where Rogers was using misleading advertising – and I can say that now because the Competition Bureau said the same thing…
They were using misleading advertising to affect Wind. I mean, the zones and tariffs (for Chatr) were set up to target Wind. If you look at it, the Chatr coverage was identical to Wind and that definitely affected us as well…
But financial investors like (Mobilicity’s and Public’s) have a horizon and they need to get out, they need liquidity.
GOB: But for Mobilicity, its options for sale are more limited (because of the five year restriction on the sale of the spectrum license to incumbents imposed by Industry Canada for those companies who bought spectrum in the set aside portion of the auction) but you could buy them.

AL: Actually, anyone who has less than 10% market share. So MTS Allstream could buy Mobilicity, or SaskTel, Videotron or Shaw could. It’s really just Bell, Telus and Rogers who are precluded from buying new AWS spectrum licensees.
GOB: Well, any of you can be the consolidator – and this is what happens in these or any industries. There is always consolidation. Always. Eventually, it’s going to happen. Whether it’s in a month or a year or whatever, this number of operators won’t exist long-term. And you’ve said before – that you hope the be the consolidator.
AL: I think we have the backing in place to lead consolidation.
GOB: Are you satisfied with your handset selection – and what are your thoughts on the next iPhone or the Google/Motorola Android handsets that will come soon?
AL: That’s a two-hour discussion right there. On the handsets, no, we’re not satisfied. AWS is a problem for handsets. We don’t have the same selection. It is widening and we have enough, but the range is not as wide as we would like it to be. And of course on the iPhone question, AWS is not supported by the iPhone. We’ll see what happens with iPhone 5, which looks like an October time frame for its release, but I’m not holding out any hope.
But, we have a lot of very good Android phones and obviously in Canada, the BlackBerry is very popular. While RIM has lost momentum globally, Canadians know BlackBerry well and like them.
But (handset selection) is not ideal. With AWS, the roadmap has been impacted by the AT&T/T-Mobile deal where there is some speculation that AT&T will re-purpose the T-Mobile AWS for LTE and if that happens you could say the roadmap is even more restricted for AWS handsets.
We’re coming close to LTE being where everyone is playing and that is where 700 MHz comes in, so that’s what we’re focusing our attention on – the 700 MHz auction.
GOB: That’s also on my list of questions for you so let’s talk about that a little bit. I know what you’ve said about it to Industry Canada, about needing to set aside all of the spectrum for new wireless companies but have you changed your mind about any of it and are you hearing anything on when the auction rules might be released?
AL: I’ve not heard anything on when the rules might be released. We had the consultations in April… and we’re still hopeful it gets tabled in the fall which, if the new Minister of Industry (Christian Paradis) follows his predecessor, will include updates on foreign ownership as well, so that the foreign ownership rules are clarified.
That’s always been the challenge there. The foreign ownership rules are not restrictive in an of themselves. They’re fine the way they are. The problem is the lack of clarity around what is acceptable and what is not.
GOB: Well sure, we just proved that when Industry Canada and the CRTC read two different things from the same law.
AL: That’s the problem. So, whether you agree with the law or not, it requires clarification. Then you can have the debate about companies with less than 10% market share being open for foreign ownership. Regional thresholds are also important and I raised that with Industry.
In the last auction, MTS Allstream, SaskTel, Videotron and Shaw, were considered new entrants but in their respective markets, they completely dominate. So there needs to be regional thresholds in addition to national ones. You can’t just say “companies with less than 10% market share” because MTS Allstream, in Manitoba, has 60% market share and in wireless, close to 70% market share (but totals that are less than 10% nationally). They are completely dominant in that market and yet even in Manitoba they are considered a new entrant. It makes no sense.
With the 700 auction – between the set aside or spectrum caps and new entrant definition – to answer your question, my view hasn’t changed but it’s evolved. We still feel that a full set aside is a viable option but we recognize that it’s a difficult option for the government given that the lack of revenue that would result. So, if we can find a scenario that we can build off the last auction which clearly worked and was quite successful for all stakeholders…
GOB: Telus, Rogers and Bell disagree.
AL: So there were a couple of stakeholders who were not happy at all, but the vast majority of Canadians think it worked well. So, can we build on that and make an improvement to the definition of new entrant to reflect regional dominance and have a set aside formula that ensures the big guys still get what they need to continue the LTE rollout while the new entrants aren’t squeezed out.
GOB: Part of the (incumbents’) argument is that they need an open auction to get 700 in order to cover rural Canada where the wireless newcomers have no plans to do rural deployments any time soon.
AL: It depends on how you define rural, but yes, we’re not going to be in Northern Ontario any time soon… but we’re hopeful that we’ll have a 700 framework that continues the pro-competition policy.
GOB: And you’re hopeful that it will all come out at once – the foreign ownership clarification at the same time as the 700 rules?
AL: That’s what (former Industry Minister Tony) Clement had indicated he was going to do.
GOB: Plus, there was supposed to be a digital economy strategy as well. But the new minister has really said almost nothing publicly that I’ve seen.

AL: Except for the Canadian Telecom Summit.
GOB: Right. And that has been his only public appearance, I think, in front of the industry… too bad he doesn’t tweet as much as Minister Clement does.
I also wanted to ask you whether you saw the EastLink announcement today where they named Ericsson its network build partner for wireless, but in the release, voice was not mentioned at all. They called it their mobile broadband network. What do you think about the voice portion of the market? Is that just an app now where people will have their device for text and data and they’ll just use Skype or something to talk – so then it’s sorry about voice revenue, that’s just going to go away?
AL: I do think voice revenue is in real jeopardy – and the incumbents really rely on it so it is a big problem for them. But, like anything in this industry, I don’t think there’s going to be a rapid erosion in voice. Things just never move that fast. We have a long, long tail here for voice.
That being said, it is under pressure so the big thing to consider is how that will affect the competitive dynamic and what do incumbents need to do to make up for those losses and still show growth?
The answer is they need to be very aggressive against new entrants, they need to push for consolidation, they need to discourage the regional cable companies from having a real aggressive offering by partnering with them in some capacity, so there’s been a lot of speculation that Shaw and Rogers are very near, if not complete an LTE co-build.
GOB: There’s also been some thought that Shaw could do what Cablevision has done in the States and go wireless with Wi-Fi, offering a data-only wireless service… because it would be so hard for Rogers to partner on a network build with a company that has no wireless net, like Shaw.
AL: What I had heard is that Shaw would contribute cash. Cash goes a long way in something like that.
GOB: You’ve done a good job in separating yourself from the competition with some inventive marketing, like “the best conversation ever”, but what else do you have planned for back-to-school or for the Christmas selling season to stand out from this large crowd of wireless operators and brands?
AL: I’m glad you liked the best conversation ever, because that’s the type of thing I want to do more of. It garnered a lot of goodwill in the communities and a lot of positive media coverage in the segments we’re targeting – that 18-35 segment. They’re a very hard group to reach with the amount of social media out there so the best conversation ever is a great platform to build on and overall the program has been very successful.
In terms of the rest of the back to school, we want to get Kitchener-Waterloo, Guelph, Cambridge out of the gate because those are big university and college areas… For the actual back to school promo period, we’re at this $29 unlimited mark but what’s important to note is we’ve gone to a significant subsidy for the high-end smart phones.
GOB: Which is something you didn’t do out of the gate. You tried to convince Canadians that paying for the phone and having no contract was the way to go.
AL: And I have to tell you that of all the things in our marketing, that’s the one where we’ve said “you know what, it just doesn’t work.” It does work for a lot of people who don’t want that obligation of owing something… and it’s way cheaper.
So we came out with a “tab” of $150 and now it’s up to $400, so it’s effectively an up-to-$400 subsidy off the high end smart phone.
… Not having the iPhone hurts, but it’s really interesting to see how quickly Android is gaining… It’s really interesting to see Apple’s behaviour and to think back to the late 80s and 90s when Microsoft was sitting there with an open developer platform. Take the PC world and look what’s happening in the mobile world. Google is out there with Android and every hardware manufacturer is building on Android. Apple is a closed architecture and the last time Steve Jobs did that, he lost – and he lost big.
He had an early lead and was way out front and then the tsunami comes when IBM and Dell and Sony and all these guys are making laptops that are running Microsoft software and all the developers can develop very cheaply if not free on it.
Maybe this time is different because they’ve completely taken over the music industry and iTunes is penetrating into video content and books.
GOB: People think before long they’ll own the TV industry as well.
AL: I have Apple TV. It’s awesome… But I think the closed architecture is not sustainable. The world just doesn’t work that way.
GOB: So, what’s next?
AL: The 700 auction is, truthfully, more critical than the AWS was. It’s the most critical next step for our business. We must be allowed to acquire spectrum in that auction at a fair price. It gives deep, in building coverage: Parking lots, video, mobile broadband, and of course the suburban and rural build… We are not a MetroPCS Island play, as some have suggested.
GOB: And many fewer towers are required with 700 MHz, too.
AL: We’ve calculated it will be a 50%-to-70% reduction in capex for suburban rollout (as compared to AWS technology). Plus, we have to put microcell repeaters in all buildings to serve businesses (because of AWS spectrum limitations). We need AWS for densification and capacity and need 700 for coverage.
I can’t stress enough that if (Industry Canada goes) the route of making it an open auction, competition is gravely threatened.
GOB: It seems as though both sides know it won’t be a full set aside, nor will it be a wide open auction. Plus, the government wants to maximize revenue.
AL: From the last auction, the only tweaks I’d make is regional dominance should be considered, the roaming issue has to be dealt with in terms of hard handoffs versus soft, and truthfully, the tower sharing policy just has not worked. We’ve built all of our own towers. We have had no success sharing sites. The guys from Rogers and Bell all say “we’ve made numerous offers to Wind and Wind is not sharing with us.”
We say we can’t share with them because they put up so many barriers it’s just cheaper for us to go and build it.
GOB: Tower sharing has been mandated historically, sort of. There’s a reason there is only one line of utility poles down the streets. The CRTC mandates that part of the industry and regulates the rates.
AL: Every other market in the world has shared infrastructure… My investors are amazed that bell, Rogers and Telus have hung onto their towers and have said ‘we’re not going to share’. We asked Industry to clarify those rules and enforce them.”
They’re loading up the towers with a bunch more antenna racks so that the towers are fully weighted. They’re putting their own gear on there that they don’t need yet or ever and just loading it so they can say “sorry, tower’s full.”