GPRS Launch in Canada Heralds Pay-Per-Megabit Era
By Andrew Tausz, Mon Oct 08 00:00:00 GMT 2001

But at what cost? That's a key issue for Canadian carriers as they grapple with mobile data pricing.


Starting October 15, Montreal-based Microcell Telecommunications Inc. will launch the first national GPRS product in Canada.

It 's going to mean a significant jump in data transfer rates of up to 56 kbps - approximately six times as fast as current, poky WAP throughput. And it's going to be a fast leap in the billing paradigm. Microcell will start selling its GPRS technology by the volume consumed and not flat-rate pricing. What remains to be seen is how willingly Canadian users will pay for a packet?

"Setting a rate plan for a carrier can be seen as the most simple or complex task known to mankind. But we're convinced that selling by megabyte for data transmissions is the model that's going to evolve over time," says Alex Brisbourne, vice-president and general manager of business development for Microcell Connections.

Operating under the Fido brand, Microcell will charge subscribers for its cheapest GPRS data-only plan $25 (all figures in Canadian dollars) for the first 2 Mb and then $10 per additional Mb. Three other plans will be offered, with the most expensive plan at $150 for the first 100 Mb and $1.50 for each additional Mb. Subscribers with WAP phones will be charged 5 cents per Kb. At first, Microcell will sell a Motorola GPRS terminal at $500. Other GPRS phones will be introduced on availability.

Brisbourne says Microcell examined pricing models for GPRS in Europe and did extensive market research in Canada before going with the pay-per-megabit gambit. The carrier expects to gain market share by being an early mover in the GPRS field.

"The GPRS pricing by Microcell does seem expensive. But it's a little bit cheaper than what AT&T charges in the States. Yet it's going to take consumers some time to understand just how much money they're spending," says Jeremy Depow, a senior analyst with the Kanata, Ont.-based Yankee Group in Canada.

He points out there's a heavy premium imposed for mobility, with costs for 100 MB of data an astonishing 1,000 per cent more for wireless access than fixed wireline charges. Enterprise users tapping corporate LANs for database info or downloading 30 e-mails a day with attachments to a laptop could easily exceed 1 Mb in a matter of minutes.

"GPRS is still more of a trial for consumers and businesses. When we say 2.5G GPRS, we're talking about 100 kb/sec. Microcell is up to half that throughput now. I think most consumers will have a wait-and-see attitude until the service gets up to full speed and the prices drop," says Depow.

Iain Grant, managing director with Brockville, Ont.-based The Seaboard Group, also argues that at first blush Canadian GPRS pricing is no bargain. "Microcell's tariffs are too steep for generic corporate e-mail. But there's an extraordinary pent-up demand for high-speed, relatively low-cost data transmissions," he says. Grant is betting the pricing will come down substantially once Canadian wireless carriers successfully migrate from circuit-switched to packet-based data.

Canada's other three national carriers - Bell Mobility, Rogers AT&T Wireless and Telus Mobility - are gunning for packet-based data services by year-end or early next year.

"We will launch imminently - in telco time that's sometime this year," says Stephen Jack, director of market business services for Rogers AT&T Wireless. In July, Rogers completed the installation of its GSM/GPRS wireless network in 25 of the largest markets across Canada. "From an operational sense, we're ready," says Jack, noting the carrier is ensuring its backend processes and billing systems work before the service commences.

Rogers' approach takes a different tack to that of its U.S. partner, AT&T Wireless. South of the 49th parallel, AT&T decided to roll out its GPRS capabilities city by city. Seattle and Portland were the first two to go live.

In Canada, Rogers will turn on the switch nationwide. In fact, it's GPRS rollout will be the largest launch in North America, a network spanning more than 3,000 miles and covering 93% of the Canadian population. The carrier is finalizing deals with manufacturers such as Ericsson, Motorola and Nokia for GPRS terminals as well as with PCMCIA card makers like Sierra Wireless.

Bell Mobility and Telus Mobility are in the midst of testing 1xRTT (1 x Radio Transmission Technology) - an interim step before moving to the wideband CDMA 3G wireless standard. It will mean data speeds roughly 10 times faster than current PCS, but less than half the speed of mature 3G. "We're moving in stages. The full singing and dancing version of 3G will allow for 384 kbps for wireless access while driving and 2 megabits for stationary use," says Vino Vonerai, director of industry relations for Bell Mobility. Speech travels well over 9.6 kbps but fast wireless Internet access and multimedia communications require about 2 megabits per second.

Not surprisingly, Bell Mobility, Telus Mobility and Rogers AT&T Wireless are skimpy on pricing details for packet-based transmissions. But they all will likely follow Microcell's lead in charging by the amount of data transferred and not by airtime.

Carriers here are no doubt anxious to start recouping some of their formidable capital costs in building out high-speed data networks. Earlier this year, the established Canadian wireless fraternity paid $1.48 billion to the federal government for 3G licenses. Bell Mobility and Rogers AT&T Wireless were the two biggest spenders for new spectrum, paying $720.5 million and $393.5 million, respectively. Telus Mobility augmented it's spectrum presence in Eastern Canada, forking out $356 million for licenses in Toronto, Montreal and further east. For its part, Microcell came up empty as it withdrew in the early rounds of bidding.

In the scheme of things, GPRS is a test bed for future 3G applications and payment options. Based on the European experience, Microcell's GPRS tariffs appear to be in line with the rates of carriers in France, Germany and Italy. But GPRS is still a costly indulgence compared to fixed-line data services. As a recently Yankee Group Study points out, "GPRS becomes uncompetitive with fixed beyond 500 KB of data consumption and at around 2MB against ADSL."

Canadian carriers could look at the wildly successful SMS service in Europe as a business model - mass adoption predicated by low rates. So far, though, the megabyte rates for GPRS cost mega-bucks - a chilling scenario for large-scale implementation. It also may take longer for Canadians to accept packet billing because subscribers here are not as familiar as their sms-savy European counterparts to paying by text rather than minutes.

In other words, the always-on GPRS technology may take some time to get turned on.

1 CAD = 0.639017 USD

Andrew Tausz is a freelance writer based in Toronto specializing in telco issues. He can be reached at www.tausz.ca.