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(Photograph by Lindsay Page for Report on Business Magazine)
(Photograph by Lindsay Page for Report on Business Magazine)

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Why the wireless war is good for you Add to ...

But not everyone is keen on locking into a contract in exchange for a discounted handset, since getting out of the deal early comes at a hefty price. So the big companies can only expect so much goodwill from that model. Instead, much of their effort will be spent attacking the newcomers where they are arguably weakest: on the strength and reach of their networks.

In less than a year, Wind has built a big chunk of what will be a $1-billion nationwide network. But when it switched on the system in Toronto this past winter, it was criticized for spotty coverage and dropped calls. Lacavera argues that it takes time to build a network-his bigger competitors have had decades to do so-and that Wind is fixing gaps as they're discovered. "We knew that it wasn't perfect at launch, and we know that it's a work in progress," he says. "Certainly Mobilicity and Public are going to have these issues as well. I just don't think that it's possible to turn on your network and have perfect coverage."

Mobilicity and Public have another vulnerable spot, in the form of roaming. Both are strictly regional players. Public spent $52-million buying spectrum from Windsor to Quebec City only, and its customers aren't yet able to roam. Mobilicity's $243-million got it 10 of Canada's 13 biggest urban markets. So, while calling is cheap inside those networks, subscribers will incur roaming charges if they venture outside that footprint-something the incumbents are eager to point out.

It might be easy to dismiss the new players, with their smaller networks and less flashy handsets. Staring down two mighty cable companies? Not so much.

The one thing about my business is, there really isn't one enemy," says Joe Natale, executive vice-president at Telus-which itself rose from regional player to national force a decade ago.

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A word of advice for Natale: He should probably keep an eye on Calgary-based Shaw. The showdown between the Western rivals is already getting dirty, with price undercutting on TV and home phone services, and verbal jabs from the corner office-and Shaw hasn't even entered the market yet. (Likewise, Bell and Vidéotron are already duking it out in Quebec.) These battles are all about bundling. The theory goes: If a customer is already buying one product from you, you can probably persuade them to buy others by simply discounting the price and consolidating it all on one bill. It's the holy grail of telecom service providers.

Take Shaw, for instance. It dominates cable TV from Manitoba to the West Coast, and has managed to steal nearly one million home-phone customers, mostly from Telus, in recent years, by bundling wireline and cable services at a discount. Add in Internet access and the rates get cheaper still. It's a potent strategy: 42 per cent of Shaw's basic cable subscribers have already signed up for its home-phone service, which has been deeply discounted.

Telus has responded with Internet-based Telus TV, which gets cheaper when bundled with wireless and Internet.

This has all the makings of a price war.

"I know they're doing a big push," Shaw CEO Jim Shaw said of Telus during a call with analysts this spring. "But we are not the least competitive guys in the world."

The boisterous Shaw is rarely one for such understatement. It didn't take long for Telus's Darren Entwistle to fire back, telling analysts: "I would like to make it clear that we're not going to allow [Telus]to ignore the magnitude of price aggression [from Shaw]that we have been experiencing in the marketplace indefinitely. So the landscape is going to change."

The dollars are flying. Telus is spending $1.7-billion to expand its network for wireless and Internet. Shaw, which spent $190-million on spectrum licences, will be dropping nine figures on building a network across Western Canada in time for next year's launch. And for $2-billion in cash and assumed debt, it acquired all of CanWest Global Communications' broadcasting assets, which it hopes to tie into the wireless launch by streaming TV content to its phones.

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