Before its wireless network is even built, Mobilicity has decided to hand over control to Ericsson, a global telecommunications powerhouse responsible for building many of the world's networks.
The new wireless entrant, which is set to launch cellphone service some time this spring, said on Tuesday that it has contracted out its network management to Ericsson, the telecommunications equipment builder, keeping in line with outsourcing non-core tasks to keep cellphone prices low.
"It's the most cost effective option," said Dave Dobbin, Mobilicity's president and chief executive officer, in an interview. "These guys know how to manage networks."
The move, which makes the wireless start-up the first to outsource network management in Canada, essentially takes the day-to-day operation and maintenance of the complicated wireless network and hands it over to Ericsson. The strategy could create significant cost savings for the young company, at a time when Canada's wireless sector is undergoing what could be a tumultuous bout of new competition.
But it may also keep crucial technical knowledge out-of-house, an analyst said, potentially leaving the company at a competitive disadvantage at some point down the road.
Canada's largest providers, such as Rogers Communications Inc. and BCE Inc.'s Bell Mobility, keep their network management in-house, says telecom analyst Greg MacDonald of National Bank Financial Inc. This allows them to manage complicated network traffic, monitor the flow of data through its vast system, and dispatch maintenance crews when things go awry.
For a start-up with no existing infrastructure or personnel, Mobilicity stands to save a lot of cash by partnering with Ericsson. Ronald Gruia, a telecom analyst with Frost & Sullivan, said similar deals worldwide have resulted in savings of as much as 25 per cent for carriers. Last year, the American wireless giant Sprint Nextel Corp. struck a similar deal with Ericsson, which was valued at roughly $5-billion (U.S.) over seven years.
"This is one less headache for Mobilicity," Mr. Gruia said. "There's a lot of complexity in managing a network."
Mr. Gruia said these deals are usually struck by large companies, such as Sprint, which are looking to remove complexity from vast operations. But he added that complexity is also an integral part of the telecommunications business. Managing a wireless network brings a company closer to the ground, he said, and outsourcing network maintenance to another company may result in crucial knowledge being stored out-of-house.
"You're helping these guys learn something that is not going to stay in your house," Mr. Gruia said.
But Mobilicity chief Mr. Dobbin, who has already outsourced customer service and billing systems to a third-party company, said focusing on core competencies such as marketing, sales and distribution would allow the company to keep costs down and be a true low-cost provider.