Rogers 2007 Annual Report Download - page 33

ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT 29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Migration to Next Generation Wireless Technology
The ongoing development of wireless data transmission technolo-
gies and the increased demand for sophisticated wireless services,
especially data communications services, have led wireless provid-
ers to migrate towards the next generation of digital voice and
data broadband wireless networks. These networks are intended
to provide wireless communications with wireline quality sound,
far higher data transmission speeds and streaming video capabili-
ties. These networks support a variety of increasingly advanced
data applications, including broadband Internet access, multi media
services and seamless access to corporate information systems,
including desktop, client and server-based applications that can be
accessed on a local, national or international basis.
Development of Additional Technologies
In addition to the two main technology paths of the mobile/
broadband wireless industry, namely GSM/HSPA and Code Division
Multiple Access/Evolution Data Optimized (“CDMA/EVDO”), three
other significant broadband wireless technologies are in the pro-
cess of development: WiFi, WiMAX and Long-term Evolution
(“LTE”). These technologies may accelerate the widespread adop-
tion of digital voice and data networks.
WiFi (the IEEE 802.11 industry standard) allows suitably equipped
devices, such as laptop computers and personal digital assistants,
to connect to a local area wireless access point. These access
points utilize unlicenced spectrum and the wireless connection is
only effective within a local area radius of approximately 50–100
meters of the access point, and provide speeds similar to a wired
local area network (“LAN”) environment (most recently the version
designated as 802.11n). As the technology is primarily designed for
in-building wireless access, many access points must be deployed
to cover the selected local geographic area, and must also be inter-
connected with a broadband network to supply the connectivity
to the Internet. Future enhancements to the range of WiFi service
and the networking of WiFi access points may provide additional
opportunities for wireless operators or municipal WiFi network
operators, each providing capacity and coverage under the appro-
priate circumstances.
WiMAX (the IEEE 802.16e standard) is a relatively new fourth
generation (“4G”) technology that is being developed to enable
broadband wireless services over a wide area at a cost point to
enable mass market adoption. By contrast with WiFi, WiMAX is a
cellular-like technology that operates in defined, licenced frequency
bands and is thereby not hampered by interference from other
applications and services using the same frequencies. The tech-
nology is designed to provide similar coverage and capabilities to
traditional cellular networks (depending upon the amount of spec-
trum allocated and available). There are two main applications of
WiMAX today: fixed (point-to-point) applications for backhaul and
point-to-multipoint broadband access to homes and businesses.
WiMAX is currently an early stage technology with capabilities that
have yet to match existing cellular technologies.
LTE is the GSM community’s 4G broadband wireless technology
evolution path, which is currently in development. LTE is an all
IP-based technology based on a new modulation scheme (“OFDM”)
that is specifically designed to improve efficiency, lower costs,
improve and expand the range of voice and data services available
via mobile broadband wireless networks, make use of new spec-
trum allocations, and better integrate with other open technology
standards. As a 4G technology, LTE is designed to build on and
evolve the capabilities inherent in UMTS/HSPA, which is the world
standard for mobile broadband wireless. LTE is fully backwards
compatible with UMTS/HSPA. LTE is designed to provide seamless
voice and broadband data capabilities and data rates of at least
100Mbps (or greater, dependent upon spectrum availability).
WIRELESS OPERATING AND FINANCIAL RESULTS
For purposes of this discussion, revenue has been classified accord-
ing to the following categories:
• Networkrevenue,whichincludesrevenuederivedfrom:
 • postpaid(voiceanddata),whichconsistsofrevenuesgener-
ated principally from monthly fees, airtime and long-distance
charges, optional service charges, system access fees and roam-
ing charges;
 • prepaid(voiceanddata),whichconsistsofrevenuesgenerated
principally from airtime, usage and long-distance charges; and
 • one-way messaging, which consists of revenues generated
from monthly fees and usage charges.
• Equipment sales, which consist of revenue generated from
the sale of hardware and accessories to independent dealers,
agents and retailers, and directly to subscribers through direct
fulfillment by Wireless’ customer service groups, websites and
telesales, net of subsidies.
Operating expenses are segregated into the following categories
for assessing business performance:
• Costofequipmentsales,representingcostsrelatedtoequipment
revenue;
• Salesandmarketingexpenses,consistingofcoststoacquirenew
subscribers, such as advertising, commissions paid to third par-
ties for new activations, remuneration and benefits to sales and
marketing employees as well as direct overheads related to these
activities; and
• Operating,generalandadministrativeexpenses,consistingpri-
marily of network operating expenses, customer care expenses,
retention costs, including residual commissions paid to distribu-
tion channels, Industry Canada licencing fees associated with
spectrum utilization, inter-carrier payments to roaming partners
and long-distance carriers, CRTC contribution levy and all other
expenses incurred to operate the business on a day-to-day basis.