Rogers 2009 Annual Report Download - page 22

26 ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT
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
technologies and the increased demand for sophisticated wireless
services, especially data communications services, have led wireless
providers to migrate towards the next generation of digital voice
and data broadband wireless networks such as HSPA. These
networks are intended to provide wireless communications with
wireline quality sound, far higher data transmission speeds and
streaming video capabilities. These networks support a variety
of increasingly advanced data applications, including broadband
Internet access, multimedia 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 process
of development: WiFi, WiMAX and Long-term Evolution (“LTE”).
These technologies may accelerate the widespread adoption of
digital voice and broadband wireless 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 metres 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 interconnected 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 appropriate circumstances.
LTE is the worldwide GSM community’s new fourth generation
(“4G”) broadband wireless technology evolution path, which
is currently in development. LTE is planned to be an all IP-based
wireless data technology based on a new modulation scheme
(orthogonal frequency-division multiplexing) 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 spectrum 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 100 Mbps (or greater,
dependent upon spectrum availability).
WiMAX (the IEEE 802.16 standard) is a relatively new 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 technology is designed
to provide similar coverage and capabilities to traditional cellular
networks (depending upon the amount of spectrum allocated
and available). There are two main applications of WiMAX today:
fixed (point-to-point) applications for backhaul and services
to homes and small businesses and point-to-multipoint mobile
broadband access. WiMAX is still an early stage, data-focused
technology with capabilities that have yet to fully match existing
cellular technologies.
WIRELESS OPERATING AND FINANCIAL RESULTS
For purposes of this discussion, our Wireless segment revenue has
been classified according to the following categories:
• Networkrevenue,whichincludesrevenuederivedfrom:
 • postpaid (voice and data), which consists of revenues
generated principally from monthly fees, airtime and long-
distance charges, optional service charges, system access and
government cost recovery fees, and roaming charges; and
 • prepaid (voice and data), which consists of revenues generated
principally from airtime, usage and long-distance charges.
• Equipment sales, which consist of revenue generated from
the sale, generally at or below our cost, of hardware and access-
ories to independent dealers, agents and retailers, and directly to
subscribers through direct fulfillment by Wireless’ customer
service groups, websites and telesales, net of subsidies.
Wireless’ 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
parties 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
primarily of network operating expenses, customer care
expenses, retention costs, including residual commissions
paid to distribution 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.