As the cash cow of providing Canadians with home phone service disappears and cable slipping away right behind it, Canada’s telecoms are still growing both their wireless and internet divisions.
These companies can set the price we all pay for monthly internet because they control the expensive fibre infrastructure. They’ve collectively invested billions connecting our homes with faster and faster networks designed to keep up with exploding data usage trends.
Investors like this competitive advantage, as well as the attractive dividends paid out by leaders in the sector. Dependable revenue is nice too.
But technology could disrupt Canada’s telecoms in a big way in the next decade.
Google (NASDAQ:GOOGL)(NASDAQ:GOOG) is working on technology that will give customers access to internet without the pesky wires.
It works like this. It can cost thousands for an internet provider to lay fibre to a customer’s home. Given new advances in wireless technology, it should soon be possible for wireless download speeds to be fast enough to satisfy even power users. Even if wireless data costs a little more, providers will make up for it by saving on install costs.
A company like Google, Facebook, or any number of others could use this technology to set up operations in a city, easily bypassing existing infrastructure, for a fraction of the price.
Canada’s telecoms will at least be able to use similar technology to fight back. Still, the fact remains that new technology will bring increased competition. That’s hardly good news for the incumbents, and it’s certainly not good news for investors who are paying approximately 20 times earnings for what are perceived as rock solid telecom companies.
