Organizations looking for more competition in wireless providers to get better rates had their hopes rewarded with Ottawa’s decision to allow new companies to bid on 105Mhz of spectrum next spring.
Regional-based providers such as Manitoba’s MTS Allstream, Quebec’s Videotron, and Atlantic Canada’s EastLink are expected to be among the bidders next May 27 when Industry Canada auctions off 40MHz of that spectrum strictly for new entrants, who will hold 10-year licences. These companies, limited by their current licences to their regions, will hope to become national brands.
New entrants – defined as entities that hold less that 10 per cent of the national wireless market by revenue – can also bid on the remaining 65MHz of spectrum along with longtime licence holders Bell Canada, Rogers Communications and Telus. In making its announcement the government took pains to note that the trio have 94 per cent of the wireless market.
Even before the Advanced Wireless Services auction starts these incumbents are expected to cut rates and hold onto their market share before the new entrants can get a foothold.
The government’s move was swiftly denounced by Telus, saying it is “deeply disappointed.”
“It is inconsistent with this government’s stated policy of relying on market forces to deliver benefits to Canadian consumers,” said Janet Yale, the telco’s executive vice-president of corporate affairs. “It also rewards companies that have both the resources and the motivation to bid openly for new available spectrum. As a consequence, Canadian taxpayers will receive less than full market value for the new spectrum.”
In making its decision, which was not unexpected, Industry Minister Jim Prentice cited studies saying Canadians pay more for wireless services that people in other countries.
This will be the third spectrum auction the government has held. Others were run in 1985 and 1995.
“Our goals are lower prices, better service and more choice for consumers and businesses,” Prentice said.
This time the government is making available 105MHz of spectrum comprised of 90MHz for advanced services, a 10MHz extension of the band licenced 10 years ago plus 5MHz in the 1670-1675MHz band.
“Today’s announcement will not please some players in the industry,” Prentice said in prepared remarks. “But let us not forget that they already control the vast majority of spectrum for mobile services on the market today.” The will be able to bid for more spectrum “to augment their already considerable holdings,” the statement said.
The new spectrum will use the same blocks as the U.S. to make it easier for providers to offer cross-border service.
The auction will also carve up spectrum into national, regional and local tiers for those who only want to operate a local business. In addition to restricting some spectrum to new entrants, Ottawa is taking other steps to ensure the newcomers won’t be shouldered out.
Bell, Rogers and Telus will have to share their antennas and roof-top sites with the newcomers, which will substantially cut their startup costs. In addition, they’ll have to give the newcomers roaming privileges within Canada for five years while they out their new networks, which could be extended another five years if their roll-out obligations are met. Roaming agreements – which include rates – will have to be negotiated, but an Industry Canada background paper indicates the government will not tolerate foot-dragging: Negotiations with existing carriers will be time-limited. If an agreement can’t be reached it will be through binding arbitration. Similarly, disputes over antenna arrangements will also be solved through binding arbitration.
To implement those rules, Prentice will have to amend the licences of the existing wireless providers, which will be done after a public consultation. The auction itself will be held under the simultaneous multiple-round ascending software Industry Canada used in previous auctions.
Next month details of the auction framework will be published, followed by a clarification period allowing for questions to be submitted to the government. In February those questions will be answered, and then in March bidders will be allowed to file applications.