Bidding starts at $1.54 billion
OTTAWA – The auction of 600 MHz wireless spectrum, when it happens, will favour the smaller newcomers like Freedom Mobile and Vidéotron and looks to offer no payments to TV broadcasters which will be forced off the band.
While the Canadian bandwidth plan is to be harmonized with the United States (something we’ve known for a while), our auction for the valuable low frequency spectrum sure won’t be the same. In its consultation paper released late Friday (Ed note: right before the long weekend, so no questions, media!) Innovation, Science and Economic Development Canada, the ministry in charge of this, is not contemplating an incentive auction to try and help broadcasters with their costs – and only mentioned TV broadcasters when saying they will have a year or two to get their signals moved when told their time is up.
In the U.S., the Federal Communications Commission (which is in charge of spectrum there) used an incentive auction to try to entice broadcasters off the 600 MHz band. While that auction was complicated, frustrating, went on for far longer than anticipated and was fraught with complaints, there is substantial funding available for the “repacking” of TV signals elsewhere in the wireless spectrum. That said, it reportedly did not produce enough cash to repack more than 1,000 U.S. TV stations apparently needing to relocate.
There is no such effort or talk by ISED of funds for Canadian TV broadcasters who will have to move their off-air signals, too. (Ed note: There could be two reasons for this. A) This government rarely speaks of the importance of conventional television or the fact that Canadians still do watch those stations, by the millions, so it may not care; and B) Two of the three largest private broadcasters, CTV and Citytv, are owned by wireless giants Bell and Rogers, respectively, and the third, Global, shares an controlling shareholder with the one who owns Shaw Communications and Freedom Mobile – which is one of the smaller wireless companies that will benefit from the auction rules proposed Friday.)
When the federal government began gathering information about transitioning 600 MHz spectrum from TV to wireless companies (back when ISED was Industry Canada and the PM was Stephen Harper), broadcasters insisted some of the cash must be reserved to help pay for their moves.
“Since television broadcasters have yet to fully recover their significant costs of transitioning to the current digital television (DTV) allotment plan in 2011, the Department should fully compensate all affected operating regular power OTA television broadcasters for the cost of transitioning to a new channel under the new allotment plan and for any television station value that is lost as a result of the new allotment plan,” read a 2015 submission to the government by Rogers Communications. Both Bell Canada and Shaw Communications (when it still directly owned TV broadcasting) said versions of the same thing.
“The auctioning off of this spectrum will create a unique opportunity for the Government to provide financial support for local television stations that are being displaced as a result of the harvesting of the 600 MHz spectrum for mobile use at a time when the financial struggles of local television stations across the country are well documented,” said the BCE submission then. Bell executives also re-iterated that call in early 2016 directly to the Standing Committee on Canadian Heritage.
All Friday’s document says of TV broadcasters is that they can stay where they are until asked to move and when that happens, regular power urban stations will get a year’s notice and those in other regions will get two years.
In 2015 though, and since, the newer wireless companies have been telling the government to ignore such cash calls from incumbent broadcasters – and reminded the feds that they need more spectrum in order to compete, especially low frequency spectrum. “We need low band spectrum and have to make sure there is set aside in the 600 MHz auction,” said then-Wind Canada CEO Alek Krstajic.
A little over a year ago, Vidéotron CEO Manon Brouillette said in a speech her company needs spectrum set aside in any new auction in order to compete. “This means that the government needs to ensure balance in spectrum access – especially in the upcoming auction of 600 MHz spectrum”, she said. “This will be the last allocation of low frequency spectrum for the foreseeable future. Low frequencies offer key advantages to the carriers that use them. The government must seize this opportunity to ensure a more equitable allocation of these frequencies between the incumbents and the challengers.”
With that in mind, the consultation paper does just that – saying it will set aside 30 of the 70 MHz spectrum being cleared for wireless providers with less than 10% of the national wireless market share (which among existing operators is Freedom, Eastlink, Vidéotron, SaskTel, Xplornet and ICE Wireless).
The document released Friday, however, seems to say that no brand new telecom companies will be able to bid on set aside spectrum. “ISED is of the view that the ability to bid on the proposed set-aside spectrum should be limited to a particular sub-set of regional service providers that are best positioned to compete in the commercial mobile services market,” reads the paper.
“As a result, it is proposed that eligibility to bid on the set-aside spectrum be limited to those registered with the CRTC as facilities-based-providers that are not national incumbent service providers, and that are actively providing commercial telecommunication services to the general public in the licence area of interest, effective as of the date of application to participate in the 600 MHz auction. In this consultation, these entities are referred to as set-aside-eligible bidders. Upon application to participate in the auction, applicants would be required to indicate in their application, whether they are applying to bid as a set-aside-eligible or set-aside-ineligible bidder on a service area by service area basis,” it continues (our emphasis).
All that seems to say the government won’t be allowing a new Mobilicity or Wind to emerge, using 600 MHz spectrum to launch a new business – and if any U.S. wireless operators want to come north, they need to have an operational toehold by the time the auction rolls around, which it is hoped will happen in 2018 (but the way Ottawa’s politicians move, 2019 seems more realistic). That said, these rules don’t preclude another wired operator (such as Cogeco or Teksavvy for example) from throwing their hats into the ring – for the set aside or non set-aside spectrum. However, it’s highly unlikely any company would be able to outbid Rogers, Bell and Telus for a block of non-set-aside 600 MHz spectrum.
As well, set-aside spectrum will not be allowed to be sold to one of the incumbents for five years – and ISED’s proposed opening bid prices, tallied from each region, came to a total of $1.54 billion.
Comments on this consultation paper are due October 2nd, with replies to those due October 25th.
