TORONTO – Spectrum was on a lot of peoples’ minds at this year’s Canadian Telecom Summit, which is hardly surprising given Canada’s slow pace of 5G deployment compounded by the fact ISED has yet to hand over the 3.5 GHz spectrum that was auctioned off this past summer that raised $8.9 billion.
“Four years ago, there was apparently a race to 5G,” said Ted Woodhead, senior vice-president of regulatory at Rogers Communications, who spoke on the summit’s regulatory panel on Tuesday.
“For those of us in the room who are Canadians, that race is over, we lost it.” Woodhead pointed out they do not have the 3.5 GHz spectrum in their hands yet, and the 3.8 GHz spectrum is yet to be auctioned.
“Canada isn’t going to really have 5G, true 5G, until a few years from now and I think that’s a bit of a public policy failure,” he said. “We’re sitting here waiting with bated breath, so I think more spectrum sooner and greater spectrum block size would accomplish a lot.”
On the spectrum policy panel earlier in the day, Rupert Wood, research director at Analysys Mason said: “Canada genuinely is falling behind on almost every level in terms of the volume of spectrum available, in terms of the timeliness of auctions, in terms the length, in terms of future auctions.” He said Canada is also falling behind in terms of the amount of spectrum available to the main national operators.
This has the consequence of “inflating the price paid for spectrum in Canada,” and “is bound to have in some sense, downstream effects,” Wood said. This includes effects on price, on availability and on operator investment, “which is likely to have downstream effects for the whole Canadian economy.”
In a keynote speech at the summit on Monday, Zainul Mawji, executive vice-president of Telus Home Solutions highlighted how expensive the latest spectrum auction in Canada was.
The country’s “national carriers paid more than 2.8 times as much as the U.S. for 5G spectrum,” she said. “Canada’s latest auction, the most expensive in the world, drove close to $9 billion in revenue for the Canadian government.”
One of the issues with this Mawji argued is money being spent on spectrum is money not being spent on network infrastructure.
Ceri Howes, head of regulatory at Opensignal, who spoke on the regulatory panel, talked about the decision to use auctions to raise funding while also aiming to close the digital divide, noting they are opposing goals.
“You’re really going to struggle to incentivize investment if you are continuing to use spectrum auctions as a cash cow,” she said.
A particularly contentious issue addressed by both the spectrum policy and regulatory panels at the summit and by Mawji in her keynote, was set-aside spectrum. This is spectrum the government allocates for smaller providers (in Canada, providers other than Bell, Telus or Rogers.)
During the spectrum policy panel, Wood said out of 24 OECD countries they benchmarked for a recent study, “Canada is the only one that routinely uses set-asides.”
On the same panel, Jacob Glick, vice-president of public policy at Telus, argued there are “two very pernicious, unintended consequences of spectrum set-asides.”
The first is a problem with companies buying set-aside spectrum and not deploying it. “There is a huge asset implicitly subsidized by Canadian taxpayers because the people who get set-aside pay a radically reduced cost from market price spectrum and it is to the detriment of Canadians and the service they receive,” he said.
The second is market distortion. Glick argued this happens in cases where companies get set-aside spectrum, but “are under very little pressure by virtue of the licenses that they receive to actually build there,” and so they let the spectrum sit on their books and eventually sell it.
“They say don’t hate the player hate the game – so, the game is problematic,” he said.
“What it means is there are hundreds of millions of dollars being made in cash profits by operators who would receive set-asides for the purpose of creating competition, but actually, those set asides have been used for a different purpose, which is just to enrich the owners of the companies of the set asides.”
Woodhead argued it is time to open spectrum auctions up.
“I’ve heard things about new entrants,” he said. “What are these new entrants? These new entrants have been around for 13 years. Don’t you have like your bar mitzvah or something… what is this?”
Using Videotron as an example, he went on to argue “these companies that are new entrants have very, very healthy balance sheets.” Péladeau has “been in business for 13 years. It’s time to open up.”
Dennis Béland, vice-president of regulatory affairs, telecommunications at Quebecor responded to Woodhead, arguing over the last 13 years Quebecor has been building its network to cover 94% of Quebec’s population, but something that has not changed in that time “is the market power of the incumbents.”
“When you have market power, you’re willing to pay a lot of money to keep it,” Béland said. He argued that open auctions would mean Bell, Telus and Rogers “will buy everything.” Woodhead immediately took issue with this claim and again noted the set-aside rate Quebecor has purchased spectrum at, some of which they did eventually sell.
Towards the end of the panel Woodhead said he thinks we are at a turning point.
“We are looking at cycles of network evolution that require massive investment, whether it be 5G or fibering the country,” he said. He also noted the government’s plan to build out fibre services to rural and remote areas of the country “is going to require a massive amount of investment… certainly the UBF (Universal Broadband Fund) and the CRTC Broadband Fund are a start,” but added it is just a start and “is not going to get this job done.”
