GATINEAU – While wireless incumbents and newcomers vehemently disagree on future auction rules, both say Industry Canada has to get a move on, and make the decisions required to open up more spectrum for more bandwidth and more products and services.
The federal government’s digital economy consultation elicited many different opinions and recommendations on how to proceed with respect to creating the right frameworks and policies going forward. But many took the opportunity to complain about current regimes.
Such was the case with Canada’s largest wireless carriers. They are using the federal government’s digital economy consultation to wail about spectrum policies and licence fees. They say the high level of fees and poorly designed spectrum auction rules represent a drag on their operations and ultimately a drag on the Canadian economy.
According to a recent OVUM report done for the Canadian Wireless Telecommunications Association (CWTA), the level of fees paid by Canada’s wireless carriers is significantly higher than what their U.S. counterparts pay and what other countries require from their wireless companies. In 2010, Canadian wireless operators will pay about $130 million in licence fees, but if the U.S. formula was used, the total would be approximately $4 million.
The large wireless companies and the CWTA argue that the industry has been subjected to policy that has shifted from a pure cost recovery model to one that earns a fair return for Canadians for the use of spectrum.
“No other class of spectrum user in Canada carries this kind of regulated financial burden simply to use the spectrum necessary to operate its networks,” Bell Canada says in its submission. “The digital economy strategy should seek to decrease government spectrum licence fees as a way to stimulate ICT investment and innovation.”
The 2008 Advanced Wireless Services (AWS) spectrum auction was raised, too, and the big carriers say government needs to avoid a repeat of this. Rogers Communications Inc. points to a NERA Economic Consulting report which said because of the new entrant set asides the auction resulted in carriers paying $2.4 billion more for spectrum than they should have.
“This is $2.4 billion that ultimately must be recovered by the industry through higher service prices, and that can not be spent on investment in new technologies and innovation,” Rogers writes.
New entrant wireless companies believe that if the government wants to continue to improve the competitive situation of Canada’s wireless industry, it must still rely on set asides and other policies that promote entry by Canadian companies.
“Government policy should support the ability and efforts of domestic new entrants to increase competition in the telecommunications sector. This requires the implementation of spectrum caps in upcoming auctions, effective and efficient tower-sharing rules and competitively-neutral foreign ownership rules,” Shaw Communications tells the consultation.
While new entrants and incumbent wireless companies may beg to differ on some spectrum policies, they agree that Industry Canada must be more proactive in identifying future spectrum and relaying those plans to the industry. They point to U.S. President Barack Obama’s Presidential Memorandum calling for the release of 500 MHz of additional spectrum for mobile and fixed broadband (to be reclaimed from analog TV broadcasters) as a path Canada should take. The carriers note that Industry Canada should be moving much more quickly with respect to the policies concerning the auction of the 700 MHz and 2500 MHz bands.
The upcoming auctions of these two bands are also of particular interest to Canadian broadcasters. CTVglobemedia wants some of the proceeds of those auctions to help fund its transition to digital TV.
The private broadcaster says that it is making the transition to digital at a great cost “without any return or benefit” and therefore suggests it get access to revenue earned from forthcoming spectrum auctions. “This could be achieved by setting aside a reasonable portion of the funds raised from the government’s spectrum auction, made possible by our transition in the first place,” the company writes.
