TORONTO – Canada’s big three wireless incumbents will be wearing handcuffs when the advanced wireless spectrum auction begins on May 27, 2008.
Industry Minister Jim Prentice was in Toronto this afternoon to announce the rules of engagement when the federal government auctions off the 105 MHz worth of spectrum. The auction itself will take two to three weeks.
Of that spectrum, 40 MHz will be set aside for new wireless entrants to bid on alone. The remaining 65 MHz will be open to everyone. “The spectrum being set aside amounts to less than 14% of the total mobile spectrum that will be in use after the auction,” says Industry Canada. However, it’s nearly 40% of this auction.
These new auction rules will ensure that Rogers Wireless, Bell Canada and Telus will not be able to buy up all the spectrum to be made available (as the newcomers say they feared) and makes room for new national wireless newcomers such as Quebecor Media and MTS Allstream, both of whom have already expressed interest in becoming a national wireless player. Shaw Communications and others (hello, Google? AT&T?) may also have such designs but they haven’t said definitively one way or the other as yet.
MTS Allstream, even though it is a wireless incumbent, can bid on the spectrum as a newcomer because it only serves Manitoba now and earns less than 10% of Canadian wireless revenue nationally. That also means SaskTel can bid too, if it wishes.
Wireless, as most know, has become an important leg of the multimedia table that telecom and media companies wish to set with all manner of products and services: mainly new “data” services such as video, music, and other internet services. Plus, after nearly two decades of losing money, the wireless incumbents are now very profitable (it’s a $12 billion-dollar business in Canada now) and others want a piece of the pie before Canada gets too well penetrated on the wireless front.
The potential newcomers say it’s so profitable because rates are far too high and innovation in Canada is proceeding far too slowly because of the cozy three-way oligopoly who don’t push each other on price or innovation. According to recent industry figures, 60% of Canadians now own a wireless device.
“We are looking for greater competition in the market and further innovation in the industry,” said Minister Prentice today. “At the end of the day, our goals are lower prices, better service and more choice for consumers and business. That is why we are setting aside a portion of radio spectrum exclusively for new entrants into the wireless market.”
Also in the decision – but not the press release – is the fact that new conditions will be applied to existing players in that both mandated roaming and tower/tower site sharing is also being instituted with this auction. Mandated roaming will be in place for a minimum of five years and a maximum of 10, depending if the newcomers are regional or national. It will be up to the operators to negotiate rates for such sharing.
“(I)t is in accordance with the orderly development and efficient operation of radiocommunication in Canada to mandate antenna tower and site sharing and to prohibit exclusive site arrangements for all licensees including broadcasting certificate holders,” reads the decision. (Ed note: All levels of government are feeling the heat on the increasing number of communications towers and no one wanted to see new players come to the market and double the number of cell towers needed.)
This caps a fun year for reporters, actually, what with Rogers founder and CEO Ted Rogers calling those wanting spectrum set asides like this, potential “corporate welfare bums” and with Quebecor Media chief Pierre Karl Peladeau saying that a consumer’s data rates, if the iPhone were made available by Rogers, would be more than the average Canadian mortgage payment.
“The three big wireless players have a stranglehold on competition and your wallet,” said Peladeau at a Canadian Club event in Toronto this summer. That has led to less price competition, less wireless penetration and less innovation, he added.
That speech was just days after Ted Rogers spoke to an Ottawa audience saying that billion-dollar companies like Quebecor/Videotron shouldn’t be asking for government handouts in the form of multi-million-dollar breaks, calling them: "The all-time corporate welfare bums in Canadian history.”
The incumbents have said all along that they have spent billions on their nationwide networks, and that extending the wireless beyond the major cities paid off because they could subsidize rural coverage with money earned in the cities. The carriers who didn’t offer wide service and only stuck to the denser regions? “They have gone bankrupt or been sold to the existing three national carriers,” said Rogers this summer.
Rogers bought Fido in 2005 – which struggled, in large part, for that very reason. Ironically, both Shaw and Quebecor each once owned pieces of Microcell, the former parent company of Fido.
One chink in the armour of solidarity among the incumbents came this summer, however, when Telus briefly pursued purchasing Bell Canada. When it did that, Telus CEO Darren Entwistle conceded that a new combined telco would accept auction rules such as spectrum caps, set asides and mandated tower sharing.
While some will say this decision goes against the Conservative government’s thrust towards letting the free market decide telecom and other industry direction rather than regulation, it’s a continuation of using the 2006 Telecommunications Policy Review Panel (launched by the last Liberal government) as a template to revamp the Canadian telecom world.
“Having considered all of the comments received during our public consultation, we agree with the TPRP that measures should be taken to enhance competition in this market,” said Prentice. “Spectrum is a scarce and valuable resource that is used by all Canadians. It is up to the government to decide how it is to be deployed to best meet the growing and diverse needs of Canadians.”
