TORONTO – While James Moore told Cartt.ca on Tuesday the 700 MHz spectrum auction will not be delayed – nor will the federal government be revisiting its wireless policies – Rogers Communications CEO Nadir Mohamed is equally strident saying he has “absolutely not” given up on convincing the Industry Minister and the Prime Minister’s Office to change their minds on both fronts.
“I still firmly believe the best answer comes from dialogue and debate and discussion, and that’s the process we’re in. There’s no question in my mind that there’s always time to make the right call, so we’ve got time before the 17th to actually change the rules,” Mohamed told Cartt.ca in an interview Thursday afternoon. September 17th is the official beginning of the auction where all intentions are declared since initial deposits must be made by that day.
The fact is, though, that there has been much dialogue and consultation over the past few years already as well as two delays of the 700 MHz auction – and government policy now appears from all angles to be set in stone. The Prime Minister and Minister Moore have told everyone the government is not changing its mind and according to a research note sent to clients from CIBC telecom analyst Bob Bek, even the combined might of large investors representing $350 billion in value don’t even merit having their voice mails returned.
Bay Street is wondering just what the federal government promised to Verizon when Industry Canada officials met with the company in May, which might have been the catalyst to draw the American firm to look at jumping into the wireless game here so late in the run up to the auction.
“Just some facts on that would be nice, given how massively important this space is to markets and Canadians,” writes Bek. “It appears, however, that the gov’t is not inclined to give any kind of constructive support/argument for its actions except to publically reiterate their objective of ‘lower wireless pricing for average Canadians’. What is interesting is that we have heard from a couple of large investors that a group of some 8 or 9 of Canada’s largest institutional investors have approached the gov’t with letters and/or phone calls to get some better understanding of what the gov’t believes it is doing and why? The response from Industry Canada (and other gov’t offices) has apparently been silence.”
On Friday afternoon, the NDP Industry critic, Hamilton Mountain MP Chris Charlton and three other committee members tabled a motion for the Standing Committee on Industry, Science and Technology to meet immediately. As parliamentary committee rules state, a meeting must be called within five days and the chair (Ancaster-Dundas-Flamborough-Westdale MP David Sweet) set one for Tuesday from 4 p.m. to 6 p.m. in Room 237-C in the Centre Block in Ottawa.
However, the meeting is to be In Camera, not open to the public, that is. (Ed note: The more cynical of us would say it is a been made a secret meeting by the government in power likely to accomplish nothing which was only forced to happen in order try and score political points anyway and not really further policy. Despite the fact initial committee meetings to set up studies are often In Camera, given all the noise from all sides of this debate all summer long, the fact this meeting will take place behind closed doors is wrong. The fear is the meeting will be called to order and the only business will be to propose, second and carry a motion to not have any more meetings.)
Along side the back and forth of lively public relations campaigns, there’s a lot of emotion and billions of dollars at stake in this battle. Consumers are angry because they feel (rightly or not) that they are getting ripped off by the big three. Bell, Telus and Rogers are angry because of everything 700 MHz spectrum means. The Conservative government has taken the populist stance and have been quite forceful in dismissing the concerns of the Canadian wireless establishment out of hand. However, Rogers’ Mohamed is still patiently trying to get his point across.
“We still have time to actually sit down and dialogue these issues. They’re important. They really are important for Canada.”
Critics of course love to point out that the big three already own most of the spectrum available in Canada, which is true, and because of that. Rogers, Bell and Telus need no more, which is not true. The big three need the spectrum they have to provide nationwide service on networks serving nearly 25 million Canadians. They have most of the wireless customers and traffic. They’ve been wireless companies for 25 years. It stands to reason they have the most spectrum already – and with the exploding growth of data traffic on those networks, every network operator needs more.
Since data traffic is “growing exponentially,” said Mohamed, the criticism that his company is hoarding spectrum, is unfounded. “I can categorically tell you if we got access to Shaw’s spectrum that currently sits idle, we’d put it to use right now. You would have western Canadians… and anybody roaming getting access to even faster speeds than we offer right now, which is something Canadians want, which is what our central premise is: We want the spectrum to actually deliver the speeds and throughput which ends up being reliability.” Rogers currently holds an option to buy the Shaw spectrum when the moratorium on the AWS set aside ends in 2014.
While the trio of issues each of the CEOs have been repeating to date have been well documented (being able to openly bid on the same number of blocks of 700 MHz spectrum as Verizon, being able to purchase the likes of Wind and Mobilicity and their set aside spectrum bought in 2008 once the five-year moratorium expires next year, and making sure Verizon or any newcomer builds its own network across Canada), Mohamed also brought up a point which doesn’t get discussed a whole lot in relation: future access to the latest handsets.
With close to 210 million subscribers, Verizon and AT&T control the handset ecosystem in North America and have a formidable influence globally. They are carrying out their LTE deployments (and will roll out future technology like voice over LTE) on 700 MHz spectrum. That means manufacturers are making handsets to suit Verizon and AT&T’s needs. Should Canadian companies be shut out of that band, Mohamed worries his customers will then lose access to the latest smartphone technology in the not-too-distant future.
“Not having access to 700 spectrum, which is the spectrum that both Verizon and AT&T are going to build the new ecosystem on, would create problems, in terms of access to devices that work on those bands, including issues like roaming,” he added. “So it’s central people understand that yes, between the three of us we have a lot of spectrum… (but) that spectrum is being put to good use. It’s in different bands, so we have a GSM band for customers that are still on GSM band. We have an HSPA band with customers on that, and we have an LTE. So it’s not spectrum that’s not being used. It’s spectrum that’s actually in use for customers today.”
These are all, in fact, cogent arguments. Nevertheless, there has been massive criticism the Fair For Canada campaign launched by the big three has only entrenched consumer backlash while hardening the resolve of the federal government. Despite how it looks to outsiders, Mohamed says he has no regrets.
“This is something that’s important for Canada and Canadians because we’re talking about a national asset that currently, under the rules that the government has, could end up in the hands of a foreign incumbent player on the basis of taxpayer subsidies. That’s an issue that we think needs to be addressed,” he explained.
“The start of that is getting Canadians informed of the issue. Information leads to dialogue. Dialogue leads to, hopefully, debate, and ultimately resolution. So I think we’ve achieved something that most people weren’t aware of as intimately as people in the industry. That’s a good place.
“I actually think it’s healthy that Minister Moore’s out visiting and talking because that says he’s engaged… Ultimately, though, we actually need to sit down and solve for this through constructive dialogue. That, to me, is what we’re pushing for.”
Postscript: Some additional items we talked about:
* Rogers Media uses 600 MHz spectrum to air television programming via Citytv. Could that spectrum be repurposed for use by the company’s wireless division? While the answer is yes, from a technical perspective that can be done, the answer is no, according to spectrum regulations. “The government would have to give us a wireless license for it,” said Rogers executive vice-president of regulatory affairs, Ken Engelhart. “They have not yet decided whether we’re going to do an incentive auction in Canada or do it the Canadian way, which is they just move you.”
* With Verizon potentially coming to Canada, would Rogers ever think of expanding beyond our borders? “My first glib answer is we’d love to have the rules the Canadian government has set. Can you see the U.S. (government) saying ‘why don’t we incent Rogers to come here and give them 700 spectrum’? I don’t think that’s going to work. “In the foreseeable future, we’ve got lots of growth here. That’s not to say anybody should rule out opportunities either to expand into adjacent markets, both geographical, but also from a line of business. You’ve seen some of that with our credit card application. It’s clearly another segment from a business point of view,” said Mohamed.
What Mohamed wouldn’t or couldn’t discuss:
* On Rogers 700 MHz auction plans (because the rules say they can’t talk about what they plan to do) or contingency plans should it come away with no spectrum in the auction. “On spectrum, we can’t comment because we’ve got all kinds of rules around spectrum strategy, bid strategy, that we just literally can’t talk about.”
* On his successor as CEO, whomever he or she may be, since he is retiring in January (right around the time of the auction) and we’ve heard interviews have been ongoing this summer: “We’ve got a search under way but as soon as we’ve got something to say, we will.”
* On the rumour Rogers is financially backing a bid by Birch Hill Equity Partners (the company from which it purchased Atria Networks in 2011) to buy Wind and Mobilicity: “You would expect nothing less from me than to say we don’t comment on speculation,” he said in response to our query.
