Government prepares to auction air

The federal government is completing the final stages of a plan it hopes will kick-start the development of wireless broadband in Canada. Despite the government’s efforts, industry analysts expect it will be years, rather than months, before broadband wireless is widely deployed.

At the heart of the government’s plan to promote broadband wireless development is the upcoming auction of licences to operate in the 24GHz and 38GHz spectrums. The licences will be handed out in several geographical blocks. Earl Hoeg, manager of wireless networks with Industry Canada, said the auction should take place in early October.

Broadband wireless, also known as Local Multipoint Communication System (LMCS), allows carriers to offer services such as high-speed Internet, videoconferencing, telephony and digital television.

The October auction will be the government’s second attempt to promote wireless broadband development. In 1996, the government issued licences to three companies in the 27.35GHZ to 28.35GHz range. While MaxLink Communications (which now incorporates all three original licensees) has several test sites running, LMCS has been slow to roll out.

One reason for the delay is technology, or rather the lack of it.

“The original LMCS companies were young companies with new services and no technology,” said Iain Grant, an analyst with The Yankee Group in Canada in Brockville, Ont. “The licensees had to wait for the technology and it’s still a bit down the road.”

Another problem, noted Jordan Worth, an analyst with IDC Canada Ltd. in Toronto, is that the government limited the original auction to firms that didn’t have ties to existing telecommunications companies. This stipulation was supposed to promote competition. Unfortunately, it also meant that the firms that won the licences didn’t have the bottomless coffers of a Bell Canada or AT&T Canada to pour into research and development.

This time, Industry Canada is allowing existing telcos to bid on the licences. But to promote competition, large telcos (those with more than $100 million in revenue) with existing facilities in a given geographical block can buy less spectrum than a bidder with no facilities in the geographical block.

“Given their existing infrastructure, [large incumbent telcos] wouldn’t require as much spectrum,” said Industry Canada’s Hoeg.

The spectrum caps are 200MHz for large carriers with existing facilities and 600MHz for new competitors.

Another difference between the upcoming auction and the 1996 auction is the target market for broadband wireless.

“When we announced LMCS (in 1996), it was assumed it would be for consumers, but from what we’ve heard from interested parties this (the upcoming auction) is going to be for business,” Hoeg said. “What the industry’s telling us is most consumers in residential areas are covered by trees and foliage and that presents problems.”

While the Yankee Group’s Grant said he believes wireless broadband will be deployed over the next couple of years, he doesn’t believe the government’s auction policy is doing much to help the process.

“If there’s a finite amount of money to develop wireless services, then to put such a large portion in government coffers seems to go against the government’s goal of establishing a competitive environment,” he said.