New carriers compete for wireless spectrum

Two surprise entrants into an upcoming auction of PCS digital telephone spectrum might serve to fill Industry Canada’s coffers.

Analysts lowered their expectations of the auction raising inflated amounts of cash after Vancouver’s Telus Communications Inc., the parent of Telus Mobility, purchased both Clearnet and QuebecTel. All three were holders of PCS spectrum and were expected to raise the level of competition in the auction.

Now, Telus is aiming to merely fill up its wireless needs in areas of Canada where it has not already reached the spectrum cap.

In Telus’s place, however, two new entrants have emerged to launch a full-scaled challenge to Bell Mobility, which is aiming to use next month’s PCS auction as an opportunity to expand beyond its Ontario and Quebec roots and become a national carrier.

The companies include W2N Inc., a company 80 per cent-owned by Canadian broadband-licence holder Wispra Inc., and 3050443, a numbered Nova Scotia company owned entirely by U.S.-based Sprint PCS, a subsidiary of Westwood, Kan.-based telecommunications giant Sprint Corp.

“It might have been well advised (for Sprint) to support a numbered company but to let somebody else be the more obvious partner,” said Iain Grant, a telecommunications analyst with The Yankee Group in Canada in Brockville, Ont. “It might (have) kept costs down. If people know they’re competing against Sprint Corp., they might try running up the auction,” he explained.

Sprint, which has about 8.6 million PCS customers in the United States – more than all the Canadian wireless carriers have combined – would not release its auction strategy, except to say it is looking to buy Canadian spectrum so its U.S.-based customers can roam on its own network. Grant suggested this might mean Sprint will limit its bidding to regions housing Canada’s major business centres.

Sprint spokesperson Nancy Sherrer added her company is hoping to put together a consortium of equity investors, and that it fully intends to find Canadians to own and manage its operations in Canada – a condition of owning spectrum in this country.

With Sprint as a competitor, observers expect the January 15 auction could possibly raise money totalling in the billions. A similar wireless auction held last year in England raised US$56.6 billion for the British government.

A confluence of factors act against that happening in Canada, among them the fact the wireless spectrum up for grabs is only classified as 2.5G (generation). The 3G spectrum, which observers say will enable significant advances in the types of Internet services offered on wireless devices, will not be auctioned off for at least two years.

However, wireless carriers are still eager for 2.5G as it will give them the capacity to handle the burgeoning ranks of mobile users in Canada. Just under a quarter of Canadians own a mobile device today, but that number is expected to double over the next three years.

Industry Canada will be auctioning off 40Mhz of spectrum in four blocks in 14 regions of Canada next month. The geography is divided along provincial lines, except in Ontario and Quebec, which are comprised of three regions each. The territories are grouped into one region, as are Nova Scotia and Prince Edward Island.

The following is an examination of where each of the six competitors in next month’s auction will likely bid for spectrum, based on the monetary deposits they have submitted to Industry Canada:

– 3050443

Sprint’s numbered company (don’t read anything into the fact its based in Nova Scotia, Sprint said) will probably target Canada’s six major markets. Expect them to bid for 20 Mhz of spectrum in British Columbia, Alberta, Eastern Ontario, and Southern and Eastern Quebec. Sprint will probably go for the full 40 Mhz in Southern Ontario, which covers the Greater Toronto Area.

– Bell Mobility

Bell has signed on to compete for more spectrum than anybody else, according to a convoluted points system Industry Canada used to measure a company’s intentions. However, Bell can only bid for 20 Mhz of spectrum in the six regions of Ontario and Quebec. If it wins, Bell will own a total 30 Mhz of PCS spectrum, as well as its existing 25 Mhz of cellular spectrum in those provinces. The company will probably try to match that 30 Mhz of PCS spectrum in each of B.C., Alberta, Saskatchewan, Manitoba and Nova Scotia and P.E.I. It would probably settle for 20 Mhz of spectrum in New Brunswick and Newfoundland.

– Microcell Telecommunications Inc., Rogers Wireless Inc., and W2N Inc.

All three companies have submitted deposits that translate into bids for 20 Mhz of spectrum in all 14 regions of Canada. For Microcell and Rogers, this makes sense, as both companies can only bid for two of the 10 Mhz blocks of PCS spectrum before they reach their spectrum limits. W2N founder Joe Church would not let on about his company’s strategy, but it’s likely the new company is just aiming to gain a foothold as a national wireless carrier this round, rather than vying for the full 40 Mhz across the country.

– Telus Communications Inc.

As said before, Telus is looking to merely bring itself up to the cap in regions where it has not already done so. This means it will probably be going after 20 Mhz of spectrum in the territories, Saskatchewan, Manitoba, Northern Ontario, Northern Quebec, New Brunswick, Newfoundland, and Nova Scotia and P.E.I. It can only compete for one block of spectrum in Southern and Eastern Ontario, and Southern Quebec.

– Thunder Bay Telephone

This Thunder Bay, Ont.-owned company has put a deposit down to bid for one block of wireless spectrum in – where else – Northern Ontario.

As Telus went over the wireless spectrum caps in some regions after its purchases of Clearnet and QuebecTel, it has to vacate some spectrum by November of next year. That spectrum will be up for auction next month also. It includes 20 Mhz of PCS spectrum covering most of B.C., all of Alberta, and some areas surrounding Quebec City.