Changes in auction, cell tower and roaming rules are aimed at helping startups and new entrants. However, one analyst has doubts
The Harper government is trying to move some of its levers to ensure there is more competition in the wireless industry.
Facing startups like Wind Mobile, Mobilicity and Public Mobile whose slow growth since launching just over four years ago has barely taken away market share from the biggest incumbents – Bell Mobility, Rogers Communications and Telus Corp. – Industry Minister Christian Paradis (pictured) this morning announced Ottawa will
–meet startups complaints by expanding the requirements for incumbents to provide roaming to competitors;
–meet startups’ complaints by strengthening the rules requiring incumbents to share space on their cell towers with competitors;
–ensure at least four providers in every region can buy spectrum in the prized 700 MHz spectrum auction, set to start Nov. 19
–review the government’s policy on spectrum licence transfers.
This last is important in light of Rogers Communication’s deal to tie up the spectrum Shaw Communications bought in 2008 when it intended to become a wireless carrier. After looking at the costs of building a network, Shaw decided against it. Earlier this year it struck a deal to sell the spectrum to Rogers – thus denying it to any new entrant – when the ban on incumbents buying spectrum from startups expires in the fall of 2014.
Opposition mounts to Shaw-Rogers deal
By announcing there will be a consultation on the criteria the government needs to set to approve such sales Paradis is essentially freezing the sale of spectrum. Shaw isn’t the only carrier that has wireless spectrum it bought in 2008 that is disposable; Quebecor Inc.’s Videotron, a Quebec-based cable company, also has spectrum covering Toronto that it wants to sell that would be attractive to the big three, as well as startups.
Paradis told Ottawa reporters a decision on the criteria for approving the sale of spectrum should be ready in May.
In 2008 Ottawa staged an auction with rules tilted towards helping new carriers come to Canada to compete against Bell, Rogers and Telus. The three had about 95 per cent of the wireless market. Wind launched in December, 2009, followed by Mobilicity and Public Mobile in the spring of 2010 and then Videotron. The result of the competition has been lower wireless rates, and measured by that the government’s policy has been a success. But the big three still have over 90 per cent of subscribers. And while Wind Mobile has around 600,000 subscribers, the telecom giant that will be its new owner said it is looking at all options, including selling to a competitor.
In a statement Paradis portrayed the government’s moves as a way of putting consumers first in federal telecom policy. “Canadian families work hard for their money, and our government wants them to keep more of it,” he said. “Through better use of existing cellphone towers and by taking action to promote at least four wireless providers in every region of the country, our government is making it possible for all Canadians to have access to world-class wireless service they can afford, no matter where they live.”
Initial reaction to Paradis’ announcement was cautious.
Mark Goldberg, a Canadian telecom analyst and consultant doubts the moves will significantly help startup carriers, although he added that he hasn’t been through all the Industry Canada decisions released today. But significantly he also believes there are no fundamental changes in the rules for the upcoming spectrum auction, rules which have been criticized by Wind Mobile.
Wind complains the Nov. 19 auction in the prized 700 MHz band splits spectrum into 10 MHz chunks. New entrants need at least 20 MHz so they can next-generation LTE service, it says, and catch up to incumbents. Some — but not all — of the spectrum the government set aside for new entrants in 2008 was 20 MHz wide.
Goldberg agrees that new entrants will face a challenge if all they can get in the Nov. 19 auction is 10 MHz of spectrum. Incumbents will also be limited to 10 MHz in that auction, he said, but they have more spectrum in other frequencies they can combine to make 20 MHz-wide bands.
On the other hand, Goldberg said, what’s good is that Ottawa has set out a roadmap for releasing some 300 MHz more of spectrum by 2015 for carriers who are always hungry for more frequencies. Included is a plan to auction off spectrum in the 600 MHz band. The lower the frequencies the better are the propogation characteristics — the ability for signals to go farther, meaning carriers can build fewer cell towers, and a better ability to penetrate buildings. The 700 MHz spectrum to be auctioned off in November is seen as superb for those reasons. By contrast Goldberg calls 600 MHz frequencies “fabulous.”
Iain Grant, managing director of the SeaBoard Group, a Montreal-based telecom consultancy also said that in the short run what was announced today won’t be of much help to the startup carriers. In fact, he said, one consequence of the temporary freeze on wireless licence transfers is uncertainty about their sale which may affect investment. However, he admitted the government is in a damned-if-you-do, damned-if-you-don’t corner.
As for the upcoming spectrum auction, the government has already said it won’t be as generous as it was in 2008 when chunks of spectrum were set aside exclusively for new entrants to bid on. Paradis repeated that the rules for the Nov. 19 auction will ensure that at least four carriers will win spectrum in each region across the country –presumably three incumbents plus one new entrant. But Grant wonders why a minimum of four. There are already six competitors in the Toronto area, he pointed out (Bell, Rogers, Telus, Wind, Mobilicity, Public Mobile), and four in Biggar, Sask. (Bell, Rogers, Telus and SaskTel), and five in Montreal, Ottawa, Calgary Edmonton and Vancouver.
Some new entrants may worry that with his statement there’s a game of musical chairs with too few seats.
Johanne Lemay, co-president of telecom consultants Lemay-Yates Associates, called the changes “incremental.” Industry Canada is trying the nudge the wireless industry, she said. But she couldn’t say if they will help new carriers significantly cut into the market share of the big three carriers.
The government’s changes to the rules on roaming don’t meet a big complaint from the new carriers: That some carriers don’t allow seamless roaming. Roaming – for a fee — from a one carrier’s network to a competitors’ is vital for widespread communications. Rules set before the 2008 spectrum auction that brought in Wind, Mobilicity, Public Mobile and Videotron said incumbent carriers had to let competitors roam on their networks.
However, some incumbents found a way to ensure new entrants were disadvantaged: When a subscriber from a new entrant roamed onto another network, the call was dropped. The subscriber could use his cellphone in the new area, but had to dial back in or reconnect over the Internet.
Today Industry Canada refused to order seamless roaming, saying it’s up to carriers to negotiate it.
Nor did Industry Canada agree to change licence rules obliging incumbent carriers to negotiate roaming agreements in good faith.
But it did agree that if two carriers can’t agree on a roaming agreement within 60 days the matter has to go to binding arbitration.
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