Rogers CEO urges early spectrum auction

Later this year Industry Canada will ask wireless carriers when they want the next spectrum auction to be held and what the rules should be, but the players are already taking their positions.

Not surprisingly, the incumbents are lining up against the startups.

The latest to speak was Rogers Communications Inc. CEO Nadir Mohamed, who told reporters Thursday in Toronto that an auction of 700 Mhz auction should go ahead next year as the industry has assumed, although the last spectrum auction took place barely two years ago.

“There’s talk of it being deferred,” Mohamed said of the 700 Mhz auction. “We’d obviously like to see it stay on course.”

When a reported pointed out that on Wednesday he and the company’s chief technology officer had assured financial analysts that Rogers had plenty of spectrum, Mohamed replied, “We’ve got lots, and we’ll need more.”

Spectrum is the “lifeblood” of a wireless operator, he said. There’s been an “explosion” of data and video use on wireless networks, he pointed out. Demand has been “insatiable.”

(A Telus executive recently also called for an auction next year.)

As for the rules of the upcoming auction, Mohamed didn’t speak to that directly. However, he did complain that the 2008 auction, which set aside spectrum so new entrants could get into the wireless business, “handcuffed the incumbents.” And earlier in the day he told shareholders at the company’s annual general meeting that the rules for the next auction should apply equally to all participants.

The timing and rules of the auction will play a role in the survival of the spectrum winners of 2008. They are only now starting to open their doors for business, and for the first few years will be significantly in debt after paying in some cases hundreds of millions of dollars for their licences, building their networks and opening stores.

Globalive Wireless Management Corp.’s Wind Mobile, the only one in business, has been selling service since December. Globalive paid $442 million for its spectrum.

Public Mobile, which spent $52 million for licences, has been signing up customers for several weeks, but can’t accept a penny until it launches in Toronto and Montreal next month. Mobilicity, the brand name of parent DAVE Wireless, which spent $243 million is expected to launch this summer, as will the new network of Quebecor Inc.’s Videotron cable division. Quebecor topped all new entrants by spending $555 million.

Shaw Communications Inc. of Calgary, which has cable networks in Western Canada and Ontario, and Bragg Group of Halifax, whose Eastlink cable network spans the Maritmes and parts of Ontario, are expected to launch their wireless networks next year.

Officials of three startups were quick to say Thursday that rules of the 700 Mhz auction have to protect their fledgling businesses.

“If it ain’t broke don’t fix it,” said Public Mobile CEO Alek Krstajic. “The AWS auction was a huge success both in terms of dollars raised and the competition it has fostered. Why not use the same approach for the 700 auction and have a set aside? The government is on a pro-customer and therefore pro-competition strategy. Having no set aside would just play into the hands of the incumbents.”

Stewart Lyons, Mobilicity’s chief operating officer said the company continues to support spectrum set asides for the existing new entrants “until such time as we are able to experience similar economies of scale currently enjoyed by the incumbents.”

Globalive chairman Anthony Lacavera also said the 2008 auction rules should be repeated. “They achieved an open auction while ensuring that there would be new competition in the wireless market.” As for timing, he said the 700 Mhz auction should be held in the next 12 to 36 months.

The biggest of the incumbents, Rogers, BCE Inc.’s Bell Canada and Telus Corp., have about 95 per cent of the wireless market, although the new entrants are expected to eat into that. One analyst believes that by the end of 2014 the new entrants will have 22 per cent of wireless subscribers.

Rogers, Bell and Telus were incensed that the 2008 auction allowed more bidders, feeling they feel pushed up the cost of licences to unnecessary heights. Industry analysts expected the auction to take in around $2 billion. When it was over, the winners had to pay $4.25 billion.

Rogers spent the most of all incumbents, just under $1 billion for 59 licences, including $235 million for 20 Mhz of spectrum over Toronto. Telus was second with $879 million, including $234 million for 20 Mhz of spectrum covering Montreal. Bell paid the most for single piece of spectrum, $314 million for a 20 Mhz licence over Toronto.

While the new entrants had spectrum set aside for them that incumbents couldn’t bid on, the new entrants could bid with everyone else on the rest. Incumbents feel that’s how values were pushed up.


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