Spectrum wheeling and dealing about to begin

While the AWS spectrum auction officially late July after 331 rounds of bidding over 40 days, that was only the first act of a billion-dollar drama.

On Sept. 2, new licence holders whose cheques have been cashed and had any foreign ownership approved by Ottawa will be allowed to make deals with each other. That’s when we’ll see what the country’s wireless picture will really look like.

Industry Canada’s hopes that setting aside 40 per cent of the licences for newcomers will lead to lower wireless prices, innovative services and wider cellular adoption seem close to being realized.

Partnerships or mergers could solidify the picture.

There could be at least three new, strong regional players built around three cable companies: Shaw Communications in Western Canada, Quebecor’s Videotron in Quebec and Bragg Communications’ Eastlink in the Maritimes.

Toronto-based Globalive Wireless, a unit of Globalive Communications, has said it wants to be a national provider. However, it has a significant gap in coverage by lacking presence in the populous Montreal area.

Because the government forbids participants from taking to each other until the results are certified, Globalive president Anthony Lacavera wouldn’t say who he will try to partner with for Quebec spectrum. But he did say that Canadians can expect “feature-rich, cost-effective offerings” including no contract bundles with “simple billing.”

One possibility is Quebecor, but another is a consortium with Canadian and U.S. owners called 6934579 Canada Inc. that had which won 10Mhz spectrum covering Southern Quebec. Montreal financial house Novacap had been the lead investor. However, it wants to pull out of the consortium and be replaced by several Canadian venture capital firms including BMO Capital and Rho Canada. As of the end of August its ownership wasn’t clear.

While the price of the licences was higher than expected, Lacavera said “we don’t think our business plan has been materially impacted.”

The cablecos’ strength that they can sell and bundle phones through existing operations. In a news release Bragg co-CEO Lee Bragg said Eastlink “will be looking to launch next generation services that will allow customers to integrate their mobile phone with their home entertainment services.” Globalive, best known for its Yak Communications brand, will try to leverage the 1 million customers across the country it says buy its Internet, VoIP and long-distance services.

Also unclear is the plan of Data and Audio-Visual Entertainment (DAVE), headed by Toronto fast food and sports entrepreneur John Bitove. DAVE won 10Mhz spectrum covering Southern and Eastern Ontario as well as the cities of Vancouver, Victoria, Edmonton, Calgary, Red Deer, Alta., Windsor, Ont., and Niagara Falls/ St. Catharines, Ont. One of Bitove’s partners at the beinging of the auction was Microsoft co-founder and billionair Paul Allen. However, according to one newspaper report, Allen pulled out of the auction early when prices got to high. A spokesman for Bitove last week said he will not give interviews.

As for how soon Canadian businesses and consumers will see more competition, opinions vary. The new entrants have to negotiate roaming and antenna sharing deals with incumbents Bell, Rogers and Telus, and buy and build considerable infrastructure that could cost hundreds of millions of dollars.

Amit Kaminer, an analyst with the Montreal telecommunications consultancy SeaBoard Group believes a national carrier would take close to a year to set up, but regionally-based business could be running sooner. SeaBoard managing director Iain Grant believes that by co-operating on infrastructure, the new entrants can save a bundle of money. But just as important, he added is, that they try to share their spectrum. They are short on 20Mhz spectrum in cities, all of which was swallowed by Bell, Rogers and Telus. Without that spectrum, he said, newcomers will be hard pressed to add innovative services beyond voice.

Toronto telecommunications analyst Eamon Hoey belives it could be at least a year by the time newcomers get all of their approvals, signed roaming agreements and infrastructure in place.

“I’m not convinced all of them have the cash they need to build,” Hoey added. “And some of them who thought they had enough cash now at the end of this may realize they spent a lot more money than they thought they would.”

As for getting incumbents to let the newcomers share antenna space, Hoey is certain neither Rogers, Bell or Telus will make it easy for competitors out to eat into their business. “Anybody who gets on a Rogers tower, it will be a miracle,” he said, “and probably Bell towers as well.” Engineers from the big three will find red tape and a multitude of reasons, such as load factors, to keep competitors from sharing prime locations. “The government’s going to have to step in with a heavy hand to get it done.”

Hoey is cautious about how much competition there will be. “It depends how innovative the new entrants are, and they’ll have to innovate more than on price,” he said.

Unknown at this point are the business plans of the new entrants: Will they be satisfied with setting up mainly voice service, will any offer multi-media services, how many will appeal to business?

Will any follow T-Mobile’s lead in the U.S. and compete with landline and VoIP providers? In a US$10 monthly service that started in July, T-Mobile subscribers will be able to use their cellphones on their home’s broadband or wireless Internet connection, regardless of provider.

There have been disappointments among those hoping for even more competition. The collapse of a consortium led by MTS Allstream, thought to have aspirations beyond its Manitoba home base, limited its bidding. Shaw also squeezed MTS by getting 10Mhz licences for Manitoba and for the city of Winnipeg. On the other hand, Grant notes that MTS’ coast-to-coast fibre backbone could be

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