Underwhelming auction doesn

Twelve months ago, it was understandable that the federal government, and most corporations who have a large stake in the Canadian wireless economy, would feel excited about this country’s upcoming PCS spectrum auction. It appeared that the bandwidth sell-off would represent the next big step in the development of a wireless world, a key plank in the further expansion of a market that has taken everyone by storm in a very short period of time.

As the results of the recently concluded on-line auction made perfectly clear, however, the expectations were much more lofty than what ended up transpiring. Before pondering the larger question of what this underwhelming process might mean for the future of wireless in Canada, let’s take a look at a few key areas that didn’t live up to the billing:

1) Revenue generation for the government: Not so long ago, there was serious talk of the auction generating somewhere in the neighbourhood of $5 billion for Ottawa. That was far higher than the $1.5 billion that was actually raised. A year ago, however, it was easy to assume this would be the case, given what was happening in Europe. Previous auctions for wireless spectrums across the Atlantic had brought in a windfall for governments there – especially in Germany and the United Kingdom. Officials at the British Treasury were no doubt tipping a few cups of tea (and probably some other beverages) in celebration of an auction in that country that generated a whopping US$30 billion – about 10 times more than had been forecasted.

When Telus Corp. purchased Clearnet Communications Inc. last summer, however, the competitive landscape of the auction dwindled considerably, making a figure of $5 billion seem astronomical. Also, it was easy to tone down any overt enthusiasm for a windfall when one looked at how much more ingrained wireless devices are in European life compared to Canada. Cell phones are simply relied upon more in that part of the world for communications than over here – why wouldn’t bidders want to pay much more for licenses in those areas?

2) Creation of a more competitive wireless landscape: It could be argued that the government’s stated desire to help admit more players into the wireless game through the auction was dealt a big blow with the Telus-Clearnet deal. Nevertheless, it was clear from early on that the big boys would be the ones in control of this process, and it would be they who would emerge as the winners. Clearnet would have lent one more competitor to Canada’s wireless economy, but who else did the government expect to emerge from the auction with enough bandwidth to take on the likes of Jean Monty and Ted Rogers – Thunder Bay Telephone?

3) Generating increased enthusiasm for wireless communication in general: Had the auction generated significantly more money than had been forecasted, it could easily be concluded that this market was hotter than the surface of Mercury, and that the future looked as bright as a supernova. But what does the actual $1.5 billion final total indicate? Does it hint that spectrum dropouts Sprint Corp. and Microcell Telecommunications Inc. don’t believe Canadians will be rushing to do everything wirelessly?

It could. And it could also mean that these companies simply didn’t think it was worthwhile to compete with the aforementioned Messrs. Monty and Rogers. Regardless of their reasoning, these companies’ lack of participation in the auction is hardly a vote of confidence for the future of wireless communication in Canada. It seems they’re betting that Canadians won’t adopt next-generation wireless applications as fervently as has been the case in other parts of the world. Whether that scenario is borne out or not, we’ll just have to wait and see.