For most of us, an auction is a simple thing: There’s one item up for grabs, and winner takes all.
But when it comes selling off government-owned wireless spectrum, there are a few more things at play. That’s why explaining the outline of the upcoming 700 MHz auction, announced last week by Industry Canada, can lead to headaches. We’ll try and give some pain relief.
To begin, remember the 700 MHz band is eagerly sought by carriers because of its ability to efficiently use the newest wireless high speed technology, LTE.
First, the government wants to ensure there is a real auction, because the more fighting, the higher the prices go, and the more money that flows into the treasury.
In the 2008 auction, most observers expected the government would pull in around $2 billion. It got $4 billion – by luck or by design.
Second, Ottawa has to ensure that more than one carrier gets spectrum.
Third, there had to be some mechanism for ensuring that new small carriers – including Wind Mobile, Mobilicity, Public Mobile and Videotron, all of whom got into the cellular business buying spectrum in the 2008 auction – will be assured of not being pushed out of the bidding by Rogers, Bell or Telus Communications Corp. The Big Three have over 90 per cent of the wireless subscribers.
So here’s what will happen at next year’s auction (get your Aspirin ready):
SEVEN BLOCKS UP FOR BID
The country will be sliced into 14 districts (southern and northern Ontario are two, B.C and Alberta are each one. Here’s a link to the list), each with seven blocks of frequencies to be auctioned. These blocks are named alphabetically as A, B, C, C1, C2, D and E.
I assured you a headache, and here it comes: Wireless frequencies can be split into upper and lower bands. For two-way communications, each band can be further split in half: One with, say, 5 MHz for the uplink, the other an equal amount for the downlink. Industry Canada can sell either a pair of frequencies, or a single group. Obviously, paired spectrum is more valuable than unpaired for cellular communications.
In this group, A, B, C, C1 and C2 will be sold as paired blocks. Blocks D and E are unpaired (or one-way) spectrum.
The reason why there will be three “C” blocks is the first one is the lower band of a certain range of frequencies, while other two represent the upper band that has been split in half. You’ll see why in a second.
Looking at all seven bands, Robert Yates, a co-president of the Montreal-based telecommunications consultancy Lemay-Yates Associates, says the “beachfront property” – the really valuable stuff – is in blocks B, C, C1 and C2. Even Industry Canada calls them prime.