A new range war has broken out between the country’s incumbent and startup wireless carriers, but the battle is over future cellular airwaves not land.
The shooting started Monday when carriers and interested parties filed opposing submissions to Industry Canada on how it should structure the upcoming auction for wireless spectrum in the 700 Mhz band.
As expected, incumbent carriers like Telus Corp. argue the auction should be wide open, without any protection for startups like Wind Mobile. However, Wind is pressing the government to prevent the incumbents from playing in the auction at all because they already have a hoard of spectrum.
Caught in the middle of the shooting is Industry Minister Tony Clement, who will have to make a decision.
At stake are perhaps billions of dollars carriers are expected to spend for this hotly-desired band, because signals in its frequencies will more easily penetrate city buildings and carry further than the spectrum carriers use now.
That makes it ideal for the most advanced wireless data technologies like LTE, being deployed now over the 700 Mhz band in the U.S., to handle lucrative video and other data intensive applications.
“It really is prime real estate as far as spectrum is concerned,” says Ron Gruia, Toronto-based principal telecommunications analyst with Frost and Sullivan.
Also at stake is the Harper government’s delayed new policy on expanding competition in the telecommunications industry. Industry minister Tony Clement has said the policy hinges on whether it wants to encourage foreign carriers or investors to be bidders or back Canadian bidders in the auction.
Some of the country’s new carriers, such as Wind Mobile, Mobilicity and Public Mobile may need that money to play in the auction, putting their future on the line.
“This auction is going to help determine which of the new entrants is going to stay and which ones will fold,” Gruia said. “The ones who don’t get any spectrum will probably exit eventually the ones that will get new spectrum will remain competitive for the foreseeable future.”
Not all of the submissions were available at press time. However, it’s expected that big incumbent operators like BCE Inc’s Bell Canada, Rogers Communications Inc. and Telus Corp. will argue Ottawa shouldn’t stack the rules against them and favour new entrants, as it did in the 2008 auction. New entrants, on the other hand, will say they need protection.
Not all new entrants are the same, however. Some, like Western Canadian cable operator Shaw Communications, have a healthy business behind them compared to true startups like Mobilicity or Wind Mobile, so have different interests.
Here are exerpts from of some of filings:
–Shaw, which says it will start its new wireless service next year, argues for spectrum caps “to prevent spectrum hoarding and auction gamesmanship by the wireless incumbents.”.
For the purpose of the 700 Mhz auction, it adds, Bell and Telus should be considered one company because they co-own a new wireless network. Also, to encourage expensive rural deployment in the 700 Mhz band, Shaw says spectrum winners should get five years to deploy rural wireless networks.
–Vancouver-based Telus Corp., one of the biggest incumbent telcos in the country, says setting aside spectrum that only new entrants can bid on – as Ottawa did in the 2008 auction — isn’t necessary. “If a company like Shaw can defer its wireless build and spend $2 billion to acquire broadcasting assets (the Canwest Global TV network) to further entrench its dominance, does Industry Canada really thinks it owes Shaw assistance in the wireless market?” the submission asked.
–Bell also argues for an open auction. Not only would spectrum caps on incumbents or set-asides for new entrants be unfair, it says, there isn’t enough available 700 MHz spectrum to make a set-aside workable. Industry Canada, it also complains “has alarmingly become more and more interventionist in its approach to the wireless sector.”
–Toronto-based Wind Mobile urges the government to tilt the rules heavily to favour new entrants like itself by not allowing Bell, Rogers and Telus to bid on any 700 Mhz spectrum. The three already have so much in other frequencies, Wind argues.
In fact, the submission adds, the trio have so much spectrum they haven’t used any of the frequencies they paid a combined $2.5 billion for in 2008.
In 2008 Industry Canada said incumbent carriers had to offer new spectrum winners the ability to roam on their networks, a way to ensure the newcomers’ subscribers wouldn’t be stranded on small networks. However the startups have always complained about the rates they have to pay. To combat that, Wind proposes this time there be caps on the rates incumbents can charge.
–Wind’s stand is backed by research published Monday by SeaBoard Group, a Montreal-based telecommunications consultancy, which argues the Big Three carriers have a considerable competitive advantage in their large spectrum holdings.
Adjusted for population, says SeaBoard, Rogers has a combined 105 megahertz of spectrum in several frequency bands across the country, Telus has 86 Mhz and Bell has 52 Mhz. By comparison the seven other wireless carriers in the country have a combined 60 Mhz of spectrum
Considering that Bell and Telus work together on their wireless networks, the disparity is even wider, SeaBoard argues.
[This comparison doesn’t include the spectrum in the 2.5 Ghz band across the country Rogers and Bell share in the Inukshuk wireless partnership because at the moment it can only be used for fixed wireless. However, a Rogers executive has told Network World Canada that it is his company’s goal to eventually use it for 4G mobile wireless. Ottawa is also setting the rules for a future auction of more 2.5 Ghz spectrum.]
Another way of looking at it, SeaBoard says, is that Rogers owns more spectrum than each of the biggest carriers in the U.S., Britain and Germany, adjusted for population (and not including any 700 Mhz holdings in those other countires.)
“Canada’s incumbent carriers already have far more spectrum than any wireless carriers on the globe – and this is before the next spectrum auction.”
In addition, SeaBoard argues, the Big Three already have spectrum in the low 800 Mhz band, close to the 700 Mhz band, which shares some of its spectral advantages of building penetration and capacity. They can mix that with their higher band spectrum gained years ago to advantage, an advantage the startups don’t have because they don’t yet have low frequency spectrum. As a result, SeaBoard concludes, the government should ensure that any incumbent holding 800 Mhz spectrum – or sharing it with another carrier – shouldn’t be able to bid on 700 Mhz frequencies.
“Be strong,” SeaBoard urges the government. “Resist the blandishments of the legions of silver-tongued incumbent lobbyists, however compelling, however seductive they seem. Remind the incumbents that the 700 MHz spectrum isn’t the end of the low frequency digital dividends – the 600 MHz spectrum will be available in just a few years, and 500 MHz will follow shortly thereafter.
After a nearly 30-year incumbent head start, give the new entrants a chance to build, to grow, to bring needed innovation and new consumer pricing models to more Canadians.”