Moore makes it clear: Auction rules are set

In case you didn’t get the message, the federal government isn’t going to change a comma in the rules for the upcoming spectrum auction despite the pleas of the three biggest incumbent cellular carriers.

If there was any doubt – and some carries might think so because their public lobbying continues about alleged unfairness if giant U.S. carrier Verizon Communications  operates here — Industry Minister James Moore made that clear in an interview Tuesday.

“The rules were arrived at with a great deal of consultation with industry, consumer groups across the country, and we’re moving forward,” Moore said.

“The incumbent big three, by the way, were originally quite comfortable with our policies (announced March 7), they said good things about it,” he said. “It’s only because in May Verizon made noises about exploring coming into the Canadian marketplace that the incumbents decided to put out a big joint effort to stop Verizon from coming into Canada. That’s fine, that’s a business decision by them to look out for what’s in the best interest of their business.

“Our obligation is bigger than that- to look out for the best interest of Canadians and to fight for Canadian consumers by providing more choice and competition.”

That means no change the rule in allowing a well-financed foreign carrier from possibly outbidding Bell, Rogers and Telus for two blocks of prime spectrum in January’s 700 MHz auction, no lifting of the rule that incumbent carriers have to allow new entrants to roam on their networks just because of their size.

Moore only left small hope that the government might allow big carriers to buy up new entrants after a five-year ban expires next year. The ban applies to carriers that bought AWS spectrum in the 2008 auction including Wind Mobile, Mobilicity, Videotron, Eastlink and Shaw Communications. Depending on the carrier, the ban runs out some time next year. But when Mobilicity fell into financial trouble it struck a deal to sell itself to Telus Corp.

However in June the government refused to sanction the deal and upheld the ban. In addition, it announced a new policy — it would review all spectrum transfers between companies after the ban expires and decide on them individually.

At the time the government said that any sale resulting in “undue spectrum concentration” would be refused.

To most observers that inferred Bell, Rogers and Telus — who are the largest spectrum holders — won’t be able to buy spectrum from small carriers. On the other hand, there’s no definition of what “undue” concentration means: Does it cover a carrier’s total spectrum (Rogers has the most) or vary by geography (Rogers has less spectrum in Manitoba than incumbent Manitoba Telecom Services)?

Asked if the government will flatly ban the big three from buying spectrum of smaller players, he replied that  decisions will be made “on a case by case basis objectively and in good faith.”
That includes, he said, Rogers deal for a first option to buy the Western Canadian spectrum of Shaw Communications, which decided after buying frequencies in 2008 not to get into the cellular business. He didn’t mention it, but Rogers has a similar deal with Videotron.

Moore is on a cross-country tour speaking to the public and reporters about the government’s wireless policy in the face of campaigns by Bell, Rogers, Telus and others who allege Ottawa’s foreign ownership and auction policies have unforeseen “loopholes that — while wanting to encourage foreign telecom investment — didn’t foresee the coming of a carrier the size of Verizon.

Last fall the Harper government changed foreign telecom ownership rules allowing foreign companies to buy all of a carrier with less than 10 per cent market share. Until them, foreign firms could only buy just under 50 per cent of a Canadian carrier. The aim was to give the 2008 class of new entrants sources of new investment for growth and to be able to afford to buy more spectrum.

The rules for the 700 MHz auction also had some tweaks for new entrants: A cap on the amount of spectrum large carriers can buy, and a continuation of rules forcing incumbent carriers to share their antenna towers with new entrants (saving small carriers money) and allowing them to roam on incumbent carriers’ networks.

However, Bell, Rogers and Telus claim these perks weren’t designed with a company the size of Verizon buying Wind or Mobilicity and claiming to be a new entrant. Thus the “loophole” argument, which says Verizon is big enough that it doesn’t need protections.

Moore firmly drop-kicked such assertions. Rule changes were made after consulting the industry last year and early this year, he said. Besides, he added, if it were true the changes were such a big benefit there’s be lots of foreign carriers trying to invest here instead of only Verizon.

Verizon [NYSE: VZ], he added, was not “courted” by Ottawa as critics allege.

The fact is, he said, Canada is a huge country with a relatively small population. “To do business in Canada in telecommunications is not an easy proposition. Its very challenging. “

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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