Opposition is mounting to a spectrum deal with Shaw Communications Inc, which gives Rogers Communications first crack at buying Shaw’s cellular frequencies ahead of competitors.
Five consumer and public interest groups said Tuesday they have signed a joint letter to Industry Minister Christian Paradis demanding the Harper government nix the deal and preserve the spectrum for new wireless companies only.
“This proposed deal is the first step back to (there being) only three big providers: Rogers, Telus and Bell,” said John Lawford, executive director of the Public Interest Advocacy Centre, one of the groups pressing the government.
The others are the Consumers’ Association of Canada (CAC), OpenMedia.ca, the Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic (CIPPIC) and the Council of Senior Citizens Organizations of British Columbia (COSCO).
These groups aren’t the only ones heated over the proposed deal, which needs government and regulatory approval.
Wind Mobile chairman Anthony Lacavera has the spectrum deal “an abomination of the rules.” In an email today after word of the interest group letter broke, Lacavera said Wind will be making a submission to the government emphasizing that the proposed deal “is a violation of the 2008 AWS set-aside policy rules.”
However, in an interview Ken Engelhart, Rogers senior vice-president of regulatory affairs, said the deal is in the public interest because Shaw isn’t using the spectrum.
The spectrum Shaw wants to sell is $190 million in frequencies in the AWS band largely in Western Canada it bought in the 2008 spectrum auction. Those particular frequencies were among a group set aside by the government for new wireless entrants so incumbents couldn’t sweep up all the spectrum and keep out competition.
In fact one of the licence rules forbids incumbents like Rogers from buying spectrum of new entrants for five years after they got their licences, which for most new cellular companies should be the spring of 2014.
Among those who bought set-aside spectrum were Shaw, Wind, Mobilicity and Quebec cable company Videotron.
Shaw hoped to follow Rogers’ lead as a cable company that also has its own cellular network. However, it decided in 2011 that building a new cellular network is too expensive, and instead chose to build a less expensive Wi-Fi network. As a result, it wants to sell the spectrum.
Last week as part of a $700 million deal selling the Shaw-owned cable licence in Hamilton, Ont., Rogers got an option to buy the spectrum. To comply with the five-year no-sale rule, the option doesn’t kick in until September 2014.
But the Jan. 18 letter from the public interest groups to Paradis says the “brazen announcement in our view should immediately be countered by your ministry.”
“We call upon you to assure Canadian wireless consumers that this Government is committed to advancing real competition that lowers prices and increases consumers’ choices of wireless providers,” it says in part.
“Your government took bold steps to initiate market entry with set-asides in the AWS auction. The result was credible new entrant wireless providers who already are offering positive plans and market discipline leading to lower wireless prices for consumers.
“Canadians expect this Government to require all wireless providers to abide by the clear rules when auctioning off the public resource of spectrum. Canadian wireless consumers look to this Government to continue its extensive efforts to promote real competition in wireless services. We call for your immediate response to preserve this consumer-friendly policy.”
But Engelhart strongly disagrees that having the option to buy the Shaw spectrum — even if the deal forbids Shaw from selling it to someone else between now and the fall of 2014 — violates the the five-year sale ban.
“There is nothing in the AWS condition of licence (of incumbent carriers) to prohibit an option,” he said. “The set aside is for five years and we are not taking ownership of that spectrum within the five year period.”
The entire deal still has to be approved by Industry Canada and the Competition Bureau.
Asked how Rogers will persaude the authorities, Engelhart said it will explain that Rogers is in a “pitched battle” with Bell Mobility and Telus Corp. to get customers for their latest generation LTE networks. Bell and Telus share a network, which means they have more combined AWS spectrum that Rogers, he said. But the Shaw spectrum isn’t being used: Rogers wants to use it.
“This enables me to compete,” Engelhart said, which should be a “compelling case” to the government.
“The new entrants don’t appear to be buying spectrum,” he said. “Their problem seems to be they don’t have enough customers for the spectrum they’ve got. The (Shaw) spectrum wasn’t being used. We can put it to good use in our LTE network.
“I think the public interest is clearly in favour of that spectrum being put to use.”
Shaw isn’t the only new entrant with spectrum up for sale. Videotron’s haul in the 2008 auction included spectrum covering Toronto, where it doesn’t have cable operations.
Engelhart wouldn’t comment on whether Rogers [TSX: RCI.A
] has approached Videotron owner Quebecor Inc. about a deal.