Organizations looking for more competition in wireless providers to get better rates had their hopes rewarded with Ottawa’s decision to allow new companies to bid on 105Mhz of spectrum next spring.
Regional-based providers who either own their own spectrum or lease it from big carriers, such as Manitoba’s MTS Allstream and Quebec’s Videotron, are expected to be among the bidders next May 27 when Industry Canada auctions off 40MHz of that spectrum strictly for new entrants, who will hold 10-year licences. These companies will hope to become national brands.
Others who could be in the running include SaskTel, the Saskatchewan telco, Calgary-based cableco Shaw Communications, Atlantic Canada’s EastLink and satellite phone providers.
Yak Communications, a Toronto-based long distance and VoIP provider, quickly said it will be one of the new bidders. “This decision galvanizes the process to enable us to compete with the big guys,” company CEO Anthony Lacavera said in an interview.
He said his company will bid for spectrum in southern Ontario, B.C. and Alberta and promise “everyday low pricing” with no contacts and no surprise fees.
A rule forcing Bell Canada, Telus and Rogers Communications to share their transmission towers with equipment from the newcomers – which will save them a huge amount of startup money – was a “big, big” factor in Yak’s decision, he said. “That will mitigate our capital investment.”
A Shaw spokesman said CEO Jim Shaw was travelling Thursday and would not comment until he has reviewed the government’s plan.
New entrants – defined as entities that hold less that 10 per cent of the national wireless market by revenue – can also bid on the remaining 65MHz of spectrum along with longtime licence holders Bell, Rogers and Telus. In making its announcement the government took pains to note that the trio have 94 per cent of the wireless market.
Even before the Advanced Wireless Services auction starts these incumbents are expected to cut rates and hold onto their market share before the new entrants can get a foothold.
The government’s move was swiftly denounced by Telus, saying it is “deeply disappointed.”
“It is inconsistent with this government’s stated policy of relying on market forces to deliver benefits to Canadian consumers,” said Janet Yale, the telco’s executive vice-president of corporate affairs. “It also rewards companies that have both the resources and the motivation to bid openly for new available spectrum. As a consequence, Canadian taxpayers will receive less than full market value for the new spectrum.”
Today’s announcement will not please some players in the industry, but let us not forget that they already control the vast majority of spectrum for mobile services on the market today.Jim Prentice>Text
In a statement Rogers also expressed unhappiness. “The rules are in sharp contrast to the federal government’s stated policy to promote facilities-based competition. There’s no requirement for new entrants to invest in infrastructure, R&D or innovation and so we don’t see the benefits for Canadians. Given that taxpayers could also forego hundreds of millions of dollars in lost auction revenue, this decision comes at a high cost to Canadian consumers and taxpayers.”
Similarly, Bell executive vice-president Lawson Hunter expressed incredulity over the rules. The government has set minimum bids for the spectrum which are low enough that there’s a risk fair market value won’t be paid, he said in an interview. “We’re not opposed to a new player entering this market,” he said. “If people want to put their money in this business and buy it (spectrum) on an open market and pay the most price, then more power to them. We’re just saying to stack the decks in favour of new entrants at the disadvantage to Canadian taxpayers seems to us not good public policy.”
However, telecommunications consultant Iain Grant of the SeaBoard Group, who has been highly critical of high Canadian wireless rates was effusive in his praise of Industry minister Jim Prentice. “He did a remarkable job. Hats off to Mr. Prentice,” he said.
While in recent months Bell and Telus have been cutting wireless data rates, in what Grant believes is a preemptive strike against Rogers before begins selling Apple’s iPhone, “that’s a small competitive dynamic to what’s going to happen when we have new [wireless] entrants,” he said.
As for complaints by the incumbents of having to face more competitors, Grant said they moaned in 1994 when Clearnet and Microcell Telecommunications were allowed to buy spectrum. Meanwhile the sale of wireless devices soared.
Those two providers no longer exist, but Grant said that’s not because they weren’t competitive. Telus bought Clearnet to expand nationally, while Microcell got pushed into bankruptcy protection because it tried to raise money on the stock market right after the dot-com implosion. It was bought by Rogers.
Rather than praising Prentice, IT consultant Eamon Hoey was disgusted that only a small slice of the spectrum is being reserved for new entrants, instead of giving it all to them to really ensure competition and lower wireless rates.
“I don’t see very much for the consumer in the short term,” he said, because wireless rates may only fall in large cities. “This is a failed opportunity” by Prentice, he said. “It’s just another decision that reinforces the status quo” for Bell, Telus and Rogers, he said, who should be facing the decision “with glee.”
In making its decision, which was not unexpected, Prentice cited studies saying Canadians pay more for wireless services that people in other countries.
This will be the fifth spectrum auction the government has held since 1999.
“Our goals are lower prices, better service and more choice for consumers and businesses,” Prentice said.
This time the government is making available 105MHz of spectrum comprised of 90MHz for advanced services, a 10MHz extension of the band licenced 10 years ago plus 5MHz in the 1670-1675MHz band.
“Today’s announcement will not please some players in the industry,” Prentice said in prepared remarks. “But let us not forget that they already control the vast majority of spectrum for mobile services on the market today.” The will be able to bid for more spectrum “to augment their already considerable holdings,” the statement said.
The new spectrum will use the same blocks as the U.S. to make it easier for providers to offer cross-border service.
The auction will also carve up spectrum into national, regional and local tiers for those who only want to operate a local business. In addition to restricting some spectrum to new entrants, Ottawa is taking other steps to ensure the newcomers won’t be shouldered out.
Bell, Rogers and Telus will have to share their antennas and roof-top sites with the newcomers, which will substantially cut their startup costs. In addition, they’ll have to give the newcomers roaming privileges within Canada for five years while they out their new networks, which could be extended another five years if their roll-out obligations are met.
Roaming agreements – which include rates – will have to b