BULLETIN: ROUND 318 ENDED THIS MORNING WITH NO MORE BIDS. INDUSTRY CANADA HAS TOLD BIDDERS THAT IF IT DOESN’T HEAR FROM ANYONE WANTING TO ENACT A PRO-ACTIVE WAIVER BY 10:45 A.M. EASTERN. IT WILL DECLARE THE AUCTION OVER.

(EACH BIDDER HAS FIVE WAIVERS, WHICH ALLOWS THEM TO NOT BE PENALZIED FOR NOT SUBMITTING A BID IN A ROUND)

AN UNKNOWN BIDDER DID ASK FOR A WAIVER, SO THE AUCTION WILL CONTINUE AT 11:55 A.M. EASTERN (for what happened after, see below)

So near and yet so far.

That’s what the end of the AWS spectrum auction has seemed in the past two weeks. The action slows to bids being increased on one or two licences. Surely that’s a sign the participants are satisfied with their holdings and the auction is on the verge of ending? However, looks can be deceiving.

Take this week, for example. In Tuesday’s round 284, bidding increased by a mere $90,000 and on one piece of spectrum. That was enough.

That licence was the 20Mhz spectrum over Cornwall, Ont., strategic because it covers part of Hwy. 401 between Toronto and Montreal. Incumbent Rogers Communications and newcomer Globalive Wireless have been battling over it since the opening gun May 27.

Globalive had held it for some 40 rounds with a bid of $1.48 million, but Rogers suddenly topped it with $1.57 million and as of Thursday afternoon still had it. Not a fatal loss to Globalive, because it retained the 10MHz Cornwall spectrum. But for some reason that set off a ripple of activity for the past two days.

Today the auction enters day 39 with the 15 remaining bidders having pushed the total of high bids to $4.221 billion.

In many ways the situation among the new entrants hasn’t changed in two weeks: Globalive Wireless has spectrum across the country except in the Montreal area, Shaw Communications is strong in the West, Quebecor dominates Quebec, Bragg Communications is healthy in the Maritimes. But here and there the bidding was extremely strategic.

Much of Thursday’s action was between Rogers, Globalive and Bell Mobility, except when SaskTel withdrew its $31.5 million high bid for the 20MHz licence over Saskatoon – its home turf – ceding it to Telus for several rounds. Then late Thursday Telus withdrew its bid and as of the end of the day it lay untouched. But in Friday’s first round, Telus put its high bid back.

Meanwhile Maritimes cableco Bragg Communications began to get territorial, snatching high bids on 10Mhz spectrum from SaskTel for southern and western New Brunswick that the prairie telco held for ages, and eastern New Brunswick from Globalive. Bragg held the three licences for the next seven rounds.

[What did SaskTel want with east coast spectrum? Perhaps, one industry analyst suggests, it will be needed if SaskTel can buy Halifax-based Bell Aliant from BCE Inc., which is rumoured to want to spin off non-core assets. Aliant’s wireless division went to BCE last year in a transfer of assets when Bell Aliant became an income trust. In return, Aliant got some landlines.]

At the same time Globalive stuck its nose for one round into three pieces of spectrum long held separately by Rogers, Telus and Bell, who were having none of it.

Amit Kaminer, a telecommunications analyst with the SeaBoard Group, says that while most of the licences are settled, there is method to this madness. Many of the new entrants are “trying to connect the dots” between the licences they hold, he said Thursday, attempting to get a piece here and there to make their holdings make more sense.

However, the points system the bidders are tied to – they have to keep a minimum number of high bids on licences worth a set number of points, or lose eligibility to bid – means they have to keep the action going. So bidder X may be trying to “park” some points by bidding on a licence it knows bidder Y will fight to keep from the pattern of Y’s bidding. Meanwhile X is also bidding elsewhere for what it really wants.

This strategy has a dual advantage: it keeps X’s points up and it forces an opponent to spend money defending a licence. One implication is that as long as the 15 bidders remaining have points – which have slowly been eroding since the auction started – the bidding will continue.

For comparison, as of round 317 this morning, Rogers still had 1,240 points covering $996 million in high bids for 59 licences, Globalive’s 687 points covered $444 million in high bids for 30 licences, Bragg’s 220 points covered $29 million in high bids for 19 licences and SaskTel’s 80 points covered $65 million in high bids for 3 licences.

Over time as bidders give up on certain licences to focus on what they really want, their points drop. Again to compare, last Friday morning (five bidding days ago), Globalive had 700 points, Bragg had 252 points and SaskTel had 92 points. Rogers still had 1,240 points.

Those with the fewest points still bidding this morning included Blue Canada Wireless (20 points) Rich Telecom (4 points) and Celluworld (2 poimts).

“We thought it should have ended two or three weeks ago,” Kaminer said, when the high bids seemed to have solidified. “It will end will companies run out of money or out of points,” he said, “or out of bidding motive.”

Follow up: When bidding resumed this morning in round 319 after the proactive waiver was filed, Rogers withdrew its $481,000 bid on licence 203i (5 Mhz covering eastern New Brunswick) and, with an offer of $3.2 million, took back the high bid on licence 306a (20Mhz for western New Brunswick), which Bragg had taken and held for 14 rounds. Rogers has been trying to dominate the 20Mhz “A” block licences, some of the choicest frequencies available. The block includes city-wide and regional licences and is identical in cities and regions to the 20Mhz “F” block, except for different frequencies. Bell and Telus largely dominate that block. With this bid there were no new entrants in the “A” block.

(For more on the “A” and “F” block situation, see this blog).

In round 320, Bragg responded by upping Bell’s bid on the 20Mhz “F” block covering southern New Brunswick (305f) to $2.88 million from $2.71 million. Bell came back the next round to boost its bid to $3.06 million, so Bragg switched to outbid Bell on the 306f licence covering western New Brunswick. Bell came back with a higher bid.

That drove Bragg late in the afternoon to start fighting with Bell for licence 332e, 10Mhz of spectrum covering the Ontario area of Windsor and Leamington. For several rounds they were the only bidders, driving up the price to just over $3 million from $2.260 million. That’s how bidding ended Friday.

It will resume Monday with round 329.

Bragg’s Amtelecom cable unit operates east of Leamington in Aylmer, Ont.