Telecommunications industry analysts didn’t think there was much meat for startup wireless carriers to feast on from Industry Minister Christian Paradis’ fine-tuning of licence rules for wireless carriers.
But two of the country’s young cell phone companies are pleased with Thursday’s announcement and believe it promotes competition.
“There’s very little I don’t like,” Anthony Lacavera, chairman and CEO of Wind Mobile said in an interview. “You could make an argument that is late, but it is sweeping. They’ve addressed tower sharing, they’ve addressed roaming.”
But he also believes one decision also means new entrants like Wind and Mobilicity can’t be bought by an incumbent carrier.
Ottawa tries to improve wireless competition
Mobilicity could not provide an official to be interviewed. Nor was there comment from Rogers Communications Inc., Bell Mobility or Telus Corp.
On the other hand, the Public Interest Advocacy Centre (PIAC) said cellphone customers are unlikely to see any real benefit from the announcement.
The moves made by Paradis to tweak rules around the incumbent carriers’ obligations to new entrants are – with one exception — likely to be the last before the Nov. 19 auction for spectrum in the 700 MHz band. As such they not only set the conditions for winning licence bidder, along with the government’s change in foreign telecom investment rules it means Ottawa has gone as far as it can go to attract investors for the auction.
That exception is the condition Paradis will set, likely in May, for the ability of new entrants to sell their spectrum to incumbent carriers.
[Who is a new entrant? Companies that have never been carriers and bought spectrum in the 2008 auction: Wind, Mobilicity, Public Mobile, Videotron, Eastlink, Shaw Communications Inc. plus a few others that haven’t launched cellular service and are presumed to be holding spectrum for sale.]
The issue arose when earlier this year Shaw, which decided not to get into the cellular business, struck a deal to sell Rogers Communications an option to buy the spectrum it picked up in the 2008 spectrum auction. Under Industry Canada rules, incumbents like Rogers couldn’t buy AWS spectrum of new entrants for five years. The Shaw deal specifies the handover won’t take place until September, 2014 to meet that condition.
If the deal goes through it denies new entrants the ability to get Shaw’s spectrum. Wind and Mobilicity, which have networks in Western Canada, would be the likely buyers – if they could strike a deal with Shaw.
Under pressure, Paradis said yesterday his department will review the spectrum sale rules for new entrants “with the objective of promoting competition in the wireless sector.”
As far as Lacavera is concerned that means not only is the Shaw sale “off the table,” it means government policy will forbid incumbents from buying the spectrum of a new entrant.
If that interpretation is right – and it will depend on the conditions Paradis sets for new entrants selling their spectrum – it will mean AWS spectrum holders like Wind and Mobilicity can’t be bought by Rogers, Bell Mobility or Telus Corp after 2014, at least not in the short run.
Paradis may not make it impossible for new entrants to sell their AWS spectrum to an incumbent. That would affect the value of their holdings. But he might extend the five-year ban for several more years.
[Public Mobile is an exception. The rules covering the PCS spectrum it bought means the company can sell those frequencies to an incumbent at any time.]
It would also mean new carriers (except Public Mobile) could only dispose of their spectrum by merging or buying each other out.
“The government’s been very clear they’re not going to allow the incumbents to vacuum up the new entrants spectrum,” Lacavera said. “So whether it’s Wind or Public or Mobilicity there’s going to be a fourth national carrier… That’s very good for consumers and businesses and sets the stage for long term competition in the wireless industry,”
He admitted he’s reading into Paradis’ announcement that new entrants can’t sell their spectrum to incumbents. But, he reasoned, “I don’t know how you could come to any other conclusion… (otherwise) why wouldn’t they just approve the Rogers-Shaw deal?”
The other interpretation Lacavera takes is that with the deal dead, Shaw’s AWS spectrum –which covers most of Western Canada and parts of northern Ontario – can only be bought by a new entrant.
That means a new entrant facing what is expected to be an expensive 700 MHz auction has another choice: Buy Shaw’s spectrum.
If Lacavera is right, Rogers, Bell and Telus will engage in furious lobbying in Ottawa before Paradis makes his decision. So will Quebec-based Videotron, which wants to sell AWS spectrum it bought in 2008 covering Toronto to the highest bidder.
As for other parts of Paradis’ announcement, Lacavera is disappointed the government didn’t mandate incumbent carriers to make seamless roaming obligatory for competitors. But Paradis did say that roaming in general is now mandatory. Under the original licence rules for new entrants, incumbents had to let competitors roam on their networks for 10 years.
Wind loses again on roaming complaint
For its part, Public Mobile said it is pleased Paradis will “scrutinize and require approvals for ‘deemed spectrum license transfers’” – meaning the Rogers-Shaw deal – “which have the practical effect of locking-up or transferring control of spectrum assets.
Public Mobile, which operates in Toronto, Ottawa and Montreal, also said it views “as very positive” Paradis’ commitment to put more spectrum up for sale by 2017. That will help the sustainability of another wireless carrier, the company’s statement said. “Public Mobile is also pleased to see that the minister has reinforced the authority of the CRTC to use its telecommunications expertise to set fair, competitive rates for both mandatory roaming and tower sharing,” it added.
In its statement PIAC complained Paradis hasn’t changed the format of the 700 MHz auction announced last year to ensure his vow that four carriers can win spectrum in every region of the country.
PIAC also dismissed Paradis’ plan to hold consultations on the Rogers-Shaw deal. “That’s just bolting the door long after the horse has left the barn,” said PIAC co-counsel John Lawford.