The government’s decision to cancel its policy limiting the amount of radio spectrum cellular telephone companies can hold may spawn more industry consolidation, an industry analyst said.

Industry Canada originally designed 1995’s spectrum restrictions to generate innovation and prevent a single

player from dominating the mobile-service business.

The government said Canada now has close to 14 million cellphone subscribers and a modern wireless infrastructure capable of delivering a wide range of voice, data and media services.

In 1995, Industry Canada said cellphone users numbered about two million and were evenly divided between the only providers, Bell Mobility and Rogers Mobility.

“”We now look at the market, and we see it’s nine years later, the market is well established. So a policy such as a general spectrum cap is no longer required,”” said Pat Carrey, policy adviser in Industry Canada’s telecom policy branch in Ottawa.

During this nine-year period, two entrants emerged on the scene — Clearnet (which as since been bought by Telus Mobility) and Microcell Telecommunications Inc., Carrey said.

Many industry stakeholders suggested the spectrum cap be lifted and that Industry Canada make additional spectrum resources available to the wireless industry in the near future.

The immediate beneficiary of eliminating the cap is Telus, said telecom consultant Mark Goldberg, president of Mark H. Goldberg & Associates Inc. in Thornhill, Ont.

“”One of the challenges for Telus in its acquisition proposal for Microcell is that in certain (geographical) areas, they would have exceeded the spectrum cap”” permitted bandwidth licensees, Goldberg said.

“”In effect, what the spectrum cap regulations were doing was harming shareholders and permitting the other players to possibly get a windfall victory out of a consolidation.””

Had the policies continued, Goldberg said debate would have focused on which rivals would acquire the spectrum, and whether Telus would be forced to dispose of it at fire-sale prices.

Telus in a public statement admitted the Industry Canada decision could ease its hostile bid for Microcell.

When asked whether lifting the cap will lead to monopolies by consolidated players, Goldberg replied: “”No single player will end up with more than half of the business even with some consolidation.””

As it stands, the industry has three other competitors besides Microcell: Bell Mobility, Telus and Rogers — each with roughly 30 per cent of the market, he said.

For Bell Mobility, the cap’s disappearance means it can buy more spectrum in Ontario and Québec, the only regions where it has reached a limit, said Almis Ledas, Toronto-based vice-president of corporate development for the carrier.

Industry regulators will keep close watch of mergers and acquisitions in the mobile phone market, Goldberg said.

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