Canada’s small mobile carriers are split on their opinion on the government’s earlier announcement to open allow them greater access to foreign capital.
The new auction rules “are a victory for Canadian consumers,” according to Stewart Lyons, president and chief operating officer for wireless startup Mobilicity.
He said the move “expands the pool of available capital for smaller carriers.
“We’ve already been approached by investors, we have some offers on the table. So we’re going to be a player in this auction, we’ll be a force. We’ll bid, and we’ll bid aggressively,” he said.
However, Globalive Wireless Management Corp., which owns Wind Mobile believes that consumers are still bound to face higher mobile plan prices, fewer choices and a wireless market dominated by large incumbent providers.
“The announcement creates the illusion that the government has gone all-in to create a competitive wireless landscape, when they’ve only done half the job,” said Anthony Lacavera, CEO of Wind Mobile.
Lacavera said allowing more foreign ownership is “only half of the equation” and that limits on the spectrum that new entrants can have still remains a major problem.
“We’ve spent countless months telling the government that caps will destroy our ability to compete with the incumbents in the next auction, thereby crippling competition in Canada,” the Wind Mobile CEO said.
Industry Minister Christian Paradis announced yesterday Ottawa’s intent to loosen foreign ownership restrictions on carriers that control less than 10 per cent of Canada’s wireless market share by revenue. The exemption will still hold for companies that increase market share beyond 10 per cent so long as it’s done without merging with another telecom company.
Currently, the telecommunications act restricts foreign investment to 46.7 per cent when direct and indirect ownership are combined. The change means that small telecom companies such as Globalive’s Wind Mobile, Mobilicity, and Public Mobile will soon have access to be able to access more foreign money to help them compete, according to the federal government.
Limits on new spectrum auction
In his announcement yesterday, Paradis said that the next spectrum acution will have limits on how much incumbents can purchase. The spectrum at stake is technically ideal for 4G networks. This provides fast speeds and better wireless reception inside buildings.
The 700 MHz spectrum auction will be held by the government in the first half of 2013, Paradis said.
But far from levelling the playing field, what the government has “stacked the deck in favour of the incumbents,” according to Lacavera. He said that in order to build an LTE network, 10 MHz of spectrum is necessary. “This decision only allows new entrants access to half of that amount,” he said.
The limit, Lacavera explained, will prevent any carrier, other than incumbents, from building faster networks.“It’s a simple formula, without the ability to acquire 10 MHz, No new entrant can build out LTE, which means No new entrant can viably compete in the long term.”
Lyons of Mobilicity, however, believs that a “reasonable compromise” has been achieved with the new rules.
“I would have liked a set-aside for the whole thing (all of the spectrum set aside for new entrants), because we don’t think the Big Three need any of the spectrum. But the way they did it I thought was a reasonable compromise,” he said.
Lyons said he would have preferred that two blocks of the four blocks in any market were set aside for new entrants rather than just one of the four blocks.
“But at the end of the day they gave us something, and I appreciate that,” he said. “It was a tough decision for the government to make and at least it means a new entrant will get spectrum in every market.”
(With notes from Howard Solomon)