Wireless firms brace for spectrum auction showdown

Industry Canada has announced the first step toward holding a spectrum auction next year that will re-purpose 105 MHz of 2-GHz spectrum for advanced wireless services, which could herald a change in rules that would give new players a deal on the coveted spectrum.

The first step is a public consultation on the framework of the auction. According to Industry Canada, the consultation process will also include a “reply comment” phase, which will give an opportunity to challenge the positions and assertions of other parties.

The hot-button issue of the consultation is whether the government will provide concessions for new telecommunications players looking to buy in to the lucrative advanced wireless market and snap up some of the 105 MHz pf spectrum available-an amount Mark Goldberg, a telecommunications consultant and co-founder of the Canadian Telecom Summit, called “substantial” and could easily support new carriers.

“The fundamental question here is, should the government make it easier for one or two new players (to enter the market)? If they make the decision to facilitate that, we will have an additional player,” he said. “This would entail the government setting aside blocks of spectrum that would be unavailable to those who already owned spectrum. If they don’t do that, it will make for a much wilder auction. The prices could go through the roof, and (who comes in will) depend on how deep their pockets are and how badly they want to enter the market.”

The cost of doing so, according to Frost & Sullivan‘s industry analyst for the mobile communications group Eduardo Kibel, could be in the ballpark of anywhere from $20,000 in small cities or towns to as high as $150-million in large urban centres. Despite the hefty price-tag, at least a couple of potential bidders have shown their hand, including, said Kibel, Toronto Hydro Telecom. According to Ian Scott, vice-president of federal government affairs for Telus, Quebecor’s Videotron is also on the list.

Goldberg said that anyone could come in, from a consortium of regional players to an investor to a speculator who might hold onto the spectrum until the legislation restricting non-Canadian access to the market changes.

Scott said that there are several issues that have been sticking points with some Canadians, including that there are too few wireless providers, and that the prices are too high, resulting in the companies making too much money. Scott said that there are six additional service providers to choose from (including Virgin, Amp’d, Videotron, Fido, PetroCanada, and Eastlink), and cites an OECD study that said that Canada has the third-lowest wireless rates behind the U.S. and Sweden. People also often confuse the cheaper, extra-minutes deals offered in the States with the prices available to average users, which, he said, are on par with Canada.

In response to the claim that they’re making too much money, Scott said, “We need to make money to pay for the investment. It’s not that old of an industry and new services must have increased flow to support them.”

In terms of the wireless industry, Canada’s telecommunications market is much smaller than that of the U.S., but that doesn’t stop them from trying to keep up. Despite being at least a year behind in terms of wireless penetration, according to Kibel, and, said Goldberg, lower than virtually any of Canada’s trading partners, this auction comes on the heels of a similar one held in the States at the beginning of 2006.

The upcoming auction will allow Canadians to more easily get coverage while roaming in the States, and vice versa; it will also reduce the amount of custom-designed equipment necessary for the Canadian wireless market. One of the other key U.S.-related issues raised by the document surrounds whether or not telecommunications companies should be obligated to hammer out roaming and tower-sharing deals with start-up telecommunications companies who have yet to establish a nation-wide network.

“Then why build a network?” said Scott. “Let them buy spectrum, let them build their network, and let them compete — no special favours, and no special arrangements.”

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