Canada about to join the 700 (MHz) club

As Industry Canada prepares to open the next major chapter for Canada’s wireless market, observers expecting radical near-term change may want to reset their expectations.

The auction for the 700 MHz block of wireless spectrum kicks off Tuesday with national and regional wireless providers scheduled to submit their initial bids for the rights to use these new frequencies to deliver voice and data services. Although a total of 15 bidders filed applications by last September’s deadline, four applicants, including Toronto-based private equity firm Catalyst Capital, and Mobilicity debtholder Birch Hill Equity Partners, have since dropped out.

The remaining 11 bidders include the incumbent national carriers, Bell Mobility, Rogers Communications and Telus, as well as regional operators such as Quebec’s Videotron, Manitoba’s MTS Inc. and Atlantic Canada’s Bragg Communications Inc., which owns Eastlink. Wind Mobile’s parent company, Globalive Communications, is also on the list.

“I'm expecting some jostling for position in terms of which carriers get which blocks,” Mark Goldberg, a Thornhill, Ont., telecom consultant and founder of the annual Canadian Telecom Summit. However, because bidders like Wind Mobile, Sasktel, Videotron and Eastlink operate in mutually exclusive territories, “all of the current service providers should be able to come away with spectrum.”

Little change expected

Despite the federal government’s high-profile campaign to encourage foreign investment and boost competition in the space, no foreign investors will be taking part in this round. After feverish speculation last summer that Verizon was preparing to enter the Canadian market – and following a controversial move by Ottawa to remove foreign investment restrictions for smaller carriers and limit the blocks available for incumbent bidding – the American giant said it had no current plans to do so.

Frequencies in the 700 MHz block have long been coveted by providers, as they can penetrate deeply into buildings and underground, and require fewer cell towers to cover a given geographic area – a boon to traditionally underserved rural areas. The spectrum was formerly used for analog television, and became available with the August 2011 deadline for broadcasters to switch over to digital distribution. AT&T and Verizon have been using 700 MHz spectrum since 2008, and deployment north of the border could open the door to more cost-effective roaming services.

“Canada has fallen a few years behind the U.S. in making spectrum available for mobile services,” said Goldberg. “As more Canadians continue to rely more on their mobile devices, insatiably consuming more capacity through video and other data intensive applications, carriers will continue to need more spectrum to power their networks.”

Made in Canada

This week’s submissions come almost six years after Canada’s last major spectrum selloff, the AWS auction, raised C$4.3 billion, brought Mobilicity, Public Mobile, and Wind Mobile into the national market and added regional players Eastlink and Videotron, as well. Since then, some of the newer operators have faltered, with Mobilicity seeking creditor protection, Wind Mobile looking for buyers and Telus snapping up Public Mobile. Despite calls for increased foreign investment to break the incumbent carriers’ 92 per cent market share, a spokesperson for OpenMedia.ca says the federal government’s failure to attract American carriers isn’t necessarily game over for more competition in the wireless sector.

“I think it’s much better to look for a Canadian solution,” David Christopher said. “There are innovative Canadian entrepreneurs and companies out there. Other than pinning all our hopes on a big foreign telco coming into the country, I think it’s much better to make sure the conditions are in place for the affordable and independent Canadian providers to thrive and to create jobs here in Canada.”

With the first 700 MHz auction moves yet to be played, Industry Minister James Moore is already looking ahead to the next auction. On Friday he announced initial terms for the April 2015 2.5 GHz auction – including new rules designed to further level the playing field for regional operators. Whether both auctions can give smaller players more traction in a market that’s consumed them voraciously for decades remains to be seen.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca