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Prepare for a wild wireless year in Canada

Those smartphones and tablets to which we're all now addicted lie at the root of a growing battle over who controls the radio frequencies that fuel burgeoning demand for mobile services.

That demand promises to make 2012 a chaotic year for Canada's wireless industry as debate rages over next-generation high-speed services, industry competition, copyright, foreign ownership and bandwidth caps.

One number promises to dominate the agenda: 700. As in 700 MHz, the next chunk of wireless spectrum that the federal government plans to auction off either late this year or early next.

In the world of wireless, whoever controls the airwaves can conceivably control the market. But wireless phone and data providers can't just set up networks and fire them up. They must first purchase rights from the federal government to use specific frequencies. The auction for the next block of spectrum — in the 700 MHz and 2.5 GHz frequency range — is expected to move forward either toward the end of 2012 or in early 2013.

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Auctions are a big deal in wireless. The last one — the so-called AWS auction in 2008 — led to upstarts like WIND Mobile, Mobilicity and Public Wireless challenging incumbents like Bell, Rogers and Telus for consumer market share. The next auction will raise the stakes even more, thanks largely to the technical characteristics of frequencies between 698 to 806 MHz, commonly referred to as the 700 MHz band.

These frequencies were freed up last year after television stations completed their federally-mandated switch from analog to digital broadcasting, which consumes significantly less bandwidth.

The 700 MHz band is perfectly suited to the new generation of high-speed 4G services — and carriers want as much of the new spectrum as possible they continue to build out their wireless LTE networks. The lower frequencies make it easier for signals to travel further, which reduces the number of towers carriers need to build. Greater range also helps bring high-speed coverage to traditionally underserved rural areas. The benefits extend to urban users, too, as 700 MHz signals penetrate buildings and other stationary objects much more effectively. Imagine devices that don't go silent as soon as they're carried inside.

The 700 MHz band is so good, in fact, that incumbent carriers like Rogers, Bell and Telus are already squaring off against the new entrants over who should have the right to participate in the auction in the first place.

The smaller players want the government to set aside either some, or ideally all, of the available bandwidth for them. They say the big three, with approximately 95 percent of the Canadian wireless market, can easily compete with the spectrum they're already using. Unsurprisingly, the incumbents say everyone should play by the same rules. At last May's Canadian Telecom Summit, Rob Bruce, President, Communications for Rogers, said Canada needs regulation that doesn't support one industry or company at the expense of another.

"Those who have suggested that companies like Rogers shouldn't have fair and equal access to this spectrum are misguided," Bruce said in a statement. "Restrictions on the 700 MHz band auction would be unfair to our nine million wireless customers who have every right to access a truly national, robust LTE network in both urban and rural markets."

As is often the case, Canada lags the U.S., which has already completed its own 700 MHz auction. The FCC raised close to $40 billion in two separate rounds, in 2008 and 2011, with AT&T and Verizon outspending all other participants. Notably, the U.S. process did not introduce any significant new players to the market.

Major 2012 milestones in the Canadian march toward next-generation wireless include the government's release, expected early this year, of the overall policy structure — the basic rules — for the auction process. The rules will dictate how much incumbents and new players will be allowed to buy, how the bandwidth might be divided up, and how consumers will continue to have access to updated devices and affordable services.

The framework is also expected to deal with the thorny issue of foreign ownership. Currently, foreign-owned companies are limited to a 46.7 percent ownership stake — direct and indirect, combined — in telecommunications companies. Canada's foreign ownership rules, implemented to protect Canada's telecom industry from becoming a branch office, have come under fire from critics who say the current policies are strangling competition, limiting investment and turning Canada into a global telecom laggard.

By the end of the year, we'll know more about who will be allowed to bid how much for wireless spectrum. Billions of dollars and the very future of the mobile devices and services market are at stake. We won't be able to take advantage of this advanced new spectrum until well into 2013 at the earliest, but 2012 is already shaping up to be a pivotal year as the rules for Canada's wireless future are hammered out.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. carmilevy@yahoo.ca