Canada Markets open in 3 hrs 43 mins

Ottawa goes for broke with new wireless auction

A commuter uses his mobile phone in New York, December 12, 2013. REUTERS/Eric Thayer/Files

The federal government’s announcement on Monday that it is scheduling an additional wireless spectrum auction – known as AWS-3 – before next year’s long-planned 2.5 GHz auction marks a sharp escalation in attempts to bring more competition to the mobile market.

“Our government will continue to make decisions that will lead to more choice, lower prices and better service for Canadian consumers,” Industry Minister James Moore said in a statement. “Today's announcement will help operating new entrants acquire valuable new spectrum to help expand their networks and deliver fast, reliable service to Canadians."

Moore said the rules for the quickie auction will align with those used for last January’s 700 MHz auction as well as the 2.5 GHz auction set to kick off next April, and “will encourage more competition in the wireless market while ensuring the interests of consumers first.”

More of the same

If this all sounds familiar, it should. The Harper government has been promising increased competition since before it was first elected in 2006. The 2008 AWS spectrum auction was supposed to introduce fresh blood into the market and create a viable alternative to the Big 3 carriers.

But Wind Mobile, Mobilicity and Public Mobile have each failed to achieve critical mass. Public Mobile was swallowed up by Telus last October. Mobilicity, which sought creditor protection last autumn, was the subject of repeated buyout attempts by Telus before the national carrier finally gave up in May.

Wind Mobile led the newcomers with a 700,000-strong subscriber base, but it was left in the cold in the leadup to the 700 MHz auction when its parent company, Amsterdam-based VimpelCom Ltd., refused to fund any spectrum bids and wrote its investment in Wind Mobile down by US$768 million.

Ottawa’s AWS-3 move salvages its hopes of creating a fourth national carrier from the ashes of its previous stillborn attempts. It is making 50 MHz of spectrum space available for auction, 30 MHz of which is set aside exclusively for smaller players. The catch? They have to already be operating in-market, with less than 10 per cent national and 20 per cent regional or territorial market share.

Tilted playing field

This approach largely locks the incumbents out of the process and is designed to encourage smaller players to consolidate spectrum holdings and scale themselves up to compete nationally. It validates Videotron’s decision to spend $233.3 million in the 700 MHz auction to snap up spectrum in southern Ontario, Alberta, and British Columbia, well beyond its traditional Quebec market. It also anoints Videotron, and to a lesser extent other regional players like Manitoba Telecom Services, SaskTel and EastLink, as the next great hope in expanding the national carrier club from three to four.

It is the most radical move we've ever seen in federal telecom policy, and a tacit admission that earlier strategies to encourage competition have completely failed. It's a seismic shift, as auctions are typically planned years in advance, with methodical timelines and rigid frameworks and not dropped on the calendar with barely eight months of notice.

But after eight years of trying and failing to deliver the wireless competition goods, the government can’t bear going into the 2015 federal election with a gaping hole in its telecom agenda. Ottawa has thrown everything at the wall in its quest to stoke wireless competition, and thus far nothing has stuck. Rather than tweak the rules yet again for the 2.5 GHz auction, holding an entirely new auction sends an even stronger message that Ottawa will stop at nothing to fulfill its long-held promise.

Will it succeed? Nothing is ever guaranteed in the wireless space, but it stands a better-than-likely chance as it reflects learnings from the 700 MHz auction and a distinct recognition that established auction processes may no longer be enough to keep Canada’s regulatory landscape in the same league as other nations. The government now sees regional-to-national scaling as the most likely, viable path to a fourth national player, and AWS-3 gives the regional operators their most powerful incentive yet to make the leap.

The dice have now been rolled. While everyone waits for the incumbent carriers to weigh in, the suddenly emergent regional players find themselves centre stage in Ottawa’s biggest-ever wireless gamble.

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

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting