Wireless spectrum auction: Last call for one that works

Just because Industry Canada wants to perpetuate its fantasy of true competition in the wireless telecom sector doesn’t mean the rest of us should.

The decision on Tuesday to essentially stymie the acquisition of Mobilicity by Telus and, more significantly, delay the 700 MHz wireless spectrum auction by two months does nothing except tell the world what won’t happen.

While you could applaud Industry Minister Christian Paradis for reaffirming the rules that had long put in place over the transfer of acquired wireless spectrum, there are still huge questions around how we’ll ever see the government’s long-overdue promise of four strong players in every market across the country fulfilled.

“I will not hesitate to use any and every tool at my disposal to support greater competition in the market,” Paradis said in a speech given in Ottawa. This begs the question of what tools are left to him, other than veto power.

Letting the free market reign has led to the incumbent stalemate we’re all used to. The first spectrum auction in 2008 – which spawned a number of now-dead competitive local exchange carriers (CLECs) and a few in what could be their final hours (Public Mobile, Wind Mobile) – clearly didn’t work either. Putting the next auction off from November to January will mean – what, exactly? That someone will give interested parties a Christmas gift worth the millions they need to become a new entrant in the wireless market?

There will be other repercussions, too. Rogers’ deal with Videotron to buy unused spectrum as part of a shared LTE partnership? Don’t count on it. Shaw’s plans to sell wireless spectrum to Rogers? Sorry. “I don’t think any of these other deals will be permissible,” given today’s decisions, said Eamon Hoey, a telecommunications industry analyst based in Toronto.

Hoey, who said he has been following this sector for 30 years, recalls the early days when the government just gave away spectrum to the incumbents and their predecessors. While Paradis said there would be limits of the 700 MHz spectrum available to the big three, Hoey suggested it would not be at all unfair to say, “Sorry guys, you’ve had your free meal.”

Forbidding transfers and imposing limits on the spectrum auction may prevent what is often described as a monopoly telecommunications market from getting worse, but it doesn’t do much to improve the long-term outcome.

Imagine for the moment if Public Mobile, Wind and Mobilicity were all thriving. This next auction would be their chance to accelerate their growth by acquiring the more powerful 700 MHz spectrum. Even if one of them had thrived, the outlook for January’s sale would not be as bleak. Instead, the last auction largely resulted in a lot of marketing from the upstart mobile carriers, some decent subscriber growth (a quarter of a million in Mobilicity’s case) and at least one star business leader in Wind chairman Anthony Lacavera.

It’s not impossible for a young firm to succeed in a highly mature industry, but it’s rare. A few years back I saw a presentation by Don Bell, who showed a slide of all the failed airlines he researched before co-founding WestJet. The slide had three columns in small font, with every variation on “air” and “Canada” you could imagine. Yet we now have not only WestJet but Porter. There may be a difference, however, in the volume of people needed to fill airplane seats and the myriad revenue streams associated with developing loyal wireless customer relationships.

If spectrum can’t be passed around for the wireless currency it is, Industry Canada needs to do something that will make it more affordable for entrepreneurs to turn it into something new, something valuable, something that will make this upcoming auction a source of hope rather than cynicism. That’s a lot to accomplish, even with an extra two months.

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