Ottawa favours smaller wireless players over Big Three in spectrum auction rules
The Government of Canada granted smaller wireless players an advantage in next year’s spectrum auction, a blow to the Big Three carriers as they prepare to bid on the airwaves needed to meet the skyrocketing demand for mobile data and to power next-generation mobile networks.
After nearly eight months of consultation, Innovation, Science and Economic Development published Wednesday the framework for the March 2019 auction of 600 MHz spectrum licences.
Citing the need to increase competition and affordability, ISED will set aside 43 per cent of the 70 MHz of available spectrum for potential new market entrants and regional competitors, such Shaw Communications Inc.’s Freedom Mobile, Quebecor Inc.’s Videotron and Bragg Communications Inc.’s Eastlink.
“Competition is a key driver of innovative and affordable telecommunications services,” ISED Minister Navdeep Bains said in a statement.
“This is an important step toward more choices, lower prices and higher quality cell phone services for Canadians.”
This decision will give smaller players a leg up in the contest for a particularly valuable block of airwaves – the 600 MHz frequency can carry signals over long distances and penetrate buildings, qualities that make it desirable in both rural and urban areas.
It’s a similar framework to the 2008 spectrum auction that resulted in the birth of Videotron, Mobilicity (eventually bought by Rogers), Public Mobile (now owned by Telus) and Wind Mobile (now Shaw’s Freedom). Startups got spectrum for cheaper than they would have in an open auction.
ISED first proposed the set-asides to “address issues of market power” when it launched consultations on the auction last August. It said the incumbents – each serve about 30 per cent of Canada’s 31 million wireless subscribers – “likely have the means and ability to prevent other service providers from acquiring spectrum licences in an open auction.”
It’s moving ahead with the proposal despite pushback from BCE Inc., Rogers Communications Inc. and Telus Corp.
The incumbents argued that well-established companies with cable, internet and telephone businesses worth billions of dollars shouldn’t get an advantage that will decrease the overall government revenue earned from the valuable asset.
“Two of the largest cable companies in Canada shouldn’t be subsidized by taxpayers,” Bell CEO George Cope told investors last fall.
Rogers CEO Joe Natale, who called spectrum the “lifeblood of our industry,” and Telus CEO Darren Entwistle also took issue with treating strong regional players like startups.
In submissions to the regulator, Shaw hit back and said this auction was an opportunity to correct a “huge imbalance” in spectrum holdings between the incumbents and the newer players.
“It will help break the status quo and end the game where the Big Three win and Canadians lose,” Shaw President Jay Mehr said in November.
Ultimately, ISED appears to have bought that logic.
The decision comes as Bains treads a fine line between promoting facilities-based competition and pushing for lower wireless prices.
Facilities-based competition supports the major players that have invested billions into Canada’s networks, which ISED noted rank second among G7 countries for wireless speed. The Big Three continue to invest heavily into network upgrades and 5G technology.
But ISED also pointed out that regions with strong wireless competition have the lowest wireless prices in Canada. This applies in Quebec and Saskatchewan where there are four strong carriers.
In a major decision last week, the federal telecom regulator did not require the Big Three to open up their wireless networks to smaller operators that relied mostly on WiFi, but it called on them to provide cheaper data-only wireless plans.
Bains called the decision a “step in the right direction,” but said more must be done.
“True affordability can only come from true competition,” he said.