Lines drawn in the sand as two sides debate eligibility over auction participation

Eligibility appears to be a key sticking point as parties to the next spectrum auction debate access to high-speed fixed wireless bandwidth. A large contingent of smaller companies is advocating a set-aside of bandwidth versus the open auction supported by the larger players, and non-incumbents point to a perceived failure of previous auctions to create new competition. Both groups are seeking access to spectrum in the 2300 MHz and 3400-3700 MHz frequency ranges, which Industry Canada is proposing to auction (RoW, Aug. 21/01). New entrants and incumbents have waged a war of words over this highly contentious issue in the past. Smaller companies have indicated that if the government wants to ensure a competitive environment, it needs to make sure new entrants are guaranteed a chance to land spectrum. In the most recent case, a Sprint PCS-backed numbered company and W2N Inc. took the government to task on the issue during the proceedings that led to the auction of additional PCS spectrum earlier this year (RoW, March 20/00 and July 10/00). They ultimately lost the fight and only W2N landed three spectrum licences in that auction (RoW, Feb. 5/01). But that hasn’t deterred their willingness to fight the fight. ABC Communications Inc. of St. Quesnel BC, an existing 3400 MHz licensee and holder of licences in the 38 GHz range, wants the government to limit the incumbents’ ability to bid on only one paired block of the spectrum in the 3400 MHz range. "ABC Communications believes that it is in the public interest to prohibit the incumbent providers from bidding on the B and F blocks and that the incumbents (both cable and voice) should only be allowed to bid on the A and E pairing," ABC president Bob Allen writes in comments to Industry Canada’s Gazette Notice DGRB-006-01. He even proposes which companies and their affiliates should be classified as incumbents: Shaw’s cable group; the Bell group of companies and affiliates; the Telus group of companies; Rogers group of firms, including AT&T Canada Corp.; and the SaskTel group, including the recently acquired RSL COM. ABC is not alone in its fight to limit the incumbents’ ability to win licences as a handful of other hopefuls are proposing similar arrangements. "We know the department is keenly aware of the failure of most of Canada’s ‘new competition’ in the areas of broadband and voice," ABC’s Allen writes. "It should also be noted that investors will now be even less keen to finance any new entrants unless some effort is made to demonstrate that Industry Canada is serious about creating and protecting new competitors." Me2 Connection Inc., Toronto, writes that the development of this market represents potential parallels to the development of the PCS industry in Canada over the last several years. It argues that in setting aside spectrum for Clearnet Communications and Microcell Telecommunications in 1995, the department created the right environment that led to much of the innovation and competitive pricing that exists in the industry today. If such an approach were to be used again, then restricting the ability of the incumbents to bid is in order, the company states. "Therefore, the total amount of spectrum made available to these entities should be fairly restricted …," Me2 writes. "In many regions where incumbents currently dominate the market, it cannot be expected that they would necessarily introduce greatly needed new WCS and FWA services unless forced by new entrants through a fair and competitive process." Wispra Inc.’s wholly owned subsidiary, lime wireless inc. of L’Orignal ON, agrees with Me2’s assessment. "For the department to increase competition and innovation in Canadian telecommunications it needs to evolve the auction rules so that they encourage the availability of affordable spectrum to new entrants, i.e. reduce the likelihood of bidding wars that new entrants have no chance of winning, while also allowing the participation of incumbents on reasonable terms," the company writes in its comments to Industry Canada. However, the company goes one step further. It suggests that some of the blocks be available to all bidders, including major incumbent carriers, while other blocks only be open to small- and medium-sized enterprises (SMEs). It recommends that one block in the 2300 MHz band be available to all prospective bidders, and in the 3400 MHz range, three blocks be open to all and two be reserved for SMEs. "This structure would foster the active participation of all qualified corporations across Canada, while at the same time providing increased opportunity to SMEs," the company writes. Another Ontario-based company wants the department to go even further by not opening the auction up to incumbents at all. High-Speed FX Communications Inc. believes that small businesses don’t have a chance of winning spectrum in this proposed auction if it unfolds like the last one. "We would like to see the ‘Big’ players removed from the proposed auction and allow only current cost competitive businesses a chance to enter the market," it writes. "Making this proposed auction only open to small working wireless Internet service providers that are currently in rural areas is one way of assisting advancement into further rural regions and attracting investment and equipment manufacturers." Even one of the country’s largest wireless service providers supports limited access to the spectrum by incumbents. Rogers Wireless Inc. believes that incumbents shouldn’t be allowed to bid on spectrum outside of their traditional operating territory, which would prevent them from gaining market control in other parts of the country. Uncertainty surrounding third-generation wireless in North America has some of the incumbents worried about the potential migration of MCS systems into the 3400 MHz range. The incumbents, along with the Radio Advisory Board of Canada and the Canadian Wireless Telecommunications Association, believe that it would be wise to wait until the Federal Communications Commission finalizes its 3G spectrum plans. With the addition of a mobile designation to the 2500 MHz band in the U.S., the future of Canada’s MCS players is still somewhat uncertain (RoW Update, October 9/01). It is for this reason that incumbents are urging the department to hold off on designating the exact amount of spectrum that will be up for grabs. Move forward with auction plans despite uncertainty of 3G On the other hand, the smaller players like Me2 Connection and lime wireless believe that it is in the greater public interest to auction the bandwidth despite the few number of players that will be affected. "In this instance, we strongly believe the department needs to weigh the true benefit to all Canadians verses the needs of a few licensees, especially when they have not yet deployed and notwithstanding a few isolated exceptions," Me2 writes. Microcell Telecommunications, on behalf of Inukshuk Internet Inc., agrees with the other incumbents, but adds that auctioning either slice of airwaves will create too much competition in an already fragile industry. If the government wants to ensure the success of the MCS industry, Microcell says, it must not proceed with an auction at this time. "Under current market conditions, and with current regulatory constraints, notably the Canadian ownership and control requirements, releasing additional spectrum for fixed telephony and high-speed Internet access service now would flood a fragile market with spectrum, and actually erode the ability of the private sector to invest, innovate and compete in the telecommunications market," the company writes. Microcell isn’t alone in calling for an all-out stop to the auction and has support from some smaller players.

Lines drawn in the sand as two sides debate eligibility over auction participation

News | October 30, 2001

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