Auction expected to net government about $140 million, Report on Wireless predicts

Ottawa will net between $140 million and $170 million in the upcoming 2300 MHz and 3500 MHz spectrum auction, set to begin later this month, Report on Wireless predicts. The take will be in the same range as the 1999 24/38 GHz auction haul of $170 million, but substantially lower than the $1.5 billion the 2001 PCS spectrum brought into government coffers. RoW bases its estimate on the average $1 price per Pop (point of presence) achieved in the 24/38 GHz auction (RoW, Nov. 29/99). While not exactly comparable with the mid-range Gigahertz frequencies, which were to have provided much needed bandwidth for very high-speed data communications, these lower bands will allow service providers to inexpensively expand their high-speed Internet and local access footprints. Price per Pop in the large urban centres will likely rise well above the $1-mark, and could even hit $5 as bidding from the national players and those looking for a market toehold will push up the high bids. Aggressive activity will be tempered, however, by conservative strategies in smaller urban regions and little predicted activity in rural and remote regions of the country. Industry Canada has been licensing the 3500 MHz band, bandwidth formerly reserved for the military, in rural areas on a first-come, first-serve basis for more than three years (RoW, Oct. 2/00 and Oct. 16/00). The 2300 MHz band, which was originally licensed in the U.S. for potential mobile uses, was believed to be sought by Unique Broadband Systems Inc., majority stakeholder in wireless cable TV provider Look Communications Inc. But since submitting an application to participate, UBS has withdrawn from the auction. Where the 24/38 GHz auction participants bid on licences in the mistaken belief that commercial gear would be available to offer service, the latest auction bidders will be vying for licences knowing that there is equipment on the market. While RoW doesn’t believe that the average price per Pop will go much above the $1-mark, the fact that there is readily available equipment in both bands could translate into aggressive bidding in large urban centres. Industry pundits have told RoW that activity will be tame in this auction due to the participation of the incumbent telcos - Bell Canada, Telus Communications Inc., SaskTel and Northwestel - and Rogers Wireless Inc., one of the country’s largest mobile wireless operators. RoW believes that for the most part industry observers are correct in their assessment because these large companies and regionally dominant players will bid to keep potential competition to a minimum. The auction won’t proceed, however, without any battles at all. Smaller players with either national aspirations or that want a stronger foothold in the lucrative western and central Canadian markets will bid aggressively. One needs only to look at Mipps Inc., recently acquired by Primus Telecommunications Canada Inc., which has laid down a $2-million deposit. While that doesn’t buy it enough points to launch a national attack, the company will try to bolster its presence in several mid-tier Ontario, Quebec, Alberta and British Columbia markets. Similarly, VCom Inc., which won 10 licences in the 24/38 GHz auction under its former moniker of WaveCom Electronics, could put up a spirited battle in several of the Saskatchewan licence areas. Richmond Hill ON-based DSL provider Softrade Inc. has also put down a substantial deposit of nearly $1.2 million, allowing it to bid aggressively for several Ontario licences. The spectrum cap of 100 MHz per player likely won’t come into play during this auction. The large players will be able to purchase the most valuable bands - the D, E and F bands - without too much difficulty, leaving the unpaired G band for the remaining players to fight over. Industry Canada is selling the rights to 848 licences across the country, comprising five licences in nearly every part of the country. There will be four in the 3500 MHz band (three paired and one standalone block) and a single licence paired block in the 2300 MHz band. The exception is Vancouver Island where interference issues have negated any sale of licences in the 3500 MHz band.

Auction expected to net government about $140 million, Report on Wireless predicts

News | 01/13/2004 5:00 am EST

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