After two weeks of bidding in Industry Canada’s auction of unassigned 2300 MHz and 3500 MHz frequencies, the outcome of the bandwidth sale appears to be nearing its end with results most could have predicted: Bell Canada, Rogers Wireless Inc. and Tele-Mobile Company (Telus Mobility) securing the majority of licences up for sale.  While numbered company 4253311 Canada Inc., backed by deep-pocketed Rajendra Singh, is proving the exception to the rule, the other smaller players appear to have succumbed to the financial pressure imposed by larger well-financed companies.  Johanne Lemay, co-president of Lemay Yates Associates, says that because of Industry Canada’s decision not to pursue a policy of setting aside spectrum for new entrants and the tier-four service area construction, it was inevitable that less well-financed companies would find it difficult to acquire substantial amounts of spectrum.  "What’s pocket change for one is funds difficult to raise for another," she tells Report on Wireless. "I was really surprised looking at Distributel (Spectrum Inc.) and how much money they were putting on the line…but at one point it becomes too much money for them so they effectively get booted out, I think because of the nature of the rules in place." (Distributel is still in the auction holding a single standing high bid of $1,550 on the Louiseville QC property.)  Reserving spectrum for new entrants as set aside, however, causes its own headaches, she says, adding that some companies will try to implement impractical business plans. "There are two sides to (the debate about spectrum set asides), but I think in general you would see that those auctions show these small guys will have a chance only when it’s under the radar screen," Lemay states.  Several companies secured spectrum in first phase bidding (part of the application to participate in the auction process involved submitting licences in which bidders were interested), the most prominent being 4253311 Canada. The numbered company landed the rights to 61 licences during that phase.  Licensing on a tier-four basis also presented problems for the smaller players, notes Lemay, highlighting the fact that the Toronto licence included other major areas of southern Ontario such as Hamilton and Oakville-Burlington. It’s difficult for Source Cable Ltd., a Hamilton-based wireless cableco for example, to compete against the likes of Bell, Rogers and Telus on a dollar-for-dollar basis.  Mike Tasker, Source Cable’s manager of wireless development, told RoW in an interview last week following the company’s exit from the auction that prices simply became too high. "As a small company, it’s hard to compete with the larger ones…and there’s some spectrum there that’s way over-inflated (price-wise). It’s tough for us to justify spending that kind of money when we’re going to end up competing with these guys in the long run anyway," he said on January 17.  Acknowledging the difficulties faced by a company such as Source Cable, Lemay suggests there could be refinements to the way the department licences spectrum to make it easier for smaller players, but also for the large ones as well. "You could do different partitioning of the spectrum, some national licences and some smaller areas. If you’re a bigger player, a bigger company, you look at this and say ‘What I really want is a national licence.’ I think there might be some different ways to do this so that the smaller players do not get kicked aside," she says.  Industry Canada’s auction of these unassigned frequencies has produced some big surprises in the first two weeks of bidding, with one of the biggest being the fact that it has lasted this long in the first place. Secondly, a few smaller players have demonstrated remarkable resistance in battling Bell, Telus Mobility and Rogers Wireless Inc.  Few would have predicted at the beginning of the auction that it would have lasted more than two weeks given the mix of players participating and given the results of last February’s auction in which only half of the licences were sold. But Lemay says the year between auctions has seen a number of structural and technological shifts.  She says that the industry was still feeling the effects of the telecom meltdown from a few years earlier, and that in 2005 the industry is in a much healthier situation. Additionally, she says, a year of wireless technology development has produced substantial upside for this type of spectrum. Both of these combined produces higher value spectrum and resulting higher interest levels of service providers. "In February 2004, you should have seen higher prices. In a normal environment, I would say you would have seen higher prices…Even though you have some of the same players (participating), I think maybe they see a better opportunity a year later using that spectrum than they saw in February 2004, so it’s worth more," she tells Report on Wireless.  Lemay adds that technological developments in broadband wireless, namely WiMAX, have also helped change the environment for the better. "A year ago, (WiMAX) was just a word that people were starting to hear and now it’s not," she says.  At the end of round 59, Bell Canada controlled 56 properties with standing high bids totaling $34.5 million. Telus Mobility held second place with $8.7 million in high bids covering 130 licences. 4253311 Canada and Rogers Wireless held onto third and fourth place with $7.6 million and $4.7 million in standing high bids, respectively.