A fourth national wireless player in Canada: Part II – The Rules

Industry Canada has embarked on a process to license valuable spectrum that will allow operators to provide a wide range of services including mobile voice and data as well as high-speed Internet access. The government plans to auction the spectrum early next year, but auction rules have to be put in place before the bidding starts (click here for Part I). In Part II - The Rules, Report on Wireless takes a look at some of the key spectrum auction rules that have yet to be decided, as well as what the various companies participating in the consultation have to say about them. There are a number of rules that most parties will say are critical, including the amount of spectrum contained in each licence, or spectrum blocks, and how large of an area each licence covers, known as serving area. Those are only two, among many, aspects of a licensing framework that will ultimately be resolved in the department's ongoing consultation. There are others, such as capping the amount of spectrum any one company can acquire and reserving spectrum for a certain class of companies, referred to as a set aside. Whether incumbent providers be required to share tower space and if the government mandates digital roaming are also two more questions that will be answered in the consultation. Setting the stage: restricting entry or promoting more competitionSetting aside spectrum and capping the amount any one company can purchase are two of the most talked-about auction provisions that can greatly affect the outcome of a spectrum auction. According to potential new entrants, using either one of these mechanisms is truly the only way that new competition can get into the wireless market. On the other hand, the big three cell phone providers argue both concepts can lead to a skewing of an already competitive market and allow for the uneconomic entry of new companies. Set asides and a spectrum cap are two ways the government can explicitly allow new entry, but spectrum block size and licensing tiers are also mechanisms that can encourage new entry. Larger spectrum blocks covering large geographic areas favour the bigger more-established companies with deeper pockets and virtually eliminate the possibility of small regional player participating in an auction. On the other hand, smaller licensing areas and spectrum blocks can allow for smaller and regional players to participate in an auction. Now that first round comments are in regarding Industry's advanced wireless services (AWS) spectrum auction consultation, it should come as no surprise where the battle lines are drawn. Incumbent wireless providers want an "open auction," which means the few rules the better, with no special provisions for new entrants. Potential new entrants want the government to set rules that specifically allow for their entry, and this is either through a set aside of spectrum or a cap on the amount of spectrum any one party can buy in the auction. Companies such as MTS Allstream Inc. and Vidéotron ltée are specifically calling on the federal government to set aside spectrum for new entrants to bid on. They are also asking the federal government to mandate reasonable roaming rates and tower sharing. Bell Mobility, Rogers Wireless and Telus Mobility are opposed to any such measures, noting that they can diminish and distort competition not increase it. Both sides of the debate say they believe the government needs to "support competition" but those two words mean completely different things to new entrants and incumbents. New entrants believe they mean supporting new competitive entry, while incumbents say the words mean supporting the current regulatory framework and preserving the industry's demonstrated competitiveness. At the end of the day these rules play a large part in determining which companies have a better chance of succeeding in acquiring the spectrum they set out to buy, or if the existing three-player national market will remain in tact. Industry Canada has maintained that it is only in the business of releasing spectrum, but the rules it sets will almost certainly have a hand in determining the outcome of the auction. Report on Wireless will next take a more in-depth look at the submissions to Industry Canada's consultation with a particular focus on delivering service to rural and remote Canadians. Later this week, RoW explores spectrum requirements for next-generation advanced services.

A fourth national wireless player in Canada: Part II – The Rules

News | May 28, 2007

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