Auction Day 34: Bidders focus on small town Canada, RoW analyzes licence costs

With the major markets all snapped up in Industry Canada's Advanced Wireless Services (AWS) spectrum auction, it has now come down to who will control the airwaves in some of Canada's smallest towns and cities.After eight weeks of bidding, battles continue for only a handful of properties: Moose Jaw SK, Dawson Creek BC and pockets of small town Ontario, including Brockville, Cornwall, Cobourg and Pembroke. Globalive Communications is still the main bidder for the Ontario licences, while SaskTel continues to hunt for additional spectrum in Saskatchewan.As the bandwidth sale continues at a snail's pace, and it will until certain bidders reach price exhaustion, the cost of spectrum continues to rise. The increase in bandwidth costs will create a challenge for companies hoping to offer lower wireless service rates to users. Service rollout could also be delayed as more money than expected is diverted from deployment expenses to spectrum licences.Some licence costs inflated; others are a bargainBelow is a table of five properties in the 10 MHz D-band: Moose Jaw SK, Mainland Nova Scotia, Prince Edward Island, Red Deer AB and Peterborough ON. The Saskatchewan licence was chosen because it's one of the more hotly contested properties. The others were chosen based on geographic area of the licence and population size to provide an analysis of current prices of spectrum. LicenceGeographic sizePopulationPrice – High BidderMoose Jaw83,287 km2104,297$2M – Sasktel Mainland NS44,427 km2760,894$950K – Globalive PEI5,696 km2135,294$291K – Globalive Red Deer32,736 km2198,479$669K – DAVE Peterborough6,661 km2192,992$905K – Globalive Clearly, some licences are more expensive, both on a per population and geographic area basis, which suggests that the value of these properties for some bidders extends far beyond a price per head in a certain geographic area.In the case of Moose Jaw, we have to take into account that SaskTel is really an ILEC in this case and will pay almost any amount to secure the rights to the property. Perhaps more interesting though is why SaskTel isn't pursuing the Regina and Saskatoon licences - much larger population sizes - with as much vigorBy design, spectrum auctions assign a value to spectrum licences and that value differs based on several factors, including population, geographic size and importance of that licence to a particular bidder or bidders. But the value of the licence also depends on the number of participants vying for control of that licence. With more players bidding on a licence, the value is certainly going to increase and that is exactly what happened here. Total standing high bids have now topped $4.2 billion.Should Industry Canada review its spectrum auction policies as a result of the disparity in licence pricing? On the surface, it doesn't make sense that the 10 MHz Moose Jaw licence has a standing high bid twice that of the same 10 MHz of bandwidth in Peterborough, particularly when the Ontario property is a tenth of the geographic size and double the population.

Auction Day 34: Bidders focus on small town Canada, RoW analyzes licence costs

News | 07/15/2008 2:02 pm EDT

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