Incumbent telcos urge better spectrum coordination with U.S., spectrum trading

OTTAWA--Incumbent telecom companies Telus Corp. and Bell Canada are urging the federal government to follow the U.S. example and free up spectrum for mobile use. Facing a growing need for mobile spectrum, the U.S. Federal Communications Commission’s National Broadband Plan called for 500 MHz of spectrum to be freed up in the next 10 years, allocating at least 300 MHz of it within the next five years to mobile broadband use. In its consultation document on the digital economy, released in May, the Canadian government said it intends to auction spectrum in the 700 MHz and 2500 MHz bands. This week major companies were coming forward with positions on digital issues, including spectrum management, as the consultation deadline of midnight Tuesday approached. Telus, in a submission for the consultation, said Canada should better coordinate its spectrum with its southern neighbour. Telus suggested that the federal government become a “formal observer" in the United States’ process toward a national broadband framework so that the two countries can coordinate plans. “Spectrum has to come from wherever the U.S. finds it. There’s no point in Canada releasing spectrum that isn’t being used for mobile, either in the United States or internationally,” Michael Hennessy, Telus’ senior vice-president of regulatory affairs, told The Wire Report. Hennessy said Canada should free up the same blocks of spectrum as the United States to facilitate the use of handsets that correspond with those frequencies. “When they say, ‘OK, we found 50 MHz here,’ Canada should try to follow suit in the same frequencies. That way there’s more of a guarantee that people will be making handsets for that frequency,” he said. “In other words, we can’t have a made-in Canada solution because none of the big handset manufacturers will make handsets only for the Canadian market.” Hennessy said that, to make room for mobile uses, Canada may have to free up spectrum that is now being used by broadcasters and the government. “If the U.S. starts to go after that is in the broadcasting space or the government-user space, and starts reallocating that to mobile, then Canada should follow suit. That’s the only way we can ensure that it will actually be useful spectrum,” he said. Mirko Bibic, Bell’s senior vice-president of regulatory and government affairs, agreed that Canada needs to pay close attention to the United States’ actions. “We do, as a country, need to follow closely where the U.S. is going to free up that 500 MHz,” he said. “The Canadian industry is too small an ecosystem on its own … It has to look at what other countries are doing, and follow suit as best we can.” Adrian Foster, a spectrum expert and partner with McLean Foster and Co. in Ottawa, said following in the United States’ footsteps for spectrum allocation is “quite sensible.” He said coordinating spectrum gives way to the creation of more handsets and devices that function in multiple countries. “The cost of manufacturing goes down. The price of handsets goes down. People don’t have to worry about having four handsets. They can have one. There are a lot of good reasons for doing that,” he said. In their submissions, the incumbent telcos also called on the government to move its spectrum management policy to full spectrum trading in secondary markets, allowing companies to freely exchange and purchase spectrum assets from one another. Bell and Telus also said the government should remove spectrum caps and avoid “set asides” for new entrants, which they say artificially inflate the price of spectrum. But Edward Antecol, vice president of regulatory affairs and carrier services with Globalive Communications Corp., said in an interview that the government should set aside spectrum for new entrants during the auctions. He added that he supports spectrum caps to restrict the amount of spectrum individual companies can own and put a limit on the incumbents’ market power. “At the last auction, the incumbents spent $1 billion acquiring spectrum, and some of them haven’t even put it to use yet. It’s quite obvious would be willing to spend $1 billion just to keep competitors out,” he said. “It’s cheaper to spend a billion dollars on spectrum and warehouse it than it is to let a competitor come in and start a price war … But I don’t think that benefits the public.” But Bibic said the incumbents are not hoarding spectrum. “There’s no evidence or justification to support that point of view. Those who need and want spectrum will always be able to secure spectrum … Hoarding spectrum in the real world is a silly concept, because all the spectrum we have, we use,” he said. In another submission for the digital consultation, SaskTel said spectrum auctions should be based on market forces and that no company should be given special designations. “SaskTel believes that, with the expansion of foreign ownership rules, ‘new entrants’ will be well capitalized and do not need a special leg up,” the telco’s position paper said. Robert Hersche, SaskTel director of regulatory affairs, said the government should operate two kinds of spectrum auctions: one for urban spectrum and one for rural. “There will be a differential in price. People will pay less in rural areas than they will in an urban area. But in an urban area, I’m serving eight million people, and in a rural block, I may about 50,000. What you should be paying for is the number of subscribers that you’ll be able to serve.” Hersche added that he is concerned about how the government uses the proceeds of the spectrum auctions, which flow into the government’s consolidated revenue fund. “Spectrum in and of itself should not be a cash cow and a way to solve a deficit and all those kinds of things. The allocation of spectrum should be for the good of the industry overall,” he said. Sasktel, Bell and Telus said in their comments that revenues from the auctions be directed toward broadband access in rural areas, digital skills training and stimulating demand for digital services. kfournier@thewireport.ca

Incumbent telcos urge better spectrum coordination with U.S., spectrum trading

News | July 13, 2010

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