Canada’s planned auction of 700 MHz spectrum in January is coming under heavy fire from the country’s incumbent operators.
As the 17 September deadline for deposits for the tender approaches incumbents Bell Canada, Rogers Communications or Telus are…
Canada’s planned auction of 700 MHz spectrum in January is coming under heavy fire from the country’s incumbent operators.
As the 17 September deadline for deposits for the tender approaches incumbents Bell Canada, Rogers Communications or Telus are stepping up their lobbying efforts to change the rules of the frequency sale.
US wireless behemoth Verizon Communications is exploring the possibility of entering the market. However the operator has said it is assessing the regulatory environment and is cautious in that respect.
In the auction Ottawa plans to sell four blocks of digital dividend spectrum. New entrants to the market will be allowed to acquire two of the blocks, while existing operators will only be allowed to buy one. This could leave one of the three incumbent operators empty handed.
The Canadian Council of Chief Executives (CCCE) – which counts the heads of Bell, Rogers and Telus amongst its members – has written to the prime minister to argue that the rules of the auction should not “discriminate against” domestic companies.
It said that the rules should be changed so that all Canadian carriers have equal access to bid on spectrum due to its scarcity, and equal opportunities to buy smaller wireless operators in the country. The CCCE also suggested that foreign entrants should be subject to the same build-out requirements as the incumbents.
In an interview with the Toronto Star Rogers’ regulatory VP Philip Lind suggested that the government was rolling out the red carpet for Verizon and that government officials travelled to New York “offering favours” as they attempted to establish a sturdy fourth operator.
The government said in a statement that it remained committed to promoting four wireless operators across the country and stressed that the rules of the auction did not discriminate against Canadian bidders: “The policy does not stipulate the type or size or nationality of the new entrants. We have been clear that we want to guard against undue concentration of spectrum.”
In a press release Bell said that the government was “unintentionally underwriting the success of US companies in Canada” and described the terms which give an entrant such as Verizon an advantage against incumbents as “loopholes” which needed to be closed.
“Favouring US companies over Canadians threatens our national communications industry and its place in Canada’s future growth, productivity and prosperity,” said Bell’s chief legal and regulatory officer, Mirko Bibic.
“These special rules were intended to help new competitive start-ups. We ask how the federal government could now hand over Canadian spectrum, infrastructure and capital to US corporations – especially when Canadians do not have similar rights south of the border.”
However the CEO of Wind Mobile – a challenger operator reportedly in negotiations with Verizon – argues that the larger operators are being “disingenuous” and that they themselves have benefitted from favourable spectrum rules in the past which led to their market dominance. Each of the dominant operators have more than seven million subscribers while a combination of Wind Mobile and fellow upstart Mobilicity would still have fewer than one million.
He told The Globe and Mail that the fact that Verizon was looking at entering the market suggested that Ottawa’s competition-boosting policy was working, and that the incumbents’ reactions to the auction rules was evidence that this “entrenched and cosy oligopoly” needed to be shaken up. The big three operators currently control 85% of Canada’s spectrum according to data from consultancy Nordicity.
Telus took a different view calling on the government to level the playing field. It argued that an operator “four times the size of the entire Canadian industry [by subscribers]” did not need “special favours”.
In an emailed statement the company said: “As it stands, Verizon could bid on two of the four blocks of prime spectrum available while we can bid on just one, Verizon would not have to build their own network but could piggyback on ours, and we could be barred from buying smaller Canadian telecoms in a competitive processes while foreign companies can purchase them at a discount – rules that were created to help small start-up firms and not foreign giants.”
