OTTAWA – Quebecor and MTS Allstream are not alone among telecom and cable firms in their desire for a wireless spectrum auction that would shackle the "big three" mobile phone companies in Canada.
Among those aligned with the Quebec and Manitoba companies that have been leading the charge to have spectrum in the auction set aside for new entrants – and who have also proposed other rules like mandated roaming and tower sharing – include: Cogeco Cable, the Canadian Cable Systems Alliance, Shaw Communications, EastLink, the Assembly of First Nations and Toronto Hydro Telecom, among others.
The list of those, such as SaskTel, aligning themselves with Bell Mobility, Telus and Rogers Wireless, who say the auction should be wide open and that the highest bidders should win, is a much shorter one.
In February, Industry Canada asked Canadians how the next spectrum auction – for advanced wireless services (AWS) – expected in early 2008, should be run and Friday was the deadline for those ideas.
At a press conference prior to the Rogers Communications annual general meeting Monday however, Ted Rogers left no doubt about his feelings on the matter. "What we’re talking about here is people trying to rip off the system to get spectrum at half cost," said the company founder.
"The big pitch is, they want more competition: ‘Competition will drive prices down – this is wonderful.’ Who are these people? Manitoba Tel (is one). Guess what, they have a 70% market share in Manitoba."
"Secondly, we’ve got Videotron and Quebecor. They already have wireless all through Quebec. How do you have more competition when you’re already competing?"
"It’s just a rip-off to try and get low-priced spectrum," said Rogers.
At the press conference, company president and COO Nadir Mohamed pointed out that the test for competition on the wired telephony side is having three facilities-based competitors in any given market, a condition satisfied in most exchanges in which the big three compete in already.
And when you add in other brands like Amp’d, Virgin Mobile, President’s Choice and 7-Eleven all marketing some form of wireless, "there is more competition in wireless than in any sector," said Mohamed.
However, many of the applications to Industry Canada criticize our country’s perceived lack of action on the wireless front and how we’re supposedly well behind other nations.
Taking on both the federal government and the existing wireless operators, the Toronto Hydro Telecom submission said: "This leisurely like approach has reduced the sense of urgency to keep Canada technologically abreast of the rest of the world. It has significantly retarded the opportunity for entry thereby removing tension within the industry and reducing the downward pressure on PCS rates and the upward pressure on service."
Others have said Canada lacks in 3G adoption and that operators like Rogers have been far too slow to market with new services. After outlining a few of the new products his company has recently brought forward, Rogers added: "These scallywags who are going around saying Canadian firms are inferior, they ought to be put in jail."
That would certainly place a lot of regulatory lawyers behind bars.
Cogeco, for example, in calling for spectrum to be set aside for newcomers, called the Canadian wireless industry a "mixed success."
"(S)pecific measures are required in the structure of this auction to increase competition in the Canadian wireless market," added the CCSA. "Recent consolidation has resulted in three large national providers who, while competitors, work closely together because of arrangements for roaming and the sharing of infrastructure. The wireless market is extremely profitable for these companies and, given the combination of Canada’s lower wireless penetration compared to many other countries and the demand for new advanced services, those companies already have considerable growth potential."
Shaw, on the other hand, suggest abandoning the auction altogether in favour of a "competitive process" – a beauty contest, if you will, that will decide in a hearing which companies’ plans look to be the best use of spectrum resources. Shaw noted that the last auction, in 2001, saw Rogers, Bell and Telus buy it all. (Then again though, in 2001, no Canadian company had yet made any profit on wireless.)
"The process for awarding AWS spectrum and the licence conditions should… be articulated with the clear objective of promoting competition and new entry," reads Shaw’s opinion. "This can best be achieved by awarding the AWS spectrum through a competitive process, rather than an auction. In our view, a competitive process will best ensure the licensee(s) of AWS spectrum will provide innovative, converged broadband services to Canadian consumers, and robust competition to existing carriers."
But, adds Shaw "If an auction is employed, a set aside of spectrum for new entrants is necessary; such a set aside is preferable to a spectrum aggregation limit, which has been unsuccessful in creating sufficient competition."
Then, on the other, other hand, the Boston Bar First Nation says wireless spectrum "within a traditional territory is no different than the allocation of land, water, timber, minerals, fish and all other natural resources," it reads. "The need to meet the criteria defined by the Supreme Court of Canada (on Aboriginal title and rights) also applies to spectrum."
They want to be consulted and the want spectrum set aside for reserves, says Boston Bar as well as the Assembly of First Nations. (And, First Nations do have legit wireless beefs, by the way, because wireless coverage on reserves is generally poor, and that’s being charitable.)
Enterprises that serve rural markets, such as the CCSA, SaskTel and Barrett Xplore (which provides broadband service to such territories), urged Industry Canada to adopt a different approach when it comes to small markets that aren’t well-served, or cheaply-served, by wireless. Rural regions lag significantly behind urban markets in mobile phone penetration and companies having to pay multi-millions for spectrum will have a very tough time envisioning a return on investment from small communities.
"Auctions as currently constructed add considerably to an already challenged economic model for rural broadband," says the Barrett submission. Perhaps, it can be argued that auctions are the only market-based approach to award spectrum: however, with greater cost pressure on the economic model, competitive entry is discouraged, and greater are the calls for government or public subsidy.
"Of equal concern are current market or licensed area definitions which include significant rural areas with large urban markets. In an auction process, rural broadband providers are severely discouraged from, and disadvantaged in bidding for these licenses. It would be uneconomic to bid for the entire license and to carry the cost burden of the true urban market area, when it is simply the rural market area which the rural provider seeks," adds the submission.
All sides, strange as it may sound, are staking out the "let market forces work" as well as the "in the public interest" territories in their arguments. The incumbents say leaving the auction alone will mean allowing the free market to act the best way it knows how and will bring in top dollar for valuable spectrum.
“Bell believes the purpose of the auction should be to deliver AWS spectrum to those who will use it best and secure appropriate compensation for the taxpayers of Canada,” said Lawson Hunter, executive vice-president and chief corporate officer of Bell Canada, in his company’s press release on Friday. “It is the approach most consistent with the Government’s clearly articulated policy directive to minimize regulatory interference and rely on market forces to the maximum extent possible.”
Those who want into wireless are saying that limiting the auction is the best way to let the market work because you can’t have a free market without competition – and that it is therefore more in the public interest to reserve some spectrum for extra players than to just cash the biggest cheque.
"Competition is in the public interest," reads EastLink’s submission. "One of the key factors that drive penetration is reduced cost of services. EastLink submits that as new entrants enter the wireless marketplace it will drive prices down, resulting in increased penetration. Some reports indicate that penetration rates in Canada are much lower than in the US and that Canadians pay more on a per-minute basis for wireless services than their American counterparts."
Reply comments are due in on June 27th.
