OTTAWA – Canadian wireless operators remain largely unconvinced that Industry Canada’s proposed changes to spectrum licence transfers will be good for the wireless market. New entrants and incumbents alike are opposed to any rule changes that would limit a secondary spectrum trading market.
Mobilicity acknowledges that the department is trying to create a more competitive wireless market and took a first good step in setting aside spectrum in the 2008 Advanced Wireless Services (AWS) auction. But the upstart says “the imposition of additional vague, open-ended restrictions on the transferability of spectrum” won’t help new entrants raise the capital they need to compete with existing players, nor will it enable the government to achieve its goal of creating a more competitive wireless market.
“As a result, in a self-contradictory manner, it undermines any initiatives that the department has or will undertake to encourage further foreign investment in the sector,” Mobilicity writes in its reply comments to the government’s proposal (DGSO-002-13).
While the big three incumbents disagree with the assessment that Canada’s wireless market isn’t competitive enough, they argue, as do new entrants, that adding new restrictions for spectrum transfers, particularly retroactive changes to AWS licences, will harm all industry players. “Modifying licence terms mid-stream only serves to undermine confidence in Industry Canada's auction process. Bell Mobility therefore respectfully recommends that, in the interest of maintaining confidence in the integrity of the department's auction processes, the proposals contained in the notice should not be implemented,” the company says in its reply.
A secondary market for spectrum trading is an integral part of the department’s spectrum management program and the government should be encouraging this activity, not imposing new barriers, adds Bell. It notes that ministerial approval for all spectrum transfers and Competition Bureau oversight over mergers and acquisitions are two important safeguards already in place to address issues surrounding spectrum concentration or competition.
MTS Allstream notes, however, that it’s premature to suggest that spectrum licence transfers will be somehow impeded under Industry Canada’s proposals. “Providers wishing to fill spectrum gaps, innovate and find more efficient uses for spectrum will continue have the ability to acquire and/or transfer spectrum. As well there is no reason, at this juncture, to assume that a detailed review will automatically impede or diminish the secondary market for more significant transactions,” says MTS.
In its consultation, the department asked whether it should adopt a threshold to trigger spectrum transfer reviews. A number of parties offered up their own preferred solutions.
Telus argues that determining a spectrum licence transfer based on a concentration basis needs to be nuanced and each case should be considered unique “rather than blind application of hard and fast rules.” As opposed to just looking at the spectrum amount, the department should consider adding a subscriber element to this calculation.
“All else equal, the higher the subscribers per MHz-pop ratio, the harder the spectrum is working and the higher the need for more spectrum to support growth to satisfy customer demand. Subscribers per MHz-pop is the most valid way to compare the relative spectrum needs of operators of all sizes in any geography.”
According to Quebecor, there still remains a variety of as yet unanswered questions that would need to be dealt with prior to looking at the threshold element. “For example, no party has addressed in any meaningful way the complex issues of how to weight spectrum above and below 1 GHz, how to treat paired versus unpaired spectrum, how to deal with encumbered or partially encumbered spectrum, and when to recognize that a repurposed band is now ‘available’ for mobile use,” the company writes.
It suggests that now is not the time to be looking into this matter. “Quebecor Media believes it is illusory to believe that an objective, predetermined trigger can be set for the detailed review of spectrum transfers. Whatever trigger is set will almost certainly impede transactions that would otherwise contribute to competitive market dynamics,” says the company.
For Mobilicity, the big issue revolves around the availability of capital. It argues that Industry Canada could solve competition issues if it allowed the new entrants to pay for their spectrum purchases in installments. On a going forward basis, new entrants would be allowed to pay for 700 MHz spectrum in installments over the life of the licence term (20 years). For AWS spectrum, the department could return all money collected from new entrants and then allow them to pay for their licences in installments with a nominal interest fee.
Industry Canada has told players it will rule on the spectrum license transfer proposals quickly, but the next important date for wireless companies is June 11, when applications to participate in the November 2013 700 MHz spectrum auction, for which the number of participants are far from certain, are due.
