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The Canadian government is moving again to spur competition in a wireless industry dominated by three players, aiming to push smaller companies to merge and create more forceful rivals.
Industry Minister James Moore announced Monday his government will auction prime AWS-3 spectrum, but in a way that would motivate an investor to buy and combine smaller, struggling firms such as Mobilicity and Wind Mobile.
The auction will set aside a large 30 MHz block of the AWS-3 spectrum on offer in each region of the country for bidding only by small players that are currently operating in that region.
The auction date is not set but will take place with results available before an already scheduled sell of of separate 2,500 MHz spectrum in April 2015.
The government is promising a "simpler, shorter" auction process as well.
"Today’s announcement will help new entrants acquire valuable new spectrum to help expand their networks and deliver fast, reliable service to Canadians," Moore said in a statement.
He said consultations on the licensing of this spectrum would begin this summer.
BELL ASKS FOR 'LEVEL PLAYING FIELD' WITH NEW ENTRANTS
With a federal election on the horizon, the spectrum rules represents a big step in the Conservatives’ high-profile political pledge to foster better service and lower prices through competition.
It also comes against a backdrop of simmering tensions with the Big Three carriers, which have chafed at Ottawa’s ongoing quest for fourth player in all markets. In a statement to BNN, Bell reiterated its requests for a level playing field for all wireless competitors.
"Spectrum is a valuable national resource and shouldn’t be given to selected companies at a bargain. It’s a cost to taxpayers," the company said. "The primary focus with mobile spectrum should be putting it to work for consumers. Bell launched 700 MHz spectrum service first, on the day we received our licenses in April, and we’re eager to put this new spectrum to work for consumers too."
The Conservatives have been very protective of new entrants such as Mobilicity, refusing to allow the Big Three telecom players to swallow them up, because Ottawa remains convinced the market can support more competitors.
THE VALUE OF AWS-3 SPECTRUM TO NEW ENTRANTS AND INCUMBENTS
AWS-3 spectrum is even more valuable than the 2,500 MHZ variety because it functions well in both urban and rural areas and signals penetrate buildings better. It's ideal for delivering service on smart phones, tablets and other mobile devices.
Spectrum auctions normally set aside some airwaves for only new or smaller players to buy – as a means of increasing competition in the Canadian wireless marketplace. This spectrum can consequently be bought more cheaply than the rest of the auction because less players can bid for it.
In this new AWS-3 auction, the set-aside spectrum will be restricted for purchase by small players that are already operating in the region where they seek to acquire more frequencies.
This will make it very valuable for whomever owns Wind Mobile and Mobilicity at the time of the auction because these small carriers are already operating in key urban and suburban markets across Canada.
Wireless carriers with less than 10 percent national and 20 percent provincial/territorial wireless subscriber market share will be eligible to bid on the set-aside in licence areas where they are providing services to Canadians.
In order to acquire this valuable AWS-3 spectrum at a bargain price in key markets across Canada, an investor would need to go through entities like Wind or Mobilicity.
Senior government officials said they believe they have to act soon to encourage investors to consolidate small carriers. Mobilicity is under court protection from creditors as it tries to restructure.
"It is an ideal time to inject additional spectrum into the marketplace in order to incent new wireless investors and to improve the conditions for the purchase of new entrants,” a government official told The Globe and Mail.
The Tories forced Telus to cease efforts to take over Mobilicity this spring by threatening to cut the Vancouver-based company out of the 2,500 MHZ auction in 2015. After Ottawa’s warning in April, Telus notified the federal government in May that it was dropping its $350-million bid for Mobilicity.
CREATING A FOURTH NATIONAL WIRELESS COMPANY
The federal government’s end game is to create a situation where struggling smaller players Wind Mobile and Mobilicity merge and the spectrum they hold gets rolled along with other spectrum into a vehicle that’s sufficiently well-capitalized to succeed in the market.
Quebecor’s Videotron has signaled it may be willing to become Ottawa’s long-sought fourth wireless player and this last winter spent $233-million buying valuable spectrum in Canada’s four most populous provinces.
But Quebecor has also strongly hinted it wants more help from Ottawa in order to make it more attractive to roll out wireless service across the country.
Canada has four substantial wireless players in a number of the country’s regional markets but not, most notably, in much of populous Ontario.
Quebecor’s Videotron purchased valuable spectrum to deploy service in markets across Canada this past winter but has so far held off launching service in new regions.
BNN is a division of Bell Media, which is owned by BCE