A new year, a new wireless auction.
As Ottawa prepares to put more mobile spectrum up for bid this spring – part of what it calls an effort to boost competition in the telecom industry – there may be little competition during the auction process.
Industry Minister James Moore announced December 18 that the government would set aside 60% of advanced wireless services (AWS) spectrum for “new entrants” – essentially any company that isn’t Bell (TSX:BCE), Rogers (TSX:RCI) or Telus(TSX:T).
This comes after the big three telecom providers dominated last year’s 700 megahertz auction, which didn’t receive any bids from smaller players like Wind Mobile or Mobilicity.
Telecom consultant and analyst Mark Goldberg said one notable condition of the upcoming AWS-3 auction is that new players must already be operating within a territory if they want to bid for spectrum there.
For example, Wind Mobile could bid for spectrum in B.C., Ontario and Alberta, but not in Quebec or Saskatchewan even if it wanted to expand to either province later.
“In many territories, there’s only going to be one qualified bidder,” Goldberg said.
He added it’s still uncertain whether Mobilicity – which operates in the same areas as Wind but is in bankruptcy protection – will get funding from its backers to bid. (Mobilicity did not respond to multiple inquiries from Business in Vancouver.)
“Otherwise, in B.C., Ontario and Alberta, only Wind Mobile will be bidding,” Goldberg said. “If there’s only one bidder, it never moves past the opening bid.”
He said that’s raising questions about whether the opening bid price is too low. The total for proposed opening bids for spectrum blocks across Canada is $162 million; for spectrum in B.C., it’s about $18 million.
Bids from last year’s 700 MHz auction generated $5.2 billion.
Wind founder and chairman Tony Lacavera told BIV the government’s announcement would help level the playing field for new entrants and boost competition for consumers.
“Incumbents have been given very large swaths of spectrum over the last 30 years. It’s only in more recent auctions that incumbents have been paying for spectrum.”
While telecom companies did not pay upfront fees when the wireless industry was in its infancy in the 1980s and early 1990s, the incumbents did have to pay annual licensing fees.
Lacavera wanted to bid in last year’s 700 MHz auction, but Wind could not secure funding from its major stakeholder, Amsterdam-based VimpelCom.
After Lacavera’s own Globalive Capital led a recapitalization plan in September, he told BIV one of his first priorities would be to expand and speed up Wind’s network.
Moore told reporters in December smaller players would have the “opportunity” to hold more than 25% of allocated spectrum by the time the upcoming auctions wrap in May. That’s up significantly from 2006, when 98% of spectrum was concentrated in the hands of the big three, according to the industry minister.
Ottawa has been pushing hard for more competition in the wireless arena.
In December 2013, the federal government introduced new rules prohibiting the charging of cancellation fees after two years, effectively ending three-year contracts. But a July report from the Canadian Radio-television and Telecommunications Commissionfound the implementation of two-year plans raised average prices for basic-level packages.
The average price for a low-volume bundle was $35.70 in 2014 compared with $30.71 in 2013 – a jump of about 16%.
But average prices for high-level packages – which include a full set of features, 300 texts and a gigabyte of data – dropped significantly from $93.59 in 2013 to $79.69 in 2014. However, only two G7 countries had higher prices: the U.S. ($91.52) and Japan ($139.90).
Despite the government’s efforts to increase telecom industry competition, Goldberg said Canada’s market is already quite competitive.
“Businesses charge what people are willing to pay. Government intervention is not something I would characterize as part of competition.”
