Government Moves to Increase Canadian Telecom Competition

by Jordan Richardson on March 15, 2012

We’ve been talking about the upcoming spectrum auction and about foreign ownership restrictions in Canada’s troubled telecommunications sector for ages now, but Industry Minister Christian Paradis has finally done something about these issues.

On Wednesday, Paradis announced both limits on the spectrum auction and a lifting of foreign investment limits on smaller telecommunications firms. It’s a move that will probably not sit well with Canada’s telecommunications giants, but it should, if it has the desired effect, level the playing field of the nation’s unfortunate oligopoly.

Paradis also announced that the awaited spectrum auction will take place in the first half of 2013.

With respect to the spectrum auction, the big firms – Telus, Rogers, Bell – will be limited when it comes to how much of the “beachfront property” they can buy. Ottawa is going to set aside one of four blocks of the 700 and 2,500 MHz frequency bands for regional providers and new entrants. Companies holding more than one block of spectrum will be required to provide wireless services to 90 percent of their coverage areas within a timeframe of five years and to 97 percent within a timeframe of seven years.

This move theoretically prevents companies from “sitting on” the spectrum.

Anthony Lacavera, chief executive officer of Globalive, said that the changes in the auction simply aren’t enough to permit new carriers to get fully competitive with the incumbents. WIND Mobile and other new carriers had lobbied hard for a greater “set aside,” but this move doesn’t allow new carriers and regional entrants to purchase enough spectrum to compete. In fairness, the incumbents lobbied for the government to make no changes to allow the Big Three to buy up whatever spectrum they wanted using their deep pockets, but Paradis didn’t rule in favour of that either.

“It’s a total disaster,” said Lacavera. “It gives the illusion that the competitive marketplace has been strengthened, but it will be a catalyst for consolidation and new entrants will be starved of frequencies.”

As far as the foreign ownership restrictions go, Paradis said that the government will lift restrictions on investment in firms that hold less than 10 percent of the market share with regard to revenue. The current exemption stays in place for companies that increase their market share beyond the 10 percent goalpost without merging with a rival, however.

“It is a clear win for Canadians, it is a clear win for Canadian consumers and I’m very proud that we’ve been fighting that battle as long as we have,” said Lacavera about the foreign ownership restriction changes. “Finally, we’ve gotten it across the goal line.”

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