Ottawa Spectrum Transfer Plan Raises Concern Among Wireless Players

by Istvan Fekete on April 5, 2013

Regulation is good, but as it turns out, only to a certain point — until it reaches the lifeblood of the wireless industry, the wireless spectrum. Ottawa’s announcement about reviewing its policy on transfers of wireless licences raises concerns among Canadian carriers, which are about to spend billions of dollars acquiring spectrum during the upcoming bid.

Ottawa’s announcement suggests it could make it tougher for incumbents to acquire spectrum from new entrants. The background: to boost market competition and keep prices low for consumers. “To be clear, our government wants to see at least four players in each market,” Industry Minister Christian Paradis said.

The government review appears to be triggered by the “option” deal between Rogers and Shaw Communications, which gives the right to the red carrier to acquire the unused AWS spectrum from the latter. As we previously pointed out, small carriers and consumer advocates have argued this could signal the end of the government’s effort to boost market competition.

With the government thinking about restricting the spectrum transfer toward incumbents, the main question for wireless players – indeed for all participants, but maybe more so for the smaller players — is: is this really worth the investment? For smaller players, who struggle to raise capital in order to be able to bid on the upcoming auction, the government review has already caused investment uncertainty. And this isn’t looking good, especially when the government claims it is taking these steps to boost competition.

The wireless players interested in submitting a bid during the upcoming wireless auction have different perspectives on the issue. Here is what they say:

“Mobilicity respectfully submits that the very announcement of this consultation with respect to license transferability a few weeks ago has already further impinged access to capital for new entrants. Ironically, this announcement has created a level of uncertainty and confusion in the minds of investors as to the liquidity of spectrum assets which in particular affects new entrants far more than incumbents and further hampers their ability to create a competitive marketplace – the very thing the Department has suggested it wants to enhance,” the company wrote in its submission.

Wind Mobile, meanwhile, wants Ottawa to give new entrants a “right of first offer” to purchase spectrum that comes up for sale. “The Canadian market is a highly-concentrated oligopolistic market consisting primarily of the three Incumbents,” its submission said.

“The Department needs to resist micromanaging the wireless industry in order to address the inaccurate claims by some that the industry is not competitive enough,” said BCE Inc. in its submission.

“Bell Mobility respectfully submits that Industry Canada should stay the course and maintain that policy and not veer off course because some in government feel we should have 4 carriers.”

Rogers: “Changing this key attribute of AWS spectrum involves changing the rights of bidders in that auction after the fact – a change that flies in the face of the principles of contractual certainty that the Department strives to attain in its spectrum auctions.”

“Telus views these proposals as unnecessary,” the carrier said, adding that preliminary assessments were “impractical” since it is not clear at what stage of negotiations companies would be obliged to notify the government of a potential deal.

The government raised $4.2 billion during the AWS auction a couple years ago. It remains to be seen whether the billions it is about to receive will help the regulators change their minds.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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