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The fight for Canadians' cellphone business could soon become more intense, after Ottawa announced yesterday it will hold a spectrum auction early next year that's expected to bring at least one more major player into the market.

Industry Minister Maxime Bernier said the government plans to make available a total of 105 MHz of space on the airwaves for additional wireless services, a process that could be a boon for both consumer prices and federal coffers. It will seek public comment on the auction between now and early summer.

Analysts said the big question that has not yet been answered is whether Ottawa constructs the auction so that new entrants are guaranteed space. If the government decides against that, existing providers could simply buy most or all of the spectrum for themselves.

Industry Canada said it could consider a number of issues, including technological convergence, the kinds of challenges new players face in entering the market, and whether the big existing companies have the "incentive" to buy up more spectrum to keep it out of the hands of budding rivals.

Canada's fast-growing market for cellphones and other wireless services is dominated by three companies: Bell Canada C, Rogers Communications Inc. C and Telus Corp. C Analysts said the auction would likely interest other cable companies such as Vidéotron Ltée C of Montreal and Shaw Communications Inc. C of Calgary, and perhaps smaller regional entrants such as utilities or even well-funded startups.

Industry Canada noted that new wireless entrants face hurdles such as acquiring spectrum and hefty capital investments. It asked for comments before May 25 on whether spectrum should be reserved for new entrants, whether there should be mandated roaming, and whether there should be a cap on the amount of spectrum one player can acquire.

Yesterday's announcement will be a disappointment to the existing operators, who have been lobbying Ottawa in recent months not to encourage new entrants.

"Wireless is just a huge cash cow for these guys," said Jeff Leiper, an Ottawa telecommunications analyst.

The announcement marks the latest move by Mr. Bernier to make Canada's telecommunications industry more market-oriented and reduce — or at least hold the line on — consumer prices. Canadians pay more for wireless services than Americans and have a lower penetration rate than in many industrialized countries./ Iain Grant, an analyst at telecom consultancy SeaBoard Group in Montreal, said new players in the wireless market have in the past led to faster adoption by consumers, because a more crowded market usually means aggressive marketing and lower prices.

When Ottawa held a wireless auction in 1995, it led to two new operators — Clearnet Communications and Microcell Telecommunications — although they were later acquired by incumbents Telus Corp. and Rogers.

Potential new competitors include Vidéotron Ltée, which has said it's interested in entering the market if the right rules are in place. Regional phone company Manitoba Telecom Services Inc. has echoed those thoughts regarding a potential expansion nationwide./ Other would-be entrants — foreign companies — are essentially locked out unless ownership rules are changed. They can't own more than a 46.7-per-cent stake in Canadian phone companies.

"Foreign investment restrictions have the effect of limiting potential entry in the telecommunications market, thereby reducing the competitive discipline that the threat of entry can provide," Industry Canada noted in its consultation paper.

"It is important to consider the effect this may have on the free operation of the market and the ability to rely solely on market forces in the forthcoming auction."

Ottawa could reap other rewards too, including a healthy contribution to the federal treasury. Mr. Grant said that if the auction is constructed so that Ottawa's financial return is a priority, the government could net about $3-billion.