After months of delays, the federal government is set to release the long-awaited rules for a key auction of wireless spectrum.
Industry Minister Christian Paradis will make an official announcement in Ottawa on Thursday morning that will outline the final regulations for the 700 megahertz auction that will be held later this year.
Mr. Paradis, who is scheduled to deliver a short speech at 8:30 a.m. ET before the open of North American financial markets, is also expected to announce revamped policies on a number of related issues including tower sharing and roaming among domestic carriers – critical decisions that could alter the competitive landscape of this country’s $19-billion wireless industry.
More than 27 million Canadians carry a cellphone, including children as young as age 11. With wireless bills increasingly becoming a kitchen-table issue for consumers, the Conservative government has been eager to demonstrate its commitment to stimulate competition in order to keep wireless prices low.
At the same time, this auction could represent a significant financial windfall for the federal government, which is desperately trying to slay the deficit. Some analysts have suggested Ottawa could make roughly $6-billion from the 700 MHz auction – although those proceeds would likely be spread over a decade.
The 700 MHz frequency is highly prized by carriers because of its ability to travel long distances and penetrate buildings. Carriers are seeking out wireless licences in that band as they build out their LTE (long-term evolution) networks, which allow Canadians to use data services, such as streaming mobile video, at ultra-fast speeds.
Canadian mobile data traffic, which increasingly includes video, is expected to increase nine-fold from 2012 to 2017, according to Cisco. And the 700 MHz band is seen as essential for new entrants like Wind Mobile, Mobilicity and Public Mobile to compete by offering modern LTE services.
Late last month, Mr. Paradis confirmed the auction of the valuable 700 MHz frequency would take place “by the end of 2013.” The government had initially promised the industry that the auction would take during the first half of 2013.
Mr. Paradis first announced the government’s initial auction rules in March, 2012, saying the government would limit the amount of so-called “prime spectrum” that incumbents could purchase in the prized 700 MHz band.
In doing so, he promised that at least four players would be able to buy wireless licences in each regional wireless market. He also indicated that players would be subject to rural rollout requirements.
Additionally, he announced key changes to the foreign investment rules for small telecoms to allow for 100-per-cent foreign ownership of carriers with a revenue market share of 10 per cent or less.
Even so, some analysts question whether the federal government will be successful in its efforts to stimulate sustainable competition in the wireless sector.
“Given that 1) new entrants have not had the impact that some had expected; and 2) with the exception of QMI (Quebecor) and EastLink, we wonder if the new entrants have the capital necessary to bid for 700 MHz spectrum and upgrade to LTE, we wonder what Industry Canada may do,” wrote Dvai Ghose, an analyst with Canaccord Genuity, in a research note to clients on Wednesday.
He added: “Finally, there is a risk that a foreign strategic backer enters Canada, but given the capital required for network upgrades and spectrum and Wind’s record to date, we wonder if there is much foreign strategic interest in Canadian wireless new entrants.”
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