The race is on for incumbents in the wireless business to buy up the spectrum that was supposed to be set aside for new competitors.
Telus Corp. wants to buy Mobilicity, and Rogers Communications Inc. wants to buy the spectrum that Shaw Communications bought to start a wireless provider before deciding it had better ways to spend billions of dollars.
The only hitch is, Ottawa does not want the incumbents buying these chunks of the airwaves. As Industry Minister Christian Paradis said a few weeks ago, “the intent of the policy was not to have this set-aside spectrum to end in the hands of incumbents.”
But what options does Mr. Paradis have?
1. Give up on the competition idea.
Admit failure. Mobilicity loses millions of dollars a month. Rivals Public Mobile and Wind Mobile are for sale. On a market level, it’s not working. What’s more, the attempts to keep creating a rival to BCE Inc., Telus and Rogers seem odd when set against the supposedly free-market nature of the Conservative party, anyway.
2. Block the Telus and Rogers deals.
At the other end of the spectrum (sorry), the government could say no to both spectrum sales and hope some sort of white knight rides in with a rescue plan and a billion dollars to keep the dream of more telecom competition alive. The risk is if the saviour never shows, companies like Mobilicity are in such bad shape they fail outright.
3. Be more heavy handed regulating tower sharing
and roaming. The government could more tightly enforce rules that are supposed to help the upstarts by, for example, giving them access to the incumbents’ towers. There’s little downside in this for Ottawa. But at this point it’s probably not enough to really save any of the upstarts.
4. Try another, lower cost way of creating rivals to BCE, Rogers and Telus. Instead of trying to create rivals with their own networks and spectrum, an expensive undertaking, the government could mandate mobile virtual network operator (MVNO) access to incumbent networks. In this scenario, a new operator could sell phones under its own brand but route calls through the incumbents’ towers and spectrum. It’s a cheaper way to get going. It’s been tried in other markets to varying degrees of success.
5. Allow the big companies to be bought.
Foreign wireless operators have not been keen to enter Canada by way of buying a small operator. Mobilicity tried and failed to drum up foreign interest. So the government could try to tempt a Verizon or an America Movil into Canada by taking off ownership restrictions on the big telecommunications companies. There are numerous hurdles, including the fact that BCE and Rogers also own protected media assets. And there’s also a big risk – that it does not actually lower prices for phone service. What if a foreign company came and bought a Canadian telecom giant, costing head office jobs and prestige, only to sit back and enjoy the high prices it could extract in Canada? That would be a political nightmare.
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