In the fourth spectrum auction held since 2008, when Ottawa first put its policy designed to encourage new entrants into play, Rogers Communications Inc. and BCE Inc. already exceed the cap in some regions where they will not be eligible to bid, leaving Telus poised to scoop up new airwaves in many areas.Gloria Nieto/The Globe and Mail
Canada's second spectrum auction of the year is set to begin Tuesday, with Telus Corp. expected to be the major winner of new licences among the country's three national wireless carriers.
The public auction of airwaves in the 2,500 megahertz frequency band is not expected to generate as much revenue as one held last month, which raised a total of $2.11-billion.
However, it will provide a buying opportunity for a number of rural Internet providers, who use such high-band spectrum to provide home Internet service in areas where wired service is unavailable. CCI Wireless, SSi Internet Inc. and Xplornet Communications Inc. have all registered to take part.
It will also be another chance for the federal government to advance its goal of getting more airwaves into the hands of challengers to the incumbent wireless carriers. This is the fourth spectrum auction held since 2008, when Ottawa first put its policy designed to encourage new entrants into play.
Unlike last month's auction for AWS-3 (advanced wireless services) spectrum – which reserved 60 per cent of the airwaves for small carriers who spent a combined total of less than $100-million to win the set-aside licences – the federal government has not earmarked any spectrum specifically for new entrants in this auction.
But there is a cap on the amount of 2,500 MHz spectrum any one player can hold that limits each operator to no more than 40 MHz in each service area (the geographic areas used for this auction divide most of the country into 58 regions plus the Northwest Territories, Yukon and Nunavut, where there is no cap on the amount held).
Rogers Communications Inc. and BCE Inc. already exceed the cap in some regions where they will not be eligible to bid, leaving Telus poised to scoop up new airwaves in many areas. (BCE owns 15 per cent of The Globe and Mail.)
"I don't expect there to be excessive valuations … I don't expect Bell and Rogers to spend very much, but that's because of the cap, and therefore, there's a bit of a free ride for Telus," said Dvai Ghose, head of research at Canaccord Genuity. He added that Quebecor Inc.'s Videotron Ltd. and Wind Mobile Corp. are also likely to enjoy relatively easy access to spectrum.
Other small wireless players registered to bid include Atlantic Canada operator Eastlink Wireless and Tbaytel. Mobilicity, which is under creditor protection and failed to take part in last month's auction after scrambling to register, did not sign up to bid in the 2,500-MHz auction.
Regional carriers Saskatchewan Telecommunications Holding Corp. and Manitoba Telecom Services Inc. did not win any new airwaves in the AWS-3 auction. MTS is registered to bid in this month's auction but SaskTel is not taking part because it already owns the maximum amount of 2,500 MHz spectrum.
In a January report, BMO Nesbitt Burns Inc. analyst Tim Casey estimated the 2,500 MHz auction could raise up to $850-million.
The AWS-3 auction used a sealed bid model, but this one will follow a more complicated "combinatorial clock" bidding process, which allows bidding on packages of licences and can last for multiple rounds. The government will announce provisional winners within five days of the end of the auction.