BCE Inc. and Telus Corp. are asking the Federal Court to block Quebecor Inc.’s purchase of 5G airwaves in British Columbia, Alberta and Manitoba, arguing that the Quebec telecom did not meet the requirements to bid on those blocks of spectrum in the most recent auction.
Quebecor’s Videotron Ltd. subsidiary spent $830-million to acquire 294 blocks of spectrum – airwaves used to transmit wireless signals – in a federal auction that took place between June 15 and July 23.
The airwaves, which are in the 3,500-megahertz range, are considered beachfront property for 5G because they combine capacity – the ability to carry large amounts of data – with coverage, or the ability to travel long distances. The fifth generation of wireless services provides much faster speeds and less lag time than previous generations and promises to power emerging technologies such as smart cities and remote surgeries.
For the auction in June and July, in a bid to encourage greater competition in the wireless market, Ottawa set aside up to 50 megahertz of spectrum for smaller carriers in each of several areas where enough licenses were available. Videotron, which offers telecom services in Quebec and Ontario, was permitted to bid on the set-aside spectrum, allowing it to purchase the highly coveted airwaves at lower prices than what the three national carriers – BCE’s Bell Canada, Telus and Rogers Communications Inc. – paid for similar slices.
Quebecor’s president and chief executive, Pierre Karl Péladeau, has said that acquiring the spectrum is the first step in the company’s expansion outside of its home province of Quebec. During a recent conference call, Mr. Péladeau said the telecom is planning to expand in one of two ways. It could acquire Shaw Communications Inc.’s wireless business, should the Competition Bureau force its sale as a condition of approving a merger between Rogers and Shaw. Or, Videotron could become a mobile virtual network operator, or MVNO. (The Canadian Radio-television and Telecommunications Commission recently issued a ruling that requires the Big Three national wireless carriers and SaskTel to open up their networks to eligible regional players who wish to become MVNOs.)
In documents filed with the Federal Court on Thursday, Bell and Telus argue that Videotron should not have been eligible to bid on set-aside spectrum in B.C., Alberta and Manitoba because the telecom is not “actively providing commercial telecommunications services to the general public” in those regions, as required by the auction rules.
Bell and Telus told the court they asked Innovation, Science and Economic Development Canada (ISED), the federal ministry that regulates spectrum, to explain why Videotron was permitted to bid on set-aside spectrum in those three provinces.
The national carriers claim that ISED refused to disclose the details of Videotron’s application, and that it said only that the telecom had indicated it provides over-the-top business internet services in those areas through its affiliate, Fibrenoire Inc. (Over-the-top refers to services that are provided through an existing internet connection.)
Mr. Péladeau called the court case “another attempt from Bell and Telus to eliminate real competition.”
“Videotron secured the right to bid on set-aside spectrum in several provinces outside Quebec based on the activities of its affiliate Fibrenoire Inc. Detailed evidence regarding these activities was provided to ISED during the auction application process. It was based on this evidence that ISED correctly determined Videotron’s eligibility,” Mr. Péladeau said in a statement.
Videotron bought Fibrenoire, a company that provides businesses with fibre-optic connectivity services, for $125-million in 2016.
“That Fibrenoire does not provide telecommunications services through its own network facilities in Manitoba, Alberta, or British Columbia is publicly acknowledged by Fibrenoire itself. Fibrenoire describes its network facilities as being offered ‘exclusively’ to business customers in Quebec and Ontario,” Bell wrote in court documents.
Bell added that Innovation, Science and Industry Minister François-Philippe Champagne “could not have properly concluded that Videotron was a set-aside-eligible bidder. Rather, the Minister appears to have accepted Videotron’s application without conducting its own analysis or review.”
Mr. Champagne did not respond to a request for comment.
Bell and Telus are requesting an order prohibiting the federal government from issuing the licenses in question to Videotron. They are also asking that any licenses that have already been issued be revoked and that any bands of set-aside spectrum that Quebecor’s subsidiaries won in the three provinces be put back on the auction block.
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