Canada’s three national wireless carriers say new auction rules reserving a large swath of airwaves for smaller players – aimed at stoking competition and lowering prices – are really just a subsidy for companies with healthy balance sheets.
The federal Department of Innovation, Science and Economic Development on Wednesday released the final rules for an upcoming auction of spectrum – the radio waves used to carry cellular signals – and said it was sticking with a plan to set aside 43 per cent of the available licences for bidding by smaller players.
Industry watchers called the move a positive one for Quebecor Inc. and Shaw Communications Inc., cable companies that operate small but steadily growing wireless businesses.
Many anticipated the final rules would include the set-aside, but national carriers Rogers Communications Inc., Telus Corp. and BCE Inc. still decried the rules.
“The government calls the folks who are going to be the beneficiaries of the set-aside ‘regional players,’ but they’re billion-dollar cable companies that are already quite established in wireless and they don’t need ongoing taxpayer subsidies,” said Mirko Bibic, BCE’s chief legal and regulatory officer, in an interview on Thursday.
He said BCE had hoped the government would reduce the size of the set-aside to 20 per cent of the available spectrum and argued that Quebecor’s Videotron and Shaw’s Freedom Mobile (formerly known as Wind Mobile) no longer need extra support to improve their network quality.
“[Videotron] has a high-quality network, and from all accounts Freedom Mobile is improving theirs and has the iPhone. And they’re well-capitalized corporations that are able to afford these investments,” he said, referencing the fact Freedom was able to strike an agreement last year with Apple Inc. to sell the iPhone directly to its customers, something the U.S. smartphone giant only permits on networks of a certain quality.
The airwaves at stake in the auction, which will take place in March, 2019, are in the 600-megahertz range, making them low-frequency radio waves that can travel long distances and penetrate buildings. Such spectrum is useful for providing broad coverage and will also be one of the first bands to be deployed using 5G (fifth-generation) network technologies in Canada.
Shaw says it needs more low-band spectrum, arguing the Big Three together own more than 90 per cent of such airwaves. “A level playing field on spectrum is required to create a truly competitive wireless market for Canadians,” Shaw said in a statement.
Quebecor similarly noted the need for smaller players to catch up with the incumbents on spectrum and also said wireless prices have gotten lower thanks to competition from strong regional players.
The federal government hopes that will continue, with Innovation Minister Navdeep Bains arguing that competition is key to better prices.
The government acknowledged that Canada’s networks rank second-fastest among Group of Seven countries and Mr. Bains said in an interview on Wednesday that he does “appreciate the record of investment in infrastructure” of the Big Three.
But he added: “Ultimately, the reality is that I get many calls and e-mails from my constituents and from Canadians across the country with regards to the excessively high prices that they pay for their cellphone bills.”
Canaccord Genuity analyst Aravinda Galappatthige said the auction rules were not a surprise and that a recent regulatory decision actually came down in favour of the incumbents. However, he cautioned, “government actions should be closely followed,” adding, “We will need to watch for future initiatives and potentially more populist policies going into a federal election in 2019.”
Eros Spadotto, Telus’s executive vice-president of technology strategy, said the decision is bad for rural communities because the carriers that will benefit from the set-aside focus on serving urban markets. And Rogers’s senior vice-president of regulatory affairs, David Watt, said the market is already competitive, with four players in most markets, and added that the cable competitors are not the same as the weak, undercapitalized startups of a decade ago, when players such as Wind Mobile and Mobilicity got their start.
“Going forward, we hope the government recognizes this and adopts more balanced auction rules [for other bands of spectrum] as the country gets ready for 5G,” he said.
Atlantic Canada carrier Eastlink said it welcomed the decision but could not say whether it would bid in the auction. Cogeco Communications Inc., which does not have a wireless business but could be eligible to bid, also said it could not discuss any plans to participate.