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opinion

Rogers corporate head office and headquarters seen from Ted Rogers Way in Toronto on Oct. 25, 2021.Evan Buhler/The Canadian Press

It’s the story that never seems to end.

Ottawa is still ruminating over Rogers Communications Inc.’s proposed $26-billion takeover of Shaw Communications Inc. Trouble is, it is also allowing that megadeal to cast a pall over Canada’s next auction of 5G airwaves.

Not only is Ottawa considering whether to approve the Roger-Shaw tie-up along with a related transaction involving the divestiture of Freedom Mobile, it is also planning an early 2023 auction of wireless licences in the 3800-megahertz band – which will further support 5G networks.

The Trudeau government isn’t adept at multitasking and industrial policy is hardly its forte. There’s reason to worry that Ottawa’s original auction timetable now appears unrealistic. Perhaps that’s why it appears to be dropping hints about a potential delay.

“Innovation, Science and Economic Development Canada (ISED) is carefully considering the comments received from stakeholders and will release a decision on the rules and timing of the 3800 MHz band in the coming months,” an ISED spokesperson said in an e-mail statement to The Globe and Mail.

Oh boy. Smells like trouble.

Any postponement of the 3800 MHz auction, should it come to pass, will rankle telecoms, deepen the rift between the business community and the Prime Minister’s Office and cause Canada to fall further behind on its 5G rollout.

Although ISED unveiled its timetable for the 3800 MHz auction just months ago, deadlines are just suggestions in Ottawa. That’s why delayed spectrum auctions have become the Canadian way.

Even if we cut the government slack for delaying last year’s 3500 MHz auction by six months because of the COVID-19 pandemic, Canada has long been a laggard among OECD countries when it comes to allocating spectrum.

In fact, Canada ranked 22nd out of 24 countries in terms of timeliness, according to a 2021 report by telecom consultancy Analysys Mason. As of last July, Canada was already four years behind Ireland in terms of assigning spectrum in the 3.4 GHz-4.2 GHz band, the report said.

If history is any guide, the coming 3800 MHz auction will begin roughly one year after ISED releases its final rules. (ISED’s deadline for industry players to provide reply comments in its consultation was March 21.)

One can only hope that Ottawa will use the coming months to carefully consider its auction framework. The significance of the Rogers-Shaw deal means that ISED ought to tweak its auction rules accordingly or risk driving up wireless prices for consumers.

Specifically, ISED should scrap its set-aside policy that gives so-called new entrant carriers preferential access to publicly-owned airwaves. There are far too many examples of those small carriers buying discounted spectrum, failing to use it and later flipping those wireless licences at higher prices.

Moreover, the Rogers-Shaw deal is a clear sign that set-asides, which have been used in Canada since 2008, have failed to produce sustainable competition in the wireless market. As a new entrant carrier, Shaw benefited from $1.7-billion in incentives – not cash payments, but arguably implied taxpayer subsidies – through its purchases of set-aside spectrum since 2008, according to public documents.

Further, the use of a set-aside in last year’s 3500 MHz auction is the reason that Canada set a world record for spectrum prices. Carriers shelled out a collective $8.91-billion, but you can bet your bottom dollar that consumers will end up footing the bill for that spending spree.

There’s absolutely no reason that successful regional cable companies, such as Quebecor’s Videotron Ltd., or even Crown-owned SaskTel, should be given special allowances to buy spectrum at lower prices. Canada is an outlier for using set-asides in this way.

Instead, Canada should follow the example of many other OECD countries and use caps to limit the amount of spectrum that each carrier can purchase in the coming auction.

“We believe cross-band cap will lead to lower total prices than the set-aside options,” wrote Jeff Fan, a telecom analyst with Scotia Capital Inc., in a recent research note to clients.

If spectrum prices are kept in check for carriers, it will allow them to devote more capital to 5G network investment. And while their spectrum costs will still be passed on to consumers – there’s no avoiding it – carriers will have one less excuse to squeeze ordinary Canadians down the road.

The very fact that Rogers supports a set-aside for the 3800 MHz auction should be reason enough for ISED to opt for caps.

Could it be that Rogers is pushing for a set-aside to stick it to its main rivals BCE Inc. and Telus Corp., as Mr. Fan suggests, while seeking out a regional player to buy Freedom Mobile?

The Rogers-Shaw deal is already looming large over the 3800 MHz auction. The timing is in doubt. Ottawa can’t afford to mess up the rules.

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