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Innovation Minister Navdeep Bains says the proposed framework for the auction of airwaves in the 600-megahertz frequency is ‘an important step to promote competition.’

Sean Kilpatrick/The Canadian Press

Canada's Innovation Minister says spectrum-auction rules that favour smaller wireless players are still necessary to promote more competition in the industry and lower cellphone bills.

The government is holding a consultation on the framework of the next public auction of spectrum – the valuable airwaves that carry cellular signals – and has proposed setting aside more than 40 per cent of the licences for bids from wireless operators with less than 10 per cent of the national market share.

The chief executives of Canada's big three carriers – Rogers Communications Inc., BCE Inc. and Telus Corp. – have all recently criticized the proposed rules, saying they will give taxpayer-subsidized airwaves to Quebecor Inc. and Shaw Communications Inc. (which owns Freedom Mobile). Both have relatively small wireless operations but are successful cable operators with healthy balance sheets, unlike the startup carriers the government tried to support with previous spectrum set asides.

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Telus's Darren Entwistle critiqued the proposed rules on an earnings call in August while Joe Natale and George Cope, of Rogers and BCE respectively, both spoke out against it during an investor conference earlier this week.

But in an interview on Thursday, Navdeep Bains, Minister of Innovation, Science and Economic Development, said the proposed framework for the auction of airwaves in the 600-megahertz frequency is "an important step to promote competition," adding it is "one of many different measures we're looking at to promote more competition."

"When you compare ourselves to other OECD countries, in particular the G7 countries, Canadians, on balance, pay more for their cellphone bills and we want to change that," he said, adding, "The way we address that is through the need for more competition and that's what we're focused on."

Industry players must file their formal submissions on the 600 MHz auction proposal by Oct. 2 but the auction itself is not expected until late next year or early 2019.

"Our working assumption is that the set asides, as proposed, are ultimately what comes down," Bank of Montreal analyst Tim Casey said in an interview with reporters Tuesday after the BCE and Rogers CEOs spoke at the conference he hosted. "We think the government will probably stick to their plan."

Mr. Bains acknowledged on Thursday the "significant investments" in infrastructure made by Canadian telecom companies, but said, "at the same time we also have to look at how to deal with the high cellphone bills that Canadians are paying."

His comments follow a June speech in which he first highlighted his concerns around telecom affordability and ordered the Canadian Radio-television and Telecommunications Commission to reconsider a decision around startup providers that use WiFi hotspots as their "home network."

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The CRTC ruled that such operators can't rely on regulated rates to access roaming service from the dominant carriers when their customers aren't on WiFi and need cellular coverage. The commission must issue a new ruling on the issue by March 31 and it received the first round of submissions last week.

Mr. Bains also announced new funding for broadband services in Nunavut on Thursday, pledging almost $50-million for improved satellite service to better serve the population of about 36,000 who live in the territory's 25 fly-in communities.

The government's investment will go to BCE Inc.-owned northern telecom provider Northwestel, which will in turn invest an additional $73-million. The federal funds are part of a program, dubbed Connect to Innovate, which will invest $500-million over five years to improve high-speed Internet service in rural and remote areas.

Mr. Bains announced late last year that the focus of the program will be backbone connections, which transport data traffic between isolated communities and the broader Internet. Areas such as Nunavut that depend on satellite communications face greater challenges with fast and reliable data transport compared with places where backbone service can be provided by fibre-optic wires or through microwave radio equipment on towers.

During a regulatory hearing in 2016, many participants said inadequate backbone connections were the biggest hurdle to better Internet service in Nunavut, where broadband is slow and expensive and capacity is limited. Mr. Bains said the priority is to connect institutions such as schools and health centres and added he expects Northwestel will work with other service providers to provide access to the backbone and connect or improve service to individual households.

The Nunavut funding is the second project Mr. Bains has announced under Connect to Innovate, after $13-million for rural communities in Quebec announced in August. Applications for funding under the program closed in April and more projects will be announced in the coming months.

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The CRTC last year established a separate fund that will invest a maximum of $750-million over five years in projects to expand Internet access. The commission is still working out how to spend that money, which will come from a levy on the revenue companies earn from telecom services.

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