No decision yet on telecom spectrum rules and foreign ownership

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Industry Minister Christian Paradis offered Canada's telecom industry some guffaws but no clarity as to how Ottawa plans to loosen foreign investment rules in the sector.

But as Ottawa prepares for another spectrum auction of wireless frequencies, he signalled the government expects cellphone companies to offer rural Canadians the same services as those living in cities. "Our government believes that Canadians should receive the same services wherever they live."

Mr. Paradis told an industry audience Tuesday that he's not yet ready to unveil changes to restrictions limiting foreigners' purchases in the sector. He indicated that a decision will not likely come until 2012.

"When we make those decisions, we will announce them – clearly and directly," Mr. Paradis said.

The Globe and Mail reported last week that a key cabinet committee was considering a proposal to allow 100-per-cent foreign ownership of telecom firms with a share of 10 per cent or less of the Canadian market. Current law restricts direct and indirect foreign investment to a combined total of 46.7 per cent.

The Conservative government is staying mum, however, and Mr. Paradis joked about the intense interest in his views.

"I know there has been a lot of interest and speculation about what I may have to say to you today," he told the International Institute of Communications conference in Ottawa. "Let me be crystal clear ... I have consulted with my cabinet colleagues … we have deliberated … and I can tell you that [comedian]Rick Mercer will not be the next chairman of the CRTC."

He later acknowledged the intense interest in foreign-investment rules and spectrum plans, saying: "Given the importance and the serious impact this will have on the lives of Canadians for years to come, this is not a decision that I nor this government will be taking lightly."

Mr. Paradis also signalled that he expects cellphone service charges to drop in coming years, saying, "We expect that globally competitive prices for consumers will flow from these fundamentals."

Later this week, Mr. Paradis heads to New York City to promote Canada, but has cancelled a meeting there with telecom analysts.

He is also busy hammering out plans for the next auction of wireless frequencies. As The Globe also reported last week, the government is looking at proceeding without setting aside licences for smaller players, as happened in 2008.

Instead, the government is contemplating capping the amount of spectrum any one company can purchase at 10 megahertz of bandwidth.

Ottawa has said it will make a decision about foreign investment before setting the rules for an auction of wireless licences in 2012.

Mobilicity executive chairman John Bitove said he hopes there will not be a delay because Canada is already two to three years behind in deployment of the 700-megahertz frequency used for new smartphones. "By the time you go through an auction and you build your network and you deploy – you'll be four, five years behind," he said.

New companies such as Mobilicity are eager to buy new spectrum because handsets such as the Apple iPhone and devices running on Google's Android system are being made to run in key bands of the 700-MHz frequency.

Mr. Bitove estimates that only about 40 MHz of that spectrum is "good" – meaning it can support a robust handset lineup, which is key for new entrants to attract new subscribers. Unlike larger incumbents, upstarts lack the clout to influence handset manufacturers to make phones that will run on multiple bands. "Data has become the biggest piece of the business going forward, and we'd like to get on with it," he said.

Anthony Lacavera, chairman of Globalive Wireless Management Corp., said he was "disappointed" that Mr. Paradis did not state Ottawa's intentions on both foreign investment and the upcoming spectrum auction, but conceded the issues are complex.

Globalive, which operates under the Wind Mobile brand name, argues that if the government fails to set aside wireless licences for new entrants during the next auction, it may not survive the next five years.

Without access to that key spectrum, new players will not be able to offer what's known in industry parlance as LTE (long-term evolution) to enable faster connection speeds for mobile devices including smartphones and tablet computers. LTE is essential to ensure reliable delivery of high-quality mobile video.

"Our business in its entirety is at risk, from our perspective. But I would say, more importantly for Canadians, all competition is severely at risk," said Mr. Lacavera. "These decisions will impact the Canadian marketplace for the next 10 years."

Michael Hennessy, senior vice-president for regulatory and government affairs at Telus Corp., said his company ideally requires clarity on both issues by January or shortly thereafter. The auction needs to occur by the end of 2012, he added.

"There are significant challenges in meeting the explosive demand for mobile broadband and as long as the decision is out quickly in 2012, that's okay," said Mr. Hennessy. "But we'd be uncomfortable seeing any longer delay because it is very critical in the marketplace that there is a level of certainty and a path to release spectrum quickly in order to serve that broadband demand."

Moreover, Telus says it supports the idea of capping the amount of spectrum any one company can purchase during the auction, but Mr. Hennessy declined to say where that cap should be placed. "We recognize the need for the government's need to create multiple winners and we will support caps," he added.