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Ottawa aims for more wireless competition with planned auction of 2,500-MHz frequency

Industry Minister James Moore said the auction of publicly owned spectrum will “support competition” in the $20-billion wireless market and potentially lower prices for consumers.

rafal gerszak The Globe and Mail

The federal government is preparing to auction off more publicly owned air waves next year as part of its push for more competition in the telecom market.

Industry Minister James Moore said Friday the auction of the 2,500-megahertz frequency would take place on April 14, 2015, stressing the licences would come with strict rules to support competition and potentially lower prices for consumers, especially those in rural areas.

Access to spectrum, the invisible radio waves that wireless companies use to provide a range of wireless services, is controlled by the federal government. The 2,500-MHz frequency can be used to provide mobile phone and data services, as well as high-speed Internet in rural communities.

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Mr. Moore is hoping the auction's rules will entice more companies to participate. In theory, that should increase market competition and result in lower prices for consumers.

"For the average person, what I think they should be heartened by is that more spectrum – which is to say more capacity for firms to deliver high-speed, high quality Internet all across this country – is coming," Mr. Moore said in an interview. "And that we've put in place rules that will allow more firms, particularly in rural Canada, access to the opportunity to provide them with the latest and greatest technology."

Throughout the press conference in Vancouver, Mr. Moore peppered his remarks with references to how rural Canadians deserve the same level of service as those in urban Canada, where many of the smaller new entrants concentrated their service due to the large capital expenditures necessary for a widespread network of cellular towers. "It's a basic business tool for rural businesses, who must offer the same real-time support for their customers as urban businesses do," Mr. Moore said.

Ottawa similarly set up a wireless licence auction in 2008 to favour new competitors to BCE Inc.'s Bell Mobility, Rogers Communications Inc. and Telus Corp., but these much smaller companies – such as Wind Mobile and Mobilicity – have struggled to compete against the large incumbent providers. Analysts doubt the industry's competitive landscape would shift because of the planned auction in 2015, calling the announcement "neutral" for wireless stocks.

Jeff Fan, an analyst with Scotia Capital Inc., said it is too soon to estimate how much money the government will make from the 2,500-MHz auction, but it is expected to glean less than the $1.7-billion he forecasts for the 700 MHz band. He also thinks the 2,500-MHz auction will attract little interest from global carriers that have considered entering Canada's telecom market, such as Verizon Communications Inc.

The rules for the 2,500-MHz auction will include "spectrum caps," which limit the amount of spectrum licences each carrier can purchase. The use of caps means, among incumbents, Telus is likely to be the "big beneficiary," since Bell and Rogers already own some of that type of spectrum, Mr. Fan said.

"We're pleased to see a date set for this important auction, and intend to compete in it," Ted Woodhead, senior vice-president of federal government and regulatory affairs for Telus, said.

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Because of the cap, Bell and Rogers, which are larger than Telus, may only be able to buy new licences in certain areas.

"In those parts of the country where we are below the cap, we will be able to participate in the auction," stated Rogers. Bell also confirmed plans to participate: "There are no requirements for Bell to divest spectrum in order to participate." (Bell parent BCE owns a 15 per cent stake in The Globe and Mail.)

Although the 2,500-MHz frequency is considered less valuable than the 700 MHz band that is being auctioned off next week, it can be used to enhance LTE (long-term evolution) networks that are becoming increasingly popular with smartphone users. LTE networks provide the fastest data speeds allowing consumers to stream mobile video and conduct other bandwidth-intensive activities on their phones.

"Existing carriers will likely be looking at the 2,500-MHz spectrum band to increase the data carrying capacity of their networks, and less so for basic coverage," said Mark Goldberg, a telecom consultant. "Each of the 2,500-MHz blocks is 20 MHz wide, twice as big as the blocks for the 700-MHz auction, yielding about double the capacity. As such, the distance covered isn't as important a consideration as the capacity being provided."

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