Industry Minister James Moore has rejected a major sale of wireless licences to Inukshuk Wireless, a rural Internet provider owned by two of Canada's biggest telecom firms, saying the transaction would concentrate "unacceptable levels of … spectrum" in the hands of incumbents.
This was the first time Mr. Moore has intervened to block a transfer of licenses since he became minister and it's another example of the government's efforts to paint itself as pro-consumer. Previously, the government had blocked two attempts by Telus Corp. to buy struggling upstart wireless company Mobilicity, citing concerns over competition.
Rural Internet service is a hot political file for the Conservative government, which draws major political support from small-town Canada and is unhappy with how long-standing wireless companies have served customers in these areas. In the 2014 budget, Ottawa announced $305-million to extend Internet service to more rural and remote areas of Canada.
Inukshuk is a joint venture of Rogers Communications and BCE Inc.'s Bell Canada division and it was hoping to buy 83 spectrum licences from NextWave. The licences, which give the holder the right to use frequencies on a certain band, are not currently being used to provide service.
BCE owns 15 per cent of The Globe and Mail.
Mr. Moore defended his decision by saying he felt that allowing two of the Big Three telecom firms to gain more of this spectrum would hurt competition.
"Canadians have been clear that they want their government to make decisions that result in more choice, lower prices and better service in our wireless sector," the minister said.
"We will not approve any spectrum transfer request that results in excessive spectrum concentration for Canada's largest wireless companies, which negatively affects competition in the telecommunications sector."
It's not clear which investor will step forward to buy the licences and launch Internet service. Federal government sources mention XplorNet Communications, a major rural broadband Internet provider, as one option. Officials at Xplornet were not available for comment Wednesday.
Industry Canada's website said the department believes the importance of the WCS band – the subject of the proposed sale to Inukshuk – as commercial mobile spectrum will increase "as the ecosystem for advanced LTE services is expected to emerge in the next few years." If Ottawa had approved the transfer, Industry noted, "it would represent a significant shift in spectrum concentration in the WCS band" and "Bell and Rogers, through Inukshuk, would increase their combined WCS spectrum holdings from 29 per cent to 77 per cent."
Unlike cities, where Internet access is provided through wires (such as copper telephone lines, fibre or cable), rural communities generally get Internet through satellite-based services or fixed wireless access that use a combination of spectrum and towers. Spectrum – the invisible radio waves used to provide a variety of services – are publicly owned and controlled by the government.
Mr. Moore has already signalled his government's impatience with the lack of effort expended by telecom firms in rural Canada.
He announced in November that Ottawa would crack down on telecom carriers that hoard valuable spectrum licences, saying the government would reclaim spectrum in the 2,300- and 3,500-megahertz bands from carriers that have held those licences for years but failed to use them. This spectrum was originally meant to provide high-speed Internet access, especially in rural communities.
Rogers and BCE's Bell Canada division collectively hold about 75 per cent of the 3,500-MHz spectrum through Inukshuk Wireless, but have not widely used it despite being given licence extensions by Ottawa.
They have flatly denied allegations of hoarding and have previously said it would be more efficient to use that spectrum to add capacity to their wireless networks rather than deploying outmoded technology for fixed Internet access.
Bell spokesman Mark Langton said the company had planned to deploy the NextWave spectrum as part of its LTE [long-term evolution] spectrum in rural and remote areas but foresees "no impact" from Ottawa's decision. He noted Bell bought significant 700 MHz spectrum in the recent federal auction and will use that to help reach rural and northern Canadian customers.
Rogers spokeswoman Patricia Trott said the blocked sale will not affect Roger's plans to roll out 4G LTE service in more areas across Canada. She said the company will use their recently-acquired 700 MHz spectrum to provider faster and better quality service in both rural and urban areas.
With files from Rita Trichur