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In a move intended to underscore its pro-consumer policy to boost competition in the wireless industry, Ottawa confirmed it will reserve the majority of cellular airwaves in an upcoming public auction for small carriers.

Sarah Dea/The Globe and Mail

In its continuing bid to boost competition in the wireless industry, Ottawa confirmed it will reserve the majority of cellular airwaves in a coming public auction for small carriers.

At the same time, the federal government, which has pushed pro-consumer policy, took pains to assure Canadians in rural areas they will not lose what Internet access they already have and revealed plans to hold another auction of valuable low-band airwaves.

Speaking in Vancouver on Thursday, federal Industry Minister James Moore announced several policy changes around the licensing and use of spectrum, the radio waves that carry telecom signals to deliver cellular services as well as broadband Internet in rural and remote areas. The minister said next year's auction of airwaves in the AWS-3 (advanced wireless services) frequencies will begin on March 3 and confirmed the framework first announced in July, under which the government will reserve the majority for small wireless carriers that are already operating.

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"This is key, 60 per cent of this spectrum will be set aside for greater competition in Canada's wireless market," Mr. Moore said at a press conference. "These auctions, just like our previous ones, will have rules that put the interests of Canadian consumers first."

The announcement marks another step in the Conservative government's push to encourage a fourth major wireless company to emerge in an industry dominated by three major players, Rogers Communications Inc., BCE Inc. and Telus Corp. (BCE owns 15 per cent of The Globe and Mail.)

Companies such as Wind Mobile Corp. and Mobilicity, which offer services in Ontario, British Columbia and Alberta, as well as Videotron Ltd. in Quebec and Eastlink Wireless in Atlantic Canada, will be eligible to bid on the set-aside spectrum. They will be able to acquire the set-aside airwaves in their operating territories with starting bids set relatively low by Ottawa, compared with what they have paid in past auctions.

This auction will be an opportunity for the recently recapitalized Wind to acquire new airwaves in its operating territories for about $60-million. Mobilicity, which is under creditor protection, could also be interested in bidding as its remaining value is largely tied to its spectrum holdings.

One or both could also consider a partnership with Quebecor Inc.-owned Videotron, which is still mulling an expansion of its wireless business outside of Quebec.

New entrants lauded the auction rules Thursday, with Wind's chairman, Anthony Lacavera, calling them evidence the government is committed to its policy of seeing at least four wireless players in all markets to provide an alternative to the country's dominant carriers.

"I think the success of [Wind, Eastlink and Videotron] is clear evidence that there is real consumer demand and real benefit to Canadians to having the policy out there," Mr. Lacavera said.

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Quebecor chief executive Pierre Dion said the rules "definitely go in the right direction," but added the company is still looking for certainty on domestic roaming rules and prices. The Canadian Radio-television and Telecommunications Commission held a hearing on that issue earlier this fall and is expected to rule on it shortly. Minister Moore said the commission would speak for itself on the timing of that announcement.

But Canaccord Genuity analyst Dvai Ghose said he did not believe the announcements Thursday were "particularly material" for the Big Three. "We see more rhetoric than substance in the announcement. Incumbents have shown remarkable resilience despite regulatory pressure," he said.

Five-year old Wind Mobile expects to reach 800,000 subscribers next week while Videotron had 589,400 wireless customers as of Sept. 30, about four years after it launched. Eastlink, owned by Bragg Communications, launched its cellular business in early 2013 but has not publicly shared its subscriber numbers.

But the Big Three carriers still have well over 90 per cent of market share: Rogers Communications Inc. has 9.5 million wireless customers and Telus Corp. and BCE Inc. both have about 8 million subscribers. (BCE owns 15 per cent of The Globe and Mail.)

Consumer group OpenMedia.ca called the set-aside announcement "really positive news for Canadians," noting that the amount of spectrum available to new entrants by next May is expected to increase to 25 per cent. The government said Thursday that is up from just 2 per cent in 2006.

The United States is in the midst of licensing the same type of spectrum in an auction that began on Nov. 13 with a reserve price of $10.6-billion (U.S.). As of noon Thursday, provisional winning bids after more than 100 rounds of bidding totalled $44.3-billion.

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Total opening bids for the Canadian auction are set at $162.5-million and Minister Moore said Thursday he would not speculate on how much the process could raise.

Rural Internet access and 3,500-megahertz spectrum

The government also said Thursday it would change a proposed policy on the 3,500-megahertz spectrum band that had rural Internet providers and users concerned they would lose their service.

The frequency band is currently earmarked solely for high-speed Internet using towers, which is known as "fixed-wireless" access.

But in August, Ottawa proposed reclassifying some of those airwaves for cellular use in urban areas. The proposal led to fears that rural residents living near larger centres could lose their Internet access if the airwaves were reclassified for mobile service and prompted more than 150 comments from concerned municipalities such as such as Squamish, B.C., and Kenora, Ont., and local officials.

The government said Thursday it still plans to provide a path to using the band for mobile services, but will do away with the geographical classifications. It will instead allow for flexible use of licences in the band for either mobile or fixed-wireless use going forward. Mr. Moore emphasized the approach will maintain "existing fixed-wireless Internet services in rural areas."

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Allison Lenehan, president of New Brunswick-based Xplorenet Communications Inc., one of the country's largest rural Internet providers, said he welcomed the shift, noting he was, "pleased and relieved at the news that [the government] made significant changes to the previously proposed 3,500 MHz spectrum policy."

Other spectrum policies announced Thursday

The government also said it is launching a consultation on making another type of spectrum available for mobile use, the 600-MHz band, which is a low-band frequency seen as valuable because the radio waves can travel long distances and penetrate buildings. The plan involves working with the United States to relocate certain over-the-air television stations using the signals to avoid interference.

The announcements Thursday also included plans for the AWS-4 spectrum band to allow a new competitor to use the frequency to operate a satellite and land-based network, useful for rural and remote cellular services.

Finally, the minister said the government will make more spectrum available for wireless backhaul, which refers to the transport of data traffic between the core network and outlying areas such as cell towers.

With files from reporter Iain Marlow in Vancouver

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