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The new spectrum will allow carriers to boost their network capacity and meet the demand for more data, and to provide new and faster services.Ryan Remiorz/The Canadian Press

Ottawa will auction off a prime chunk of the public airwaves in March of next year, raising at least $162-million for federal coffers and – it hopes – prompting more competition in Canada's mobile phone market.

Industry Canada released the timing and some technical details of the auction on Monday, in its draft of rules for how companies will bid for the so-called AWS-3 spectrum they can use to expand and improve mobile phone service.

The new spectrum will allow carriers to boost their network capacity and meet the demand for more data, and to provide new and faster services.

But the government is also using the sale of spectrum as a policy tool, specifically to help boost struggling smaller wireless players such as Mobilicity and Wind Mobile.

"This spectrum is ideal for delivering fast reliable service to Canadians on the latest smart phones, tablets and mobile devices," a senior Industry Canada official said on a conference all. But the auction's rules are "designed specifically to support competition in the wireless market while ensuring that the interests of consumers come first," she added.

Sixty per cent of the AWS-3 spectrum will go to the smaller players who are already active in the market, and will not be available to the big three – Telus, Rogers and Bell. There will also be restrictions on the transfer of spectrum among players after the auction is complete. That will allow the government to ensure the big three don't eventually get their hands on it.

In Ottawa's view, strengthening those smaller mobile phone companies may make them more attractive to investors interested in buying them up or consolidating their operations, thus creating a strong fourth competitor in certain markets that don't already have four big players – particularly Ontario.

The small players have to be operating in one of the 14 regions across the country by January 31 in order to qualify to bid for the restricted portion of the spectrum in those areas. That might prompt some consolidation or takeovers of those companies before that deadline.

The coming auction will involve the licensing of 50 Mhz of the AWS-3 spectrum for a 20-year period. The total of the minimum bids set for the auction is $162.5-million, but the government will likely bring in far more than that, if all the licenses are sold.

The spectrum reserved for the smaller companies will likely cost far less than the portion that the big players can bid on, because it will draw fewer bidders in the auction.

When the auction was first announced early in July, Bell Canada said it disagreed with the move to set aside so much of the new spectrum for small players. It said the airwaves are a valuable national resource and shouldn't be given to selected companies at a bargain.

Smaller players were more enthusiastic. Tony Lacavera, CEO of Wind Mobile, said the AWS-3 auction should make it easier for his company to attract investors and participate. Wind didn't take part in the last auction because it couldn't raise enough cash.

Quebecor's Videotron has indicated it might be willing to take on the role of a fourth national wireless player, and it recently spent $233-million buying spectrum in four of the most populous provinces. But Quebecor has also hinted it wants more help from Ottawa in order to make it attractive to roll out wireless service across the country.

A crucial issue for Quebecor is whether it will be able to get cheaper rates for its customers when they roam on rivals' networks. The CRTC is expected to rule on that issue some time in 2015, but it could be after the AWS-3 spectrum auction is completed.

RBC Dominion Securities analyst Drew McReynolds said in a note Monday that he "would be surprised if a recapitalized fourth wireless player did not emerge over the next 12 months." Still, such a player "should be a manageable competitive threat for the incumbents, given the challenges that would still face any fourth-player wireless model in Canada."

Industry Canada has already scheduled another sale of spectrum – in the 2,500 Mhz frequencies – for April 2015.

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