The government's desire for a fourth wireless carrier in every major market is in jeopardy, and BMO Nesbitt Burns Inc. analyst Tim Casey is not buying the idea that Verizon Communications Inc. will be the white knight that bails out Ottawa.
So what can the federal government do to fix the fact that the new entrants in wireless have not been able to make a go of it, and don't have the cash to enter the upcoming auction for more wireless spectrum they sorely need?
He offered up nine ideas, revolving around two major themes.
Ottawa could look at what Mr. Casey called "funding relief." With the total costs for the coming spectrum auction likely multiple billions of dollars, the new players like Mobilicity and Wind are going to struggle to pay the bill. (Mobilicity is facing a potential court-supervised restructuring after its sale to Telus Corp. was blocked by the government.)
He suggests that the government could allow buyers of spectrum to pay on the instalment plan. That's been done in India and Spain, among other countries. Another option is to refund some of the money that the upstarts paid in the last spectrum auction (unlikely, since the government needs money).
A third funding relief option is to give away spectrum, or sell at the minimum price set for the auction. But again, low probability because of the government's fiscal situation.
His final two funding options are where he gets really out-there. He suggests the government could inject capital into the new wireless competitors, or even nationalize them. Even Mr. Casey admits these are very, very, very long shots.
Mr. Casey has four more options to propose under the umbrella of "operating conditions."
These have the benefit of being less costly. But they do require the heavy hand of intervention.
The government could force incumbents to share their networks, which would enable upstarts to cut spending on network build out. The government could force incumbents such as Telus Corp., BCE Inc., and Rogers Communications Inc. to drop their cut-rate "flanker brands" that look like competition but are really just offshoots of the big players.
He also suggests the government could prohibit bundling by the big three, since the smaller players can't compete because they don't have TV and land line offerings to bundle. Or finally, the government could force the sale of cellular towers owned by the big incumbents, which might make it easier for upstarts to get access to towers.
Again, Mr. Casey puts the likelihoods all low.
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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