Skip to main content

Industry Minister Christian Paradis announced in March, 2013, that Ottawa is reviewing its policy on wireless-licence transfers – an indication that he could block major carriers from acquiring spectrum from wireless newcomers.

Sean Kilpatrick/The Canadian Press

The federal government risks a legal fight if it blocks big wireless carriers from purchasing spectrum assets from mobile upstarts, says a new analyst report.

Jeff Fan, who covers the telecom industry for Scotia Capital Inc., argues that Industry Canada is tempting fate with its review of wireless licence transfers. That consultation could result in new rules for spectrum transfers between mobile carriers, with the potential to alter the industry's competitive landscape.

A final decision is expected as soon as May, and carriers worry that Ottawa will change the terms of existing spectrum licences to prevent major players like Rogers Communications Inc., BCE Inc. and Telus Corp. from bulking up on spectrum, which are the radio waves used to provide wireless service. Already those incumbents collectively control about 85 per cent of Canadian spectrum, and Industry Minister Christian Paradis has said his objective is to ensure sustainable competition in the wireless sector to keep prices low for consumers.

Story continues below advertisement

Still, Mr. Fan contends that Ottawa could trigger a nasty legal battle if carriers feel their contract rights have been violated, especially in a scenario where Ottawa retroactively changes licence terms.

"Violating contractual obligations could lead to legal actions initiated by the new entrants against IC [Industry Canada] if it denies the transfers to incumbents. Rogers eloquently articulated this in its submission. The new entrants did not go as far to suggest this in the filings but we suspect they are all sharpening their pencils on this potential move," wrote Mr. Fan in his latest Converging Networks report.

"Remember, if new entrants can't sell to the incumbents, they lose on how much they would get back. We estimate this could be up to hundreds of millions of dollars, which would be very material. While carriers may be hesitant to sue the regulator, it is important to remember that many of the new entrants' backers may not have intentions to maintain goodwill with IC."

A lot is hanging in the balance. Rogers Communications Inc. has struck an "option" deal to eventually acquire unused spectrum from Shaw Communications Inc., while financially-strapped upstarts such as Wind Mobile, Mobilicity and Public Mobile are in play. Already, Telus has entered talks to acquire Mobilicity.

On Monday, Mr. Paradis suggested that it was never the intent of government policy to see the AWS spectrum that reserved for new entrants during the last auction "end (up) in the hands of incumbents."

Rogers, this country's largest carrier, is among those that have told Industry Canada it would be a mistake to alter the terms of existing spectrum licences, such as those for the AWS band, to prevent carriers from swapping spectrum.

"It was in part on the basis of these rights that bidders in the AWS auction (as well as other spectrum auctions) valued the spectrum and formulated their bidding strategy. This provision contributed to the $4.2-billion raised in the AWS auction," Rogers said in its submission. "Changing this key attribute of AWS spectrum involves changing the rights of bidders in that auction after the fact – a change that flies in the face of the principles of contractual certainty that the Department strives to attain in its spectrum auctions."

Story continues below advertisement

The language from new entrants has also been stark. Mobilicity, for instance, has said Ottawa's consultation has "further impinged access to capital for new entrants" because investors are worried that spectrum assets could become less liquid.

"Legal actions could be a real messy situation for IC," added Mr. Fan. "Imagine Wind and Mobilicity suing the government for allegedly breaking contractual terms on the licences they obtained four years ago. We think this development would not help IC's case of attracting new strategic investors. We thought the list of interested strategic investors was already short. If this messy situation materializes, we think it is safe to say even the insane would not bite at the opportunity."

Mr. Fan, however, takes his argument one step further – flatly suggesting that Ottawa give up its dream of ensuring at least four carriers in every regional market. Canada may be the second-largest country in the world in terms of geography, but it has a relatively small population of 35 million.

"Don't fight a battle that cannot be won. Stop listening to the consumer activists and groups criticizing the wireless industry with outdated information," said Mr. Fan. "Canada is not large enough to support four facility-based competitors. IC should focus on the CRTC code to protect consumers and provide the CRTC with more power to enforce the code appropriately."

Return to Streetwise home page.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies