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Score one for incumbents in wireless war Add to ...

Remember that $4.25-billion auction of wireless spectrum last September?

You know, the one that was supposed to have all these new players rushing into the market, putting cheap cellphones into the hands of every Canadian, while destroying terrific franchises at the three incumbent wireless companies?

What ever happened to those guys?

Well, a funny thing happened when the new kids tried to actually build networks - that would be Globalive Communications, Quebecor and Data & Audio-Visual Enterprises Wireless (they're known as DAVE) and regional players Shaw Communications and Bragg Communications.

Federal regulators at Industry Canada made it clear that the old boys - BCE, Telus, and Rogers Communications - had to share their networks. So the upstarts moved to cut infrastructure deals on mundane but essential network issues: Where to install new antennas on towers, how to share broadcasting sites. (All of these discussions are taking place at the same time new entrants attempt to borrow billions of dollars in the midst of a credit crunch, in order to build networks.)

Well, to the surprise of absolutely no one who has watched challengers attempt to steal share from incumbents, the infrastructure talks are bogged down. Federal watchdogs at Industry Canada, which wants more competition in wireless, asked all the players for an update on technical issues. UBS analyst Jeffrey Fan fired out a report Thursday that looked at the wireless industry's response and said: "Details in the new entrants' submissions show they are encountering delays in this process."

Channel Claude Rains in Casablanca for a moment: I am shocked, shocked, by this development.

Here's where things gets interesting. Industry Canada is attempting to light a fire under the incumbents. Mr. Fan noted the regulator has put out a new set of guidelines that insists Bell Canada, Telus and Rogers respond to the new entrants request for technical information within a week  "irrespective of workload." The government ministry also wants to see capacity opened up on towers and sites.

But it's not clear Ottawa actually make a difference.

"In our view, the core issue goes beyond these guidelines. We believe it is unclear whether Industry Canada has sufficient enforcement power ... to ensure that these hurdles are removed for the new entrants," said Mr. Fan. He predicts Globealive, Quebecor, DAVE and the regional competitors will have to pay more than expected to build networks, and take longer than expected to roll out services.

"These hurdles are causing new entrants to build sites where it may be unnecessary," said Mr. Fan, who said Quebecor has publicly complained about this problem. With nothing to indicate Industry Canada is going to toughen up regulations, Mr. Fan said: "We believe this process will increase the costs of the network and likely increase the new entrants' time to market. Incumbents (Rogers, Telus and BCE) could benefit from delays."

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