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Bell and Rogers collectively hold about 75 per cent of the 3,500 MHz wireless spectrum through a joint venture called Inukshuk Wireless.Brent Lewin/Bloomberg

The smartphone revolution is giving rise to a new battle in Canada's telecom industry, one that is testing the federal government's resolve to bridge the urban-rural digital divide.

Internet service providers such as Xplornet Communications Inc. are accusing Rogers Communications Inc. and BCE Inc. of "hoarding" spectrum that they have held for years but failed to use. Now that those licences are up for renewal, Xplornet argues the companies' ongoing control of those assets is stifling competition for Internet services in rural areas, to the detriment of some two million Canadians.

Spectrum refers to the radio waves that telecom companies use to provide a variety of services, including cellphone and Internet access for consumers and businesses. It is a finite resource controlled by Ottawa, so the stakes are high for telecoms to secure licences.

This particular spectrum skirmish centres on the 3,500 megahertz band, which is currently designated to provide so-called fixed wireless access, which is industry speak for high-speed Internet. Unlike cities where Internet is provided through wires, such as telephone lines, fibre or cable, rural communities generally get Internet through either satellite-based services or fixed wireless access that uses a combination of spectrum and towers.

Now the future of the 3,500 MHz band is up in the air. The explosive popularity of smartphones has a number of countries, including Canada, reconsidering how it should be used. In particular, that spectrum has the potential of being used to provide mobile phone services on ultrafast LTE (long-term evolution) networks.

Rogers and Bell collectively hold about 75 per cent of the 3,500 MHz spectrum through a joint venture called Inukshuk Wireless, but have not widely used it despite being given licence extensions by Ottawa. With their licences set to expire starting next year, the companies are asking for more time to see how international plans for that spectrum shake out, and deny allegations of hoarding. Separately, those companies are building their respective LTE networks. They argue the 3,500 MHz band could be used to add capacity, resulting in faster speeds.

Still, their request for another extension is sparking objections from rural Internet service providers. Xplornet warns that unless small players can gain access to more spectrum for fixed Internet use, rural Canadians will be "condemned to mobile Internet only" through smartphones. "This is our huge frustration," said Christine (C.J.) Prudham, executive vice-president and general counsel for Xplornet. "They are purchasing it for an improper purpose and they are sitting on it."

Xplornet holds about 5 per cent of the 3,500 MHz spectrum and has already deployed about 90 per cent of that. It wants Ottawa to reclaim unused spectrum from Rogers and Bell and reallocate it to Internet companies that plan to use it in rural areas.

"To allow carriers to continue to hold large amounts of spectrum licences without proper deployment by the end of their licence term simply endorses spectrum hoarding strategies," reads Xplornet's submission to Industry Canada.

Rogers and Bell deny hoarding spectrum. The companies say the 3,500 MHz band is not being widely deployed because smartphones and other equipment are not generally made to work on that band yet. They have asked Ottawa to hold a consultation on a new band plan no later than early 2014 – adding there is no point in using aging technology.

"Canadians will be more effectively served by the implementation of the most innovative and advanced technologies such as LTE, even if this means that the deployment requirements must be extended again," says Inukshuk's submission. "The department should therefore reject Xplornet's self-serving recommendations."

Bell's parent company, BCE, owns a 15-per-cent stake in The Globe and Mail.

Bernard Parkinson, chief executive officer of Platinum Communications Corp., an Alberta-based rural Internet service provider, argues incumbents have no interest in serving rural areas. "This is a utility. Move into a house and you have sewage, running water, electricity, gas and Internet. That is your expectation. And you get it in downtown Toronto. So, there are two levels of citizenry that are evolving here," he said. "Country cousins want what city cousins have."

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