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Industry Minister Tony Clement (Sean Kilpatrick/THE CANADIAN PRESS)
Industry Minister Tony Clement (Sean Kilpatrick/THE CANADIAN PRESS)

Prime-quality frequency on auction block Add to ...

It is called the real estate of the telecommunications business. Wireless spectrum, the regulated airwaves over which an increasing amount of the world's data flows, is a key source of profit for the industry and brings in billions to the federal treasury when it is sold off.

But like real estate, not all spectrum is created equal. And the next government auction - for the highly valuable 700 megahertz frequency, which travels farther and more easily penetrates buildings - is being likened to the sale of prime beach front property.

Industry Minister Tony Clement said Monday that the next wireless spectrum license auction for Canada's telecom companies will take place in late 2012, rejecting demands by certain companies to hold the auction earlier. His decision, in some respects, is unsurprising: The auction is being held then in part because it is tied to a much more politically volatile decision on foreign ownership - a decision the Harper government won't make before the spring of 2011, Mr. Clement said.

"I know it seems laggardly," Mr. Clement told reporters after a speech to a telecommunications conference in Ottawa, stressing there is only one chance to get the auction right. "But we're getting started right now."

The next wireless license auction, and how it is structured, are crucial matters for Canada's telecom industry. The spectrum being made available is extremely high quality, perfectly suited to an era of explosive growth for smart phones and other mobile devices connected to wireless networks. There is the added concern that applications and activities online, such as streaming video downloads, are putting immense strain on carriers' networks. (In the U.S, AT&T's network has already been suffering because of heavy use from iPhone users, with dropped calls and slowing services.)

The structure of the auction is even more important than its timing, however. In the 2008 auction, which was for spectrum of lesser quality, some licenses were deliberately set aside for new competitors by the previous Conservative minister of industry, Jim Prentice - a lobbying defeat for the entrenched providers such as BCE Inc. and Rogers Communications Inc., who had argued against it. Those companies fear the same thing may happen again.

In a previous interview, Mr. Clement said loosening foreign ownership restrictions in the sector and the looming spectrum auction were inextricably linked, given the strictly regulated industry's need to know whether foreign companies would be allowed to bid for licenses, or whether and how much foreign capital could be used by domestic companies, should they so choose.

But Mr. Clement gave few hints on Monday as to his current views on that subject. The minister is likely saving bold policy announcements for his digital economy strategy, which is to be released next spring.

Rogers, the country's largest wireless player, has pushed to hold the spectrum auction earlier, which some in the industry think is because new competitors such as Wind Mobile are still struggling to find capital. Mr. Clement's announcement on Monday that the auction would be in late 2012, however, didn't seem to bother Ken Engelhart, Rogers' senior vice-president for regulatory affairs.

"The sooner the better, but I don't think that's an unreasonable time frame," Mr. Engelhart said, noting the political balancing act required in solving the extremely long-standing issue of foreign ownership restrictions in Canada's telecom sector. "I'll be very interested to see how the government handles that."

Stability is one of the main reasons such stress is being put on knowing details of the upcoming auction as soon as possible. Mr. Clement said on Monday that he would be extending the length of spectrum license terms to aid providers' long-term investment decisions.

On a related note, Mr. Clement said he was ordering a departmental review of how cellular "tower sharing" agreements were unfolding in the marketplace, a decision that comes after new wireless competitors licensed in the last spectrum auction complained that entrenched providers have delayed or denied requests to hoist telecom equipment on towers across Canada. Larger companies such as Telus Corp. and Rogers have denied those accusations. The review should be completed by spring of 2011, Mr. Clement said.

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