Could wireless spectrum crunch put Canada on hold?

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For many, the smart phone revolution means unlimited wireless data plans, streaming movies online and the ability to be online anywhere, at any time.

But as the popularity of smart phones, tablet computers and other wireless devices continues to surge, so do concerns about how carriers will meet the unrelenting demand for data.

The wireless spectrum describes the band of radio frequencies used to carry voice and data for wireless communication devices, such as cellphones.

Most countries regulate and manage use of the spectrum, which is considered a public resource. In Canada, telecommunications companies receive licences to use certain frequencies through auctions run by Industry Canada.

But there is a limit to the radio frequencies available for use. It's a serious issue facing the telecommunications industry, and experts say if it's not addressed, the problem will lead to more dropped calls and spotty or slow Internet service. It may even hamper Canada's ability to remain competitive and innovative in business.

"There's a cost to the economy," said Adrian Foster, partner at McLean Foster & Co., an Ottawa-based telecom and spectrum consulting firm. "The longer you wait [to deal with the problem] the less competitive you are."

"If you get constantly increasing demand for wireless data, and if you have only a certain amount of wireless bandwidth out there, then eventually you're going to run out of wireless capacity," said Michael Mace, chief executive officer of Silicon Valley-based Cera Technology Inc., an information management startup. "It's basically as simple as that: the wireless data traffic is growing faster than the networks can grow."

Signs of the looming crisis are already visible in major centres such as New York City and San Francisco, where peaks in demand result in dropped calls and sluggish mobile service.

"The spectrum is coming under higher demand because wireless data usage is exploding," explained Greg MacDonald, analyst at Macquarie Securities.

Julius Genachowski, chairman of the U.S. Federal Communications Commission, has repeatedly warned about the looming "spectrum crunch" and the potentially devastating impact it could have on consumers and the economy.

As he told an international wireless telecom industry convention earlier this year: "Every day we are not freeing up the spectrum for mobile broadband is a day with real costs to our economy, our global competitiveness and our future."

Some experts say Canada isn't facing an immediate crisis because the networks are well-prepared and carriers have managed to use the available spectrum efficiently to cover most of the country. But others believe we are facing the same problems as the U.S., and action needs to be taken now to avoid service disruptions in the future.

It's a highly charged, politicized debate that is expected to heat up as Canadian companies get ready for the next spectrum auction, expected next year.

Mr. Foster believes the problems are due to excessive government interference in the marketplace.

"There's got to be a greater reliance on markets and on economic valuation to guide decisions on how the spectrum should be used," he said. "I think the regulator needs to be able to step back and allow the markets to play a greater role."

On the other hand, some experts say the telecommunications industry is exaggerating the prospect of a spectrum crisis to persuade governments to make decisions in their favour.

"The carriers are very, very good at lobbying the government," Mr. Mace said.

Large and small carriers are also squaring off, with big telecommunications companies fighting to restrict spectrum access for smaller companies.

Recently, Rogers was criticized for an online campaign asking consumers to sign a petition urging the government to hold an open spectrum auction. Doing so would allow large incumbents to outbid small startups, such as Mobilicity or Wind Mobile, which argue the government should set aside spectrum for them in order to increase competition.

Regardless of how the auction is run, one thing is clear: To remain competitive and innovative, Canada needs to make more of the spectrum available to carriers, Mr. MacDonald said. It's an issue that is expected to become crucial as Canada moves toward fourth generation (4G) networks.

"We're not looking over the edge of the abyss just yet," Mr. Macdonald said. "But if you leave this much longer, you will be."