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Is government on right path with AWS-3 spectrum rules?

InfrastructureMobility

The government’s announcement on Monday of streamlined procedures for the upcoming AWS-3 spectrum auction was called a step in the right direction by some wireless industry observers and a realization of past mistakes by others.

On Monday, federal Industry Minister James Moore said that the government is setting aside a huge chunk of the spectrum from new wireless entrants and is creating a simpler and shorter process to provide the smaller players a “visible path to high quality spectrum.”

“Our government will continue to make decisions that will lead to more choice, lower prices and better services for Canadian consumers,” said Moore in his announcement at an event in Toronto. “Today’s announcement will help operating new entrants acquire valuable new spectrum to help expand their networks and deliver fast, reliable service to Canadians.”

New wireless entrant Wind Mobile applauded the government’s announcement.

“Today’s announcement is proof that the federal government is taking significant and important steps in encouraging more competition, more choice and more value in the Canadian wireless industry, and I applaud Minister James Moore for his positive efforts,” said Anthony Lacavera,  CEO, Wind Mobile. “Competitive alternatives like Wind Mobile need additional spectrum to grow and flourish. Decisions like the one announced today recognize that the Canadian wireless industry is maturing and demonstrate that the Government is determined to see that the demands of Canadian consumers are addressed.”

OpenMedia.ca, a community-based organization supporting the idea of an open Internet, called the announcement “very encouraging.”

“This is a tangible step in the right direction, and it’s great to see Minister Moore taking positive action to improve wireless choice for Canadians,” said Steve Anderson, executive director of the organization. “Canadians have been calling for years for robust measures to stop Big Telecom from squatting on vital digital assets.”

“In particular, this decision could help indie provider Wind get access to the infrastructure it needs to better service Canadians,” he added. “The Big Three have used various underhanded tactics to prevent Wind and other indie providers from effectively serving Canadians.”

However, another industry expert said it’s too early to tell if the government’s move will actually level the playing field the new entrants.

“I can’t really say from the announcement if the government is indeed headed in the right direction,” said Mark Goldberg, principal of the Thornhill, Ont.-based telecommunications consulting firm Mark H. Goldberg & Associates Inc. “The announcement however seems to indicate that they have recognized some of the problems in their earlier attempts to foster competition in the last seven years.”

He said he is more worried about “the unintended consequences” that the government’s move might bring.

The auction rules that favour smaller wireless players include:

• A large block of spectrum (more than half or 30 megahertz out of 50 megahertz total) is set aside for operating new entrants;
• Strict provisions on the transfer of AWS-3 spectrum so that Canadian consumers benefit from increased competition in wireless services; and
• A simpler, shorter auction process that will provide operating new entrants with a visible path to high-quality spectrum

“It would be irresponsible of the government to deploy spectrum into the marketplace and not do so with a deliberate policy objective of increasing competition in the wireless market,” said Moore.

The AWS-3 spectrum is ideal for delivering fast, reliable service to Canadians on the latest smartphones, tablets and mobile devices. The AWS-3 band also includes 50 MHz of paired spectrum and is adjacent to the AWS spectrum auctioned in 2008.

A streamlined licensing process will allow wireless providers to have the results of AWS-3 auction before the 2500 MHz auction, scheduled on April 14, 2015.

The AWS-3 spectrum is considered more valuable than the 2,500 MHz spectrum because the former functions in both rural and urban areas and its signals can better penetrate buildings.

Consultations on the licensing of the AWS-3 spectrum will begin this summer.

The government’s move could also encourage smaller and currently struggling wireless players such as Mobilicity and Wind Mobile to band together to compete against the industry’s big three players, Rogers, Bell and Telus. The Big Three control about 95 per cent of the Canadian wireless market.

The Conservative government has been protective of new wireless entrants and had in the recent past twice prevented Mobilicty from being gobbled by Telus. Telus, however, was able to purchase another small player, Public Mobile last year.

By setting aside a huge chunk of the AWS-3 spectrum for new entrants that happen to operate in key urban and rural areas in Canada, the government is making these smaller players very appealing companies to investors. Goldberg said in the 2008 spectrum auction the government missed an opportunity to create a fourth strong player in the wireless market when its parcelled of a 40 MHz block into smaller four smaller blocks rather than selling it as a whole block.

“What we ended up with was four new entrants with smaller parcels of spectrum rather than one strong new player,” said Goldberg.

Another past mistake, he said, was considering providers SaskTel and Manitoba Tel as small providers even if they held a sizeable portion of the wireless market in their respective areas. Goldberg said a current definition of new entrant now takes into account not only the national market but also the regional market that a provider operates in.

Incumbents currently control over 90 per cent of the wireless market and over 85 per cent of wireless spectrum, said Anderson. The big companies have used this power to keep prices high by blocking Canadians from more affordable providers, he said.

“It’s good to see the government removing some of the Big Telecom roadblocks that are preventing Canadians from having the independent wireless choice they deserve,” said Anderson.