Concern over rules proposed for the upcoming auction of 700 MHz spectrum licenses in Canada continues to simmer, as this week Bell Canada threw its voice behind those questioning the government’s current plans to limit bidding opportunities for established wireless carriers in favor of those from foreign-backed entities.
In a statement, Bell Canada said it supported calls for an “urgent review of the federal government’s wireless policy by the House of Commons Standing Committee on Industry, Science and Technology.” That call comes a day ahead of a planned closed-door meeting by that committee on whether to hold public hearings into proposed rules for the 700 MHz auction that opponents claim favor an entry by U.S.-based telecommunication operators.
“Like Canadians across the country, Bell believes in fair competition on a level playing field,” said Mirko Bibic, chief legal and regulatory officer for Bell. “But the policy in place tilts the playing field in favor of well-funded U.S. carriers, an approach that Canadians clearly don’t support. It is time for a fair, open and transparent dialogue about the wireless rules through public hearings.”
U.S.-based telecommunications provider Verizon Communications has recently stated its interest in entering the Canadian wireless market, with reports indicating the company has been in talks to acquire beleaguered wireless start-ups. Verizon has said its interest in entering the market would come ahead of the planned 700 MHz spectrum auction, which if entered and if licenses were acquired, would align with its Verizon Wireless services.
“If you look at the population of Canada, about 70% of that population is between Toronto and Quebec,” noted Verizon CFO and SVP Fran Shammo during the company’s recent second quarter financial results conference call. “That’s adjacent to the Verizon Wireless properties. Again if you look at the spectrum auction, it mirrors up exactly what we launched here in the United States on the 700 megahertz contiguous footprint. So we’re looking at all these but obviously some of the cautions here are the regulatory environment, a foreign investor coming into the Canadian market and what does that mean? So again, cautiously looking at it, not ready to make any announcements today and we continue to explore and have discussions, but at this point it’s just really just an exploratory exercise.”
Established Canadian operators have expressed concerns over Verizon’s potential entry, noting that government telecommunications regulator Industry Canada’s attempt to entice new entrants would produce lower prices for market entry. Those carriers sponsored a survey released last week that showed Canadian consumers “preferred that neither foreign‐ nor Canadian‐owned telecommunications companies are favored in the upcoming government auction of the airwaves,” and that if one side is favored, 70% of those surveyed said that Canadian companies should receive the benefit.
Industry Canada has received flak from established Canadian carriers for attempting to set rules for the upcoming auction of 700 MHz spectrum licenses that would limit the number of licenses that can be acquired by established operators in an attempt to attract new entrants into the market. Industry Canada has stated it wanted to establish at least four viable wireless carriers in each market across the country, which is currently dominated by three nationwide operators – Rogers, Telus and Bell Canada – as well as a handful of smaller, regional players.
Bell Canada noted its biggest concern was with three “loopholes” in the rules, including “preferred access” to spectrum; “the right to piggyback” on current Canadian carrier networks; and the right to acquire “struggling companies in Canada that Canadian companies like Bell can’t buy.”
Industry Canada looked to infuse competition into the space in 2008 through the auction of 1.7/2.1 GHz spectrum licenses, which resulted in limited success as only a handful of carriers have entered the space, while others have sold off those spectrum holdings to established carriers. Industry Canada earlier this year looked to quell those deals as it refused to approve Telus’ acquisition of 1.7/2.1 GHz spectrum licenses from Mobilicity citing the initial requirement of those licenses to be used by new entrants into the market.
In setting up the original rules for the 700 MHz auction, Industry Canada said it would apply spectrum caps to the auction in a move to ensure that at least four new entrants enter the wireless space. In addition, build out requirements for rural areas will also be in effect for those companies acquiring two blocks of paired spectrum. Those spectrum caps will place a limit on “prime” spectrum to incumbent operators that is expected to reserve those licenses for new entrants into the space.
“In the case of the 700 MHz spectrum, a limit on prime spectrum will be imposed on incumbents, which, like a set-aside, will effectively reserve prime spectrum for new entrants and regional providers,” Industry Canada noted last year. “Unlike a set-aside, the measures will not require Industry Canada to identify specific blocks of spectrum, allowing companies to bid according to their business plans.”
In addition, any provider that does not currently own spectrum in the lower bands would be allowed to purchase up to two new spectrum blocks at 700 MHz. The government also said it will apply “specific measures” for its planned 700 MHz spectrum auction “to see that rural Canadians will have access to the same advanced services as everyone else in a timely manner.” The propagation characteristics of the 700 MHz spectrum band are seen as ideal for providing mobile broadband coverage to the vast expanses of Canada outside of city centers.
The new regulations will require companies that control two or more blocks of paired spectrum in the 700 MHz band to cover 90% of the country’s population with their “current high-speed coverage” within five years and 97% within seven years of being granted the licenses. The government also said it would enforce general rollout timelines to both the 700 MHz and 2.5 GHz spectrum licenses ranging between 20% and 50% population coverage within a 10-year period.
Industry Canada earlier this year postponed the 700 MHz spectrum auction date from Nov. 19 to Jan. 14, 2014.
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