Spectrum Auction Puts Wireless Competition on the Line

My weekly column (Ottawa Citizen version, homepage version) looks at the current debate over the spectrum auction set for 2008. The first round of the consultation comments closed last month, generating nearly 50 industry submissions, yet surprisingly only four Canadians provided their views (follow up responses can be made until June 27th).  By comparison, in the United States more than 250,000 people have written to the Federal Communications Commission to urge it to set conditions on a forthcoming spectrum auction that would make Internet access more open, affordable, and accessible.

Despite the lack of Canadian public awareness, the issue has an enormous impact on telecommunications since it plays a pivotal role in determining wireless competition.  The three incumbent wireless providers (Bell, Telus, and Rogers) along with some business groups stand on one side, calling for an "open auction" that would involve minimal pre-conditions and see the available spectrum auctioned off to the highest bidders.  These groups argue that the Canadian wireless market is already competitive and that the government should avoid setting aside spectrum for new providers.

Major cable companies (Shaw, Quebecor, Cogeco) and smaller telecom companies (MTS Allstream, Toronto Hydro Telecom) provide the alternate perspective.  They are seeking a "set-aside" that would reserve spectrum for new entrants.  These companies point to data that places Canada well below other developed countries on metrics such as the number of wireless subscribers, pricing, and the introduction of innovative services.  They also note that Canadian spectrum auctions are not truly open, since foreign ownership restrictions exclude many potential bidders.

While the incumbents have been quick to characterize a spectrum set-aside as akin to a government subsidy, they fail to acknowledge that they were handed reserved spectrum to get off the ground.

In 1984, the government allocated its first block of spectrum for wireless services, specifically reserving spectrum for Cantel (later Rogers), who benefited from no upfront payments and regulations that mandated that the incumbent providers could not provide service in a given region before Cantel established service there.  In 1995, the government again adopted a regulated approach to the allocation of spectrum for PCS services, setting aside spectrum for the two new entrants – Microcell and Clearnet – that are today owned by Rogers and Telus.

With so many options and opinions, Industry Minister Maxime Bernier faces a tough choice.  The best guidance for action, however, may have come last week from a question near the conclusion of the 2007 Canadian Telecom Summit debate on the spectrum auction.  After each side exhausted their arguments, the debate moderator asked what the companies intended to do with the spectrum if their bids were successful.  

The new entrants responded that they plan to build a new national wireless network to increase the competitive landscape in Canada.  The incumbents, meanwhile, did little to alter the view that their primary interest in obtaining new spectrum is simply to stop would-be competitors from doing so, since the best response they could muster was to suggest that increased spectrum would reduce the need to build more cell towers, while ensuring that they could offer services for new phones designed specifically for the new frequency.

Viewed through the lens of planned spectrum use, the choice boils down to the chance for increased Canadian competition through a set-aside or an open auction that offers little in the way of change.  For a Minister who has made his mark reshaping the Canadian telecommunications landscape, the decision may not be so difficult after all.


  1. Cognitive Radio
    What the public needs is some spectrum set aside for cognitive radio (i.e. anyone can broadcast, subject to some ‘fairness’ regulations). This will ensure free communication and will eliminate the barrier to creating a wireless communication system. Individuals and small companies can’t buy spectrum. Currently the big telecos hold all the cards. Never mind that they can censor or spy on you; throttle or control your connection; etc. Free spectrum is

    My understanding is that current ‘unregulated’ spectrum allocation (e.g. ISM) is a little too small or other unsuitable (too much interference?) .

  2. Much attention, relatively speaking, focuses on accessing the new technologies, as it should. What is discouraging, is the ultimate reliance on “backhaul” options. If I want to create a wireless mesh network, that network has to ultimately hook into a “backhaul” infrastructure controlled by a select handful of companies. If the telco or cable monopoly doesn’t like what’s happening, the price for the backhaul service goes through the roof, and the wireless mesh network fails. The cellular industry conceivably offers some independence, at some point, but at what price? It’s time, I think, that a global agreement appear, one that controls the costs for backhaul for all users. Japan does a nice job, it seems.

  3. My comments
    It may be worth noting that one of the ‘members of the public’ comments comes from the former CEO of ClearNet. He may be a membr of the public, but his experience is distinctly industry – so the number of ‘non-industry’ submissions may be even lower. (Must say, though – kudos to him for being transparent about his background.)

    My own comments, although brief, concentrate on the issue of carrier device control. Much of the market power of the incumbent carriers is in the financial lock via subsidy they have with their existing customers. Although I cannot see it being practical to prevent subsidization of customer equipment, requiring that carriers make reasonable provisions for allowing customer provided equipment on the new bands would create a more robust market for devices. Carriers currently avoid devices like he Nokia N61 (has WiFi) for the N62 (no WiFi) even though the customer could see strong value in such devices. You can also see this behaviour when you discover you can’t easily download pictures from your cameraphone via USB.

    It’s also likely not practical to consider alternative architectures for this spectrum at this time — we’re going to see tower-to-customer for a while yet. But a robust market in devices would create market pressure on carriers to offer spectrum-only packages, opening up the options to purchase spectrum as you use it.

  4. And I Kid You Not!
    With regards to the FCC’s auction of prime wireless spectrum, the bidding rules will be THE KEY on the auction’s success of creating new competition for broadband Internet in the country. And I kid you not!

    AnitoKid at