Telus is currently engaged in a full-court lobbying press aimed at killing the government’s plans for a spectrum set-aside for new entrants in the forthcoming spectrum auction with Telus CEO Darren Entwistle warning ominously of a “bloodbath” should the government move ahead with its strategy. Entwistle notes that the company has invested more than $100 billion in the Canada and that the industry as a whole has invested $420 billion. Yet only a fraction of those figures are actually linked to wireless investment in the way that most would conceive of it. A Telus spokesperson said yesterday that spending on technology and infrastructure was actually $30 billion, leaving $70 billion for operational expenses, such as paying salaries, office supplies, and rent. Last year the CWTA said the entire Canadian wireless industry has invested $25 billion on spectrum and wireless infrastructure. That is a far cry from Entwistle’s $420 billion figure, which is apparently based on such a broad notion of investment that my lunch at Subways and coffee at the Second Cup is also an investment. More on the Telus numbers in a must-read post from Peter Nowak.
Beyond exaggerated investment claims, the dire warnings about the future are nothing new for the incumbents. Before the government’s 2007 spectrum decision, Rogers called potential new entrants the “all-time corporate welfare bums in Canadian history.” When the government announced a spectrum set-aside in 2007, Bell warned that “basically you’ve sold an asset of Canada at well under market price.” When the auction actually generated far more than expected, Bell, Rogers, and Telus argued in 2009 that the auction format drove up prices that resulted in billions in overpayment. As a result, Telus warned that “this will push the industry back into a cumulative cash flow negative for a number of years.” By 2010, well before Verizon’s entry emerged as a possibility, Telus was already warning about the dangers of another spectrum set-aside.
Although Telus then expressed support for the government’s announced spectrum policy in 2012, Entwistle now claims that a spectrum set-aside was designed for smaller players (“fledgling new competitors”) and never envisioned participants such as Verizon. The National Post reports:
If Verizon comes to Canada, Mr. Entwistle said, the government should consider three possible changes to the auction rules, which he said were intended to protect fledgling new competitors not foreign players more than ten times the size of Telus.
Yet Entwistle said the opposite in 2007 when he was proposing to merge Telus and Bell. The Telus merger proposal raised obvious competition concerns, which Entwistle sought to address by arguing for a spectrum set-aside, which he promised would attract deep-pocketed competitors that were not start-ups. The Toronto Star reported on the competition concerns and the Telus proposal:
Among Telus’ proposals would be setting aside a block of spectrum licensing in each region only for new entrants. Telus would also make available transmission towers and building rooftops for the new player. Where there is not enough room on that equipment, Telus would allow roaming by the new entrant for three years. “We believe this policy will facilitate an active competition,” he said. The new third competitor would likely come from among the ranks of cable providers, who have been itching to get into the growing wireless business. Entwistle said these organizations are not startups and could quickly transform their significant customer base and established distribution networks. “They are positioned to capitalize on the securing of spectrum in a very expeditious fashion.”
In other words, when Telus wanted to address competition concerns, the company argued that a spectrum set-aside was an effective policy measure that would attract serious, financially strong competitors. Now that it wants to stop competition, it warns that a set-aside would create a bloodbath for the industry.