Keeping Score of Canada’s Spectrum Auction

Reports indicate that Industry Minister Christian Paradis could unveil the government’s spectrum auction and telecom foreign ownership policies this month. My weekly technology law column (Toronto Star version, homepage version) provided a preview of some the key issues. While interest in spectrum auction policy is typically limited to telecom companies and business analysts, all Canadians have a stake in this decision. The available spectrum – known as the 700 MHz spectrum – opens up a host of possibilities for new innovation, competitors, and open Internet access. It is viewed as particularly valuable spectrum since it easily penetrates walls, making it ideal for delivering wireless high-speed Internet services.

Auctioning the spectrum raises a host of critical policy choices.

Topping the list is whether the government tinkers with the auction framework to help foster greater marketplace competition. Some of the large incumbents unsurprisingly favour an “open auction” with no bidding limits, but assuming Paradis concludes that some measures are needed, the choice will likely come down to either a spectrum set-aside that reserves some spectrum for new entrants and smaller companies or spectrum caps.

The last spectrum auction included a set-aside, which opened the door to a handful of new competitors such as Globalive, PublicMobile, and Mobilicity. A further set-aside may make sense since this round of new entrants may look to use the spectrum primarily for wireless broadband services, providing a potential alternative to the cable and telecom dominance.

If another set-aside proves too unwieldy, a spectrum cap, which would limit the amount of spectrum any single company could hold, may emerge as the alternative. A spectrum cap might prove effective if combined with two additional conditions.

First, the implementation of a use-it-or-lose it principle that would require all bidders to use the spectrum within a defined period. The use-it-or-lose-it approach would help guard against the hoarding of spectrum, particularly for incumbents who may overbid in the hopes of keeping new competitors out of the market.

Second, safeguards against opportunistic flipping of the spectrum with the prohibition on its sale within the first five years of the auction. The trio of policies – caps, mandatory use, and a block on transfer, may increase the number of successful bidders.

Another critical issue is who should be entitled to bid for the spectrum. The last spectrum auction featured Canadian ownership requirements, thereby limiting potential entrants. Given that Canada is one of the only developed countries that has retained significant telecom foreign ownership restrictions, the auction provides a tailor-made opportunity to eliminate the restrictions by opening the market to all bidders.

The spectrum policy decision will also determine which spectrum is available for auction and which is reserved for alternate purposes. The government has already indicated that it plans to grant some of the spectrum to law enforcement agencies, which intend to create their own emergency wireless network.

Many leading technology companies have recommended allocating some of the spectrum for unlicensed purposes. This spectrum, which would be free to anyone to use without the need for licence or government approval, could yield new services and technologies.

Beyond the technical details of the spectrum auction, the final billion-dollar question is what the government should do with the auction proceeds. While the $4 billion in proceeds from the last auction went into general revenues, this auction represents the best – perhaps only – opportunity to access billions of non-tax dollars for the digital economy.  The money could be used to support broadband initiatives, digital content creation, and digital skills programs. 


  1. Amidst all the fuss about about set-asides and caps we seem to be missing the root of the problem – there isn’t enough spectrum available to support all the companies that want to provide cell phone service in our country.

    If the government really wants to promote competition they should find a way to make more spectrum available. Failure to do so puts the government in the position of having to choose the winners and losers. And if the government is going to choose the winners and losers then I vote for home grown Canadian companies over foreign multinationals – we might as well create jobs in Canada to support Canadian families, schools and healthcare rather than Egypt.

  2. Want competition, and invite foreign investment? Restrict the spectrum bidding to foreign telcos, with a promise to relax foreign investment in the incumbents over a set period.

  3. @MeHere

    I’m not sure I understand your logic. You appear to be suggesting we should shut out Canadian companies and then let foreign companies buy them out later when they have been starved into bankrupty.

    That will actually decrease competition while also moving jobs out of Canada.

  4. The Spectrum Shortage

    I haven’t seen any really compelling evidence that there is an actual shortage. The biggest issue is that every company needs a separate hunk of spectrum. That might work for cable vs DSL but something different needs to be done in terms of wireless. There simply isn’t enough spectrum available to waste in this way. Eventually we will have to find a way to share the wireless last mile.

  5. @bwalzer

    Wow, that degree of infrastructure sharing would be like asking Walmart and The Bay to share shelves in the same building. Network coverage and performance are competitive differentiators between wireless companies so it’s hard to imagine how that could ever work.

  6. @Flyguy

    Well it is pretty easy for *me* to imagine… 🙂

    It is really the same arguments as the ones that support the separation of distribution and media in the case of wired Internet. If anything the case is stronger for wireless as the ownership of spectrum is a more easily abused monopoly.

  7. @bwalzer

    There is no question that spectrum is a finite commodity bound by the laws of physics. But are you suggesting that to make the most efficient use of spectrum we need all wireless service providers to share it?

    If all carriers share that finite commodity, how do you deal with the case where one carrier gives his customers unlimited data at rock-bottom prices and then his customers congest the shared channels with so much traffic nobody else can use them? It creates a “first piggy to the trough” mentality amongst carriers and everybody loses.

  8. @Flyguy

    Isn’t your case pretty much exactly the situation that generated all that discussion with Bell and how they bill for the last mile? It’s a problem that needs to be dealt with no matter what the technology. There are lots of ways to deal with this particular issue.

  9. @bwalzer

    The Bell situation with sharing their last mile of cable is totally different. There is nothing stopping Bell or any of the resellers from installing a new cable to add capacity. It’s expensive but certainly not impossible.

    The difference with spectrum is that you can’t create more of it. What’s there is there. The government could open up more spectrum blocks in other bands if they wanted to but the spectrum plan is already getting quite full so they would have to reassign it from somewhere else.

  10. Glad to see mention of the need to reserve some spectrum for unlicensed uses.


    Bear in mind: it has been argued that the idea of a “spectrum crunch”, or the finitude of spectral assets, is being propagated largely by companies who would rather obtain access to more spectrum than increase capital investment in physical infrastructure.

    This means that it’s about either more spectrum, or more towers – amounting to a public subsidy to telco’s, since being able to access more spectrum saves from (more expensive) capital investment. You’re right to point out that more spectrum can’t be created; it cand, however, be used more efficiently, by aggregating bands and increasing the density of wireless terminals.

  11. Un-Trusted Computi9ng says:

    What you’re proposing is in fact the “old system” which brought us some of slowest speeds, lowest bandwidth usage allocations, and highest prices in the world. I for one am glad we have foreign (and domestic) competition as prices have dropped, usage caps have increased, and all in all wireless penetration is becoming more prevalent.

    Set asides and mandated competition has been a boon for the Canadian wireless consumer.

  12. @un-trusted

    I wasn’t suggesting any system at all. I was suggesting the reason companies are fighting over spectrum is that there isn’t enough to go around. If they don’t have access to spectrum then they don’t have the basic stuff they need to be a wireless carrier. Fewer wireless carriers means less competition. Try to imagine how long your neighborhood gas station would stay in business if they had no gas to sell.

    I keep hearing complaints that Canada’s broadband lags the rest of the world but I just don’t see it. I have a $15Mbps service with a 250GB cap that costs me $34 per month in Edmonton. At my Phoenix condo I’m paying $49 a month for a 1.5 Mbps and that’s the fastest speed I can get even if I was willing to pay more. In my experience the US internet is more expensive and it sucks.

  13. Re: Stacey
    “I keep hearing complaints that Canada’s broadband lags the rest of the world but I just don’t see it. I have a $15Mbps service with a 250GB cap that costs me $34 per month in Edmonton. At my Phoenix condo I’m paying $49 a month for a 1.5 Mbps and that’s the fastest speed I can get even if I was willing to pay more. In my experience the US internet is more expensive and it sucks.”

    You know, there is more to the world than the US. The US is actually low in the world too in Broadband Ratings. Canadian internet is still expensive compared to the rest of the world thanks to oligopolies.

  14. @Eric L.

    What’s an oligopoly? Granted my home city of Edmonton doesn’t have anywhere near the choices folks have in Toronto but I can still get highspeed internet to my house from either Telus, Uniserve, Open Concept, Shaw, Internet Crossroad, MCSNet, Galaxy Broadband, Syban, HughesNet, XPlorenet, Virgin Technologies, Internet Center, ExpressPC. I can also get highspeed internet over the cell phone network from the likes of Telus, Rogers or Bell – I have an internet stick on TELUS and I routinely get download speeds of 10 Mbps so it’s not too shabby at all.

    Is a choice of 15 or more service providers still considered an oligopoly or am I missing something?

  15. We should sell everything:–olive-capitalism-s-ugly-face-in-london-ont?bn=1

    Long live foreign capital!

    Ask the Greeks if still not convinced….