(Photo: Sarah Dea/The Globe and Mail/Canadian Press)
The Canadian government is going ahead with another spectrum auction in an effort to spur competition and drive down cellphone prices.
The auction will be faster than usual, Industry Minister James Moore said at a press conference in Toronto on Monday morning, and geared towards getting more spectrum—the lifeblood of cellphone companies—into the hands of smaller players such as Toronto-based Wind or Quebec’s Videotron. One block of 30 MHz out of the total of 50 MHz, or more than 50%, will be reserved for smaller providers in each region of the country.
As per the press release:
Wireless carriers with less than 10 per cent national and 20 per cent provincial/territorial wireless subscriber market share will be eligible to bid on the set-aside in license areas where they are providing services to Canadians. This auction will take place before the 2,500 MHz auction, which is scheduled to start in April, 2015.
The key takeaway from the announcement is that carriers must not only be smaller, they must also already be providing services in an area to qualify for the set-aside. That leaves a very small list of potential participants and therefore a very limited set of potential outcomes.
At this point, there’s only one company that could realistically qualify for the set-aside in most parts of the country: Wind. Mobilicity would too, but with the company on financial life support it’s unlikely to be able to bid on new licenses even if it only had to compete against one other player. If the auction were to happen today, Wind would walk away with a whole whack of virtually free spectrum.
The more likely outcome is that someone buys Mobilicity and/or possibly Wind to effectively get cheap access to those valuable airwaves. With Videotron’s parent Quebecor recently signaling that it is “ready, willing and able” to expand outside of Quebec after buying licenses in Ontario, Alberta and British Columbia in the 700 MHz auction earlier this year, the company looks like the most likely buyer. Picking up either upstart and their operations in certain regions would qualify Quebecor for the set-aside.
READ: Videotron won its 700 MHz spectrum. Now what? »
Another possibility is that Quebecor acquires Mobilicity, but not Wind, resulting in two bidders for the set-aside spectrum. In that scenario, a replay of the 2008 auction–where Wind won licenses in every region of the country except Quebec, where it was aggressively outbid by deep-pocketed Quebecor–is likely.
Quebecor could also qualify for the set-aside without buying either firm, although it would have to fire up its 700 MHz licenses into a fully functioning network and set up actual services for consumers in three provinces fairly quickly, making that an unlikely scenario.
Someone else – U.S. giant Verizon, perhaps–could also come along and scoop up Wind and/or Mobilicity, but with Quebecor already having one figurative foot in the tub, that’s also a remote possibility.
When the dust settles, either Wind or Videotron will emerge as the official fourth national carrier that Ottawa has been questing for, thanks to the veritable red carpet that this auction is laying out.
The decision to go with a set-aside will inevitably leave Bell, Rogers and Telus howling for blood, but it’s ultimately not surprising given the government’s consistent position – going on seven years now – of trying to inject new competition into the wireless market. While there’s little the Big Three will be able to do before the auction, there will be plenty of reaction after the fact.
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