Bloomberg News

Canada Said to Set Wireless Spectrum Auction Rules This Month

February 01, 2012

Feb. 1 (Bloomberg) -- The Canadian government will announce rules this month to govern its next auction of wireless spectrum, which could unlock billions of dollars of infrastructure investments by companies such as BCE Inc.

The government will release the auction rules as early as Feb. 13, said a person familiar with the plans, who spoke on condition of anonymity because the information isn’t public.

Companies spent C$1.8 billion ($1.8 billion) on wireless infrastructure in 2010, down from C$2.2 billion the year before, according to the latest figures from the Canadian Radio- television and Telecommunications Commission, which regulates the industry. Established providers such as BCE and Telus Corp. say new spectrum will help prevent a logjam on their networks as consumers boost use of data-heavy applications on smartphones.

“We’ve had this complete uncertainty for a year and a half,” said Mark Goldberg, principal at Toronto-based telecom consulting firm Mark H. Goldberg and Associates, referring to delays by the government in setting the auction rules and clarifying its policy on foreign ownership in the industry.

The auction may allocate spectrum to new entrants to the country’s mobile-phone market, who say they need access to frequencies to compete with incumbents.

“I’m pretty certain the government will find in favor of the new entrants,” said Stewart Lyons, president of Mobilicity, which began mobile services in 2010 after buying C$243 million of spectrum in the government’s 2008 auction, when a block of spectrum was reserved for new entrants.

‘Winners and Losers’

The government should avoid trying to pick “winners and losers” by allocating frequencies to recent entrants, said Michael Hennessy, Telus’s senior vice president of regulatory affairs.

“It’s very difficult in a set-aside regime to pick who the beneficiaries should be” since new entrants may end up merging, Hennessy said by phone.

Globalive Communications Corp., a two-year-old Canadian wireless carrier, is in talks to buy Mobilicity, a person familiar with the discussions told Bloomberg in December.

If there are bidding limits, Telus would prefer that the government cap the amount of spectrum that a single company can acquire. “It’s the best balance between encouraging competition and investment,” said Hennessy.

Industry Minister Christian Paradis met in August with executives from telecom and cable companies including BCE, Telus and Rogers Communications Inc. to discuss options on the spectrum auction and foreign-ownership rules. In a Nov. 29 speech, he said the government needed more time to consider the issues.

Auction Delays

The last spectrum auction raised C$4.25 billion for the government, which has promised to eliminate its budget deficit by the fiscal year starting April 2015. Delays to date mean the auction may not take place until 2013, Goldberg said.

The government pledged in March 2010 to relax foreign ownership rules, which prohibit foreign investors from having majority stakes in telecommunications companies. Former industry minister Tony Clement said in November of that year the government would delay updating foreign-ownership rules until the auction, which will make available spectrum in the 700 and 2,500 Megahertz bands.

The U.S. government auctioned spectrum in 2008 in the 700 Megahertz band, which is coveted by wireless providers because devices using that frequency range are better able to receive signals inside buildings and in rural areas.

In December 2009, Prime Minister Stephen Harper’s cabinet overturned a decision by the broadcast regulator that found Globalive violated foreign-ownership limits. Globalive, which sells mobile phone services under the Wind Mobile brand, was backed at the time by Egypt’s Orascom Telecom Holding SAE, which has since merged with Russia’s VimpelCom Ltd.

--Editors: Paul Badertscher, David Scanlan

To contact the reporter on this story: Andrew Mayeda in Ottawa at amayeda@bloomberg.net

To contact the editor responsible for this story: David Scanlan at dscanlan@bloomberg.net


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