Canada’s 700 MHz auction important, but unlikely to change status quo

Cellphones

The Canadian government began auctioning off blocks of the 700 MHz wireless spectrum to ten telecommunications companies on Jan. 14, 2014.

The 700 MHz wireless spectrum auction holds great importance for the future of Canadian telecommunications, although ultimately, it may not change anything.

The federal government intended to increase competition with the auction by having more companies participate. This, however, did not happen as expected. Canada’s attempt to bring Verizon Wireless, an American telecommunications company, fell flat. Private equity firms withdrew from the auction before it began. Most notably, WIND Mobile, one of the biggest Canadian telecommunications companies, withdrew from the auction on Jan. 13, 2014, one day before the auction began.

According to David Christopher of OpenMedia.ca, the auction’s rules were stacked against WIND to the point where it would not have been able to compete with Bell, Rogers, and TELUS. WIND withdrew due to a lack of funding.

“This was a great opportunity to open things up a bit for the smaller providers, but that doesn’t look like it’s going to happen anymore,” said Christopher. “It looks like the big three are going to continue dominance.”

Who’s participating

Of the 15 companies that applied to participate in the auction, five dropped out. The 10 remaining companies, currently in the bidding process, are as follows:

  • Bell Mobility Inc.
  • Bragg Communications Incorporated
  • Feenix Wireless Inc.
  • MTS Inc.
  • Novus Wireless Inc.
  • Rogers Communications Partnership
  • Saskatchewan Telecommunications
  • TBayTel
  • TELUS Communications Company
  • Vidéotron

Of these 10 companies, five operate on a regional level, as opposed to a national one. This is important to note because the spectrum is being auctioned off in 14 regional blocks. For example, since MTS Inc. caters to Manitoba, it will likely go all-in on the Manitoba block and leave the others alone.

One of the ways the federal government is trying to encourage competition through this auction is to limit the number of blocks participants can bid on. This essentially hands certain blocks over to certain regional companies.

Consider this: why would one of the big three try to get Manitoba, when the population of southern Ontario is so much greater?

“The Southern Ontario block is of high value due to the capacity on the network in southern Ontario. That is, a large population with high density equals more demand,” said Natalie Ciura, a senior account manager with TELUS.

So while Manitobans will likely be able to sign contracts with MTS Inc., residents in southern Ontario will probably only have a choice between Bell, Rogers, and TELUS.

700 MHz’s importance

Cell Towers

This auction marks the first time the 700 MHz wireless spectrum will be available in Canada. Fewer cellular towers, such as these, will be required to transmit data using it.

The 700 MHz wireless spectrum is one of the highest quality available, making this auction especially important. Customers subscribed to a carrier that can provide them with the 700 MHz spectrum will likely be able to expect better service.

“It is extremely high value spectrum,” said Ciura. “The frequency can penetrate elevators and underground. The carriers need network capacity and coverage due to demand being driven by our customers. More devices are being connected everyday so their mobile providers need capacity.” The 700 MHz spectrum will be able to provide these services.

Not enough competition

“The Minister of Industry, James Moore, needs to do more,” said Christopher. “He should have set aside a large chunk of the spectrum for independent providers.”

“There have been no details on how to fulfill the promise [of more competition]. Moore needs to explain the details.”

Instead, at least five prospective bidders who would have increased the competition and diversity of the Canadian telecommunications market were forced to drop out.

TELUS, for its part, is in favour of increased competition – to an extent.

“We believe in a fair and open marketplace. We do not shy from competition,” said Ciura. “We put customers first and that is why we have the lowest paid churn rate in the industry and why our complaints to the CRTC are falling while the overall industry is going up.”

However, Verizon’s potential presence posed a threat.

“Based on the parameters of the auction set forth by the government, Verizon, as a ‘start up’, would have had access to spectrum blocks that the three largest carriers would not have had access to.”

Different outlooks

Ciura is excited about what the auction will bring.

“[TELUS] is investing significantly in this auction so that we can continue to meet our customers’ demand for uninterrupted mobile access at home, at work, and on the move.” TELUS is optimistic about what the auction will bring for it.

Christopher, however, is less optimistic.

“It looks like we’re headed for more of the same, and the status quo is unacceptable,” he said. “Canadians pay some of the highest prices in the industrialized world for telecommunications.

“This is holding back the country, and the economy,” Christopher said. “Once there are more affordable options out there, Canadians will go for them. It will force the big three to lower their prices so they can present attractive packages… That’s the road we need to go on.”

The auction is expected to end within the upcoming weeks. Canadians will then find out whether they have more choices, or if things will remain the same.