Canadian Wireless Spectrum Auction....wooooot!!!!

[mariokarter]

Today Ottawa announced the details up the upcoming wireless spectrum auction to be held in May 2008.

-105 megahertz up for grabs
-40 megahertz reserved for new entrants
-mandated roaming and tower sharing

Certainly sounds like good news to me! Too bad there are still foriegn ownership restrictions. A foriegn company must make a bid via a joint venture with a Canadian company. I would have loved to see Apple or Google make a bid, think about it, they could get so much experiance here launching a service provider, I mean, for companies with thus far zero experiance, would they really want to dive right into the US market? Launching in a smaller one first could be useful. You never know though, maybe Apple, Google, AT&T, Tmobile, Orange, or Vodafone or some other big player will decide to back one of the Canadian companies.

Potential Canadian bidders:
-Shaw (cable and internet provider in western Canada)
-Manitoba Telecom Services (small regional cell provider)
-Quebecor (cable and internet in Quebec)
-Random Toronto company? <--(completely speculation by me)

But at least all the spectrum won't be gobbled up by the incumbants (Rogers, Bell, and Telus). The star (second) article also has a good video for those who don't like reading.

Ottawa's wireless auction could cut cellphone rates. Ottawa announced it will hold an auction of the wireless spectrum in May 2008, which could mean more competition and lower cellphone rates for Canadians next year.
Industry Minister Jim Prentice told a press conference in Toronto on Wednesday that about 105 megahertz of spectrum will be sold to bidders. Forty megahertz will be set aside for newcomers to the industry.

"The introduction of new service providers will help to make Canada's wireless market more dynamic, more competitive, and more innovative so as to meet the needs of Canadians," Prentice said.

Prentice said that Canadians are currently paying more for wireless service than other countries. Industry insiders say that's one reason there are fewer wireless users relative to the United States.

Companies who hold less than 10 per cent of revenues in Canada's wireless market will be allowed to bid for the 40 megahertz that will be set aside.

An Ottawa-based consumer group said cellphone users could be the big winners following next spring's auction. The Public Interest Advocacy Centre wrote in a media release that "the government has realized the public has an interest" in the issue beyond filling treasury coffers with fees collected from the auction.

The industry is currently dominated by three big players in Canada: Rogers Communication, Bell Mobility, and Telus. During a consultative process, larger companies came out against setting aside space in the wireless spectrum for smaller companies. Telus officials didn't mince words after Prentice's announcement, calling it "deeply disappointing news."

Telus executive vice-president Janet Yale said, "We thought this was a government that believed in market forces, that believed in not trying to create special concessions to help new entrants, and at the end of the day we believe this is not in the best interest of consumers or telecom industry overall.

Telus was all for the set-aside option this summer when it was bidding for BCE Inc., but it reverted to its original position of being against set-asides after it lost the bid. Rogers also criticized the announcement.

Prentice told CTV Newsnet's Mike Duffy Live that larger telecommunications companies in Canada benefited from set-asides during similar auctions in the 1980s and 1990s.

"But let us not forget that they already control the vast majority of spectrum for mobile services on the market in Canada. These same players will be able to bid for 65 of the 105 megahertz being put up for auction to augment their already substantial holdings."

Industry analysts say that the amount of spectrum made available is significant.

"More users require more spectrum and the new internet services, of course, will require broader spectrum," Iain Grant told CTV Newsnet immediately after Prentice's announcement.

Prentice also announced that the government will mandate cellphone tower sharing. This will force companies to allow other companies to use their towers at commercially negotiated rates.

"I think as a Canadian who doesn't necessarily want to see a forest of towers outside my house, I really appreciate it if we can have some sharing of existing resources," said Grant, who is managing director of the Montreal-based telecom consultancy The Seaboard Group.

Grant noted that Canadians will likely not see prices drop for about a year.

Prentice told Mike Duffy Live that he is not sure how much money the auction could raise.

With files from The Canadian Press.

Ottawa's wireless auction could cut cellphone rates : Top Stories : News : Sympatico / MSN

[mariokarter]

Lower cellphone rates ahead? Ottawa opens up wireless competition
The federal government is opening up Canada’s wireless communications industry to more competition, a move that could lead to lower cellphone rates.

A three-week auction of wireless spectrum - or capacity - to be held next May should foster competition between telecommunications companies and ultimately result in lower prices, better service and more choice for consumers, Industry Minister Jim Prentice said today at a news conference in Toronto.

In the auction, about 105 megahertz of new spectrum will be made available for bidders, with 40 megahertz of that set aside for newcomers to the industry. Foreign companies will not be able to make independent bids on spectrum, but may do so in partnership with a Canadian firm.

“A more competitive wireless market is in the best interests of all Canadians,” Prentice said.

“The amount of spectrum takes into account the need for new entry in all regions of Canada while considering the interests of incumbent operators and their current spectrum holding.”

To be eligible to compete for bandwidth set aside for new players, companies must currently hold less than 10 per cent of the national wireless market based on revenue.

Prentice’s move comes amid rising concern about the state of wireless competition in Canada, where there are only three major national players. They are Rogers Communications Inc., BCE Inc. and Telus Corp.

In a bid to challenge what some have referred to as an oligopoly, Quebec media and communications giant Quebecor Inc. and Manitoba-based MTS Allstream Inc. have both expressed interest in entering the wireless market on a national basis, and were among a handful of players hoping Ottawa would set aside spectrum for new entrants.

Cable firms may also be among the bidders as they look to add another element to their businesses, which already include home phone and Internet services in many regions.

Toronto Hydro Telecom had also spoken out in favour of setting aside spectrum.

Amit Kaminer, an analyst with consulting firm The SeaBoard Group, said in an interview in advance of the announcement that a spectrum set aside was a historic “opportunity to change the landscape” and that nearly every sizable phone or cable company in the country was likely to consider a bid.

“Having a wireless play in your company is a great thing,” Kaminer said. “Profits are huge and there’s so many other advantages such as the ability to bundle (different) services.”

Kaminer added that he wouldn’t be surprised if the government quietly makes it more difficult for the incumbents to simply purchase a smaller upstart as was the case in 2000 when Telus bought Clearnet Communications, or in 2004 when Rogers bought the parent company of Fido. “I can’t see Ottawa liking the idea that all their ideas will go down the drain with a post-announcement purchase.”

Proponents of a set aside had argued that an open auction for airwaves would allow the deep-pocketed incumbents to gobble up the additional spectrum in a bid to keep competition out.

In addition, potential new carriers had asked the government to mandate “reasonable” roaming arrangements and cellphone tower sharing practices in order to give them time to establish their own networks.

Rogers, Bell and Telus, by contrast, had argued that a set aside would be nothing more than an unfair subsidy since several of the companies planning to bid on spectrum were multi-million dollar businesses.

Rogers, for example, said it would bid on spectrum because it needs more airwaves as customers migrate to things like wireless video and email, which eats up bandwidth.

While the wireless segment is widely-considered to be a promising growth business, critics have complained that a lack of competition means Canada is lagging several other developed countries, and even some developing ones, when it comes to offering consumers innovative wireless pricing and services.

A recent study by J.D. Power and Associates found that overall customer satisfaction with their contract service fell nearly 3 per cent in 2007, compared to a year earlier. The study’s authors blamed the year-over-year decline on a perception among cellphone users that they are paying too much compared to people in the United States and elsewhere.

Another study, published earlier this year, by consulting firm The Seaboard Group suggested that “average” cell phone users in Canada pay up to 33 per cent more than their U.S. counterparts, while “heavy users” pay up to 56 per cent more.

In fact, the Seaboard study found that the only category in which Canadians were better off were so-called “light” or “survival” users, which paid about 27 per cent less on average than they would in the U.S., but still more than in some European countries.

However, a recent follow-up study by the Seaboard Group found that the price of transmitting wireless data such as email and browsing the Web was beginning to fall at two of the big three Canadian carriers, a finding the study’s authors attributed to the inevitable arrival of data-hungry devices such as Apple Inc.’s iPhone in Canada.

The run-up to Prentice’s decision was characterized by a war of words between would-be entrants and established players.

Pierre Karl Peladeau, the CEO of Quebecor, has accused the big three wireless players of maintaining a “stranglehold” on wireless competition and customers’ wallets.

Ted Rogers, meanwhile, lashed out at potential challengers’ calls for spectrum set asides, calling them “scallywags” that are trying to “rip off the system and get spectrum at half-cost and have taxpayers pay for it.”

However, critics of Rogers’ position noted that the cable giant wasn’t required to pay up front for access to the airwaves when it first started out in the business.

TheStar.com | Business | Lower cellphone rates ahead?

[H@t Trick]

Mariokarter, this is bad, very bad, Think about it, this auction does not reflect a free market. The prices we pay reflect the Canadian marketplace, just like the car market. Sure we now have a stong dollar and this will result ina gradual lowering of new car prices (new model lines will be cheaper much faster, esisting lines will take time so as to protect the used car market everyone forgets about this). When it comes to wireless, the us is a huge market, 10x our size, virtual volume discount, more demand, etc, but also consider how we pay a flat rate for local land line service here in North America. In Europe they pay per minute fees for local land line calls I believe, this changes how cellular rates work, access rates to the PSTN are different for the carries etc (Bell and the other ILEC who offer cellular service don't have to pay this as they control the PSTN, but ofcourse go with the market rates), it's not directly comparable. As for data rates, well this should change when a critical mass is reached in data usage, the lauch of Roger's UMTS/HSDPA network probably indicates data rates are coming down soon, and the others will follow. The fact that Bell and Rogers didn't have to pay up front initially doesnt mean they didnt pay BILLIONS for the spectrum over 20+ years of AMPS service. It wasn't free as I have read that the potential new entrants tried to tell us. Also the incumbents are not going to over spend to keep new entrants out, it's ludicrous to think they would do that, common sense says that's bad business, you never want to over pay for something, you always want to under pay if at all possible. I don't know abotu Bell or Telus, but look at the history of Ted Rogers, he's never backed down from a challenge, he built his empire out of nothing, everything was a risk, in the 80's no one knew wireless would be as big as it is world wide. I've read that Fido and Clearnet were started with the intention they would be bought down the line and thats exactly what happened. I've agreed with almost every move our Conservative government has made but this one was the one I just coul not believe they made, it's just a stupid decision.

[lazyjai]

I tend to disagree... for consumers the spectrum auction can go either good or bad, but the benefits outweight the risks.

Canada has one of the highest ARPU's for mobility in the world. Our penetration is also pitiful at somewhere around 65% compared to say Japan which sits at about 94%. We've reached a glass ceiling because mobility pricing is so high in compared to traditional wireline services that people would rather forgo the excess costs and do without mobile service.

You are right however about the economies of scale argument. Canada has a much more disperse population and bringing coverage is a lot more expensive. That's why CMDA was introduced because it is a much more cost effective deployment than GSM. Combined with traditional per month pricing, which by the way different from the per-minte pricing that is used elsewhere in the world primarily to ensure steady, predictable revenue streams which is key for corporations, Canada has a very stable telecom industry with very high margins. When you have a situation where you're just there to harvest high margin products, and multiple companies are in implicit collusion to keep margins high, consumers lose. PSTN termination still incurs costs for incumbents. Sure the infrastructure on inta network terminations are next to zero, but a signifigant portion of the traffic is terminated between carriers, and internationally. This still incurs a signifigant costs.

Hence, IF new spectrum is snapped up by new contenders which have the capital to develop a new mobility infrastructure in Canada, it would increase competition and force innovation in the current incumbents. Operations would streamline, each company would seek specific product differentiators (Advanced features), and ultimately prices will fall as mobility service becomes more and more of a commodity and competition arises.

That being said, the foriegn ownership laws still have to be reviewed to allow companies like British Telecom, Deutsch Telecom, Organge, Hutchinson, etc. to make signifigant inroads toward developing infrastrcture in Canada. Current regulations are too strict which does not create a compelling business case for these companies to enter the Canadian market.

In the big picture, if a signifigant player with major capital funding wins signifigant parts of the auction then it will be a long term boon for Canadians. But in the current state and with the pending US recession, we may not be so lucky. Considering that I also work at one of the big 3 telecoms, I might just get to keep my job for another year because of the lack of competition...